<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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, SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
BEVERLY ENTERPRISES, INC.
5111 ROGERS AVENUE, SUITE 40-A
FORT SMITH, ARKANSAS 72919-1000
(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)
- -------------------------------------------------------------------------------------------------
<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).
------------------------
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
- -------------------------------------------------- --------------------------------------------
<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; Unaudited Pro Forma Combined
Financial Statements
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; 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
- -------------------------------------------------- --------------------------------------------
<S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Compa- 15. *
nies
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; 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, 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.
In the Merger, you will receive shares of Beverly common stock for your
shares of PMSI common stock as described in the accompanying Prospectus/Consent
Solicitation Statement. 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 Merger is a
momentous event for our company and presents you with the opportunity to
participate in what I believe will be a more diversified health care
institution. We are excited about the prospect of working together with Beverly
during a period of change and consolidation in the health care industry.
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, among PMSI,
Beverly and Acquisition (the "Merger Agreement") and the transactions
contemplated thereby, as described in the accompanying
Prospectus/Consent Solicitation 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)
PROSPECTUS
PHARMACY MANAGEMENT SERVICES, INC.
CONSENT SOLICITATION STATEMENT
This Prospectus of Beverly Enterprises, Inc., a Delaware corporation
("Beverly"), relates to 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 (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
February 9, 1995, the last sale price for Beverly Common Stock as reported on
the NYSE composite tape was $13.25.
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) 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 average
trading price of Beverly Common Stock for the ten (10) consecutive trading
days ending two (2) trading days prior to the consummation date of the
Merger. 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, 1993, as
amended May 27, 1994, on Form 10-K/A (the "1993 Beverly 10-K");
2. The portions of the Proxy Statement for the Annual Meeting of
Stockholders held May 19, 1994 that have been incorporated by reference
in the 1993 Beverly 10-K;
3. Quarterly Report on Form 10-Q for each of the quarters ended March 31,
June 30 and September 30, 1994, respectively;
4. Current Report on Form 8-K dated January 4, 1994, as amended January 7,
1994, on Form 8-K/A;
5. Current Report on Form 8-K dated April 7, 1994;
6. Current Report on Form 8-K dated December 14, 1994, as amended February
10, 1995, on Form 8-K/A;
7. 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
8. 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 to Shareholders, and by PMSI's Quarterly Reports on Form 10-Q
for the quarter ended April 30, 1994 and for the quarter ended October 31, 1994,
as amended January 4, 1995, on Form 10-Q/A (Amendment No. 1), as
ii
<PAGE> 8
filed with the Commission, which are attached hereto as Appendix G, Appendix H
and Appendix I, 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 year ended July 31, 1994, as
amended October 24, 1994, on Form 10-K/A (Amendment No. 1) and as
amended November 23, 1994, on Form 10-K/A (Amendment No. 2);
2. The unaudited consolidated Financial Statements of PMSI for the nine
months ended April 30, 1994, as set forth in the Quarterly Report on
Form 10-Q for the quarter ended April 30, 1994;
3. The Quarterly Report on Form 10-Q for the quarter ended October 31,
1994, as amended January 4, 1995, on Form 10-Q/A (Amendment No. 1);
4. Current Report on Form 8-K dated December 26, 1994; and
5. The "Selected Financial Data" set forth on page 1 of PMSI's 1994
Annual Report to Shareholders, the "Management's Discussion and
Analysis of Financial Condition and Results of Operation" set forth
on pages 5 through 7 of PMSI's 1994 Annual Report to Shareholders,
and the "Quarterly Financial Data (Unaudited)" set forth in note 14
to the Notes to Consolidated Financial Statements on page 19 of
PMSI's 1994 Annual Report to Shareholders.
Except for those portions of PMSI's: (i) Annual Report to Shareholders; and (ii)
Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 specifically
described above, the remainder of PMSI's 1994 Annual Report to Shareholders is
not part of the Registration Statement nor is it incorporated by reference
herein.
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, SENIOR 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.
------------------------
iii
<PAGE> 9
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.
iv
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... ii
Beverly............................................................................. ii
PMSI................................................................................ ii
SUMMARY............................................................................... 1
Beverly............................................................................. 1
Acquisition......................................................................... 1
PMSI................................................................................ 1
The Consent Solicitation............................................................ 1
Vote Required....................................................................... 2
The Merger.......................................................................... 2
Conversion of PMSI Common Stock.................................................. 2
Recommendation of the Board of Directors of PMSI................................. 2
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............................................................. 3
Certain Federal Income Tax Consequences.......................................... 3
Resale Restrictions.............................................................. 4
Stock Exchange Listing........................................................... 4
Conditions to the Merger......................................................... 4
Termination...................................................................... 4
Termination Fee.................................................................. 5
Markets and Market Prices........................................................... 5
Beverly.......................................................................... 5
PMSI............................................................................. 6
Beverly Selected Consolidated Financial Data........................................ 7
PMSI Selected Consolidated Financial Data........................................... 9
Selected Unaudited Pro Forma Combined Financial Data................................ 10
Selected Unaudited Pro Forma Combined Per Share Data................................ 11
Recent Events of Beverly............................................................ 11
Recent Operating Results......................................................... 12
Institutional Pharmacy Acquisitions.............................................. 12
1994 Credit Agreement............................................................ 12
CERTAIN CONSIDERATIONS................................................................ 13
Governmental Regulation and Reimbursement........................................... 13
Increased Labor Costs and Availability of Personnel................................. 13
Certain Anti-Takeover Provisions.................................................... 14
THE CONSENT SOLICITATION.............................................................. 15
Matters to be Voted upon by the PMSI Shareholders................................... 15
Termination Date.................................................................... 15
Record Date......................................................................... 15
</TABLE>
v
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Vote Required....................................................................... 15
General.......................................................................... 15
Shareholders' Agreement.......................................................... 15
Irrevocable Proxies.............................................................. 16
Exemptions From Certain Provisions of the FBCA................................... 16
Revocation of Consents.............................................................. 16
Solicitation of Written Consents.................................................... 17
No Dissenters' Rights............................................................... 17
THE MERGER............................................................................ 18
General............................................................................. 18
Background of the Merger............................................................ 18
Reasons for Merger; Recommendation of PMSI Board.................................... 20
Opinion of PMSI Financial Advisor................................................... 22
Comparable Company Analysis...................................................... 23
Comparable Merger and Acquisition Transactions Analysis.......................... 23
Leveraged Buyout Analysis........................................................ 24
Exchange Ratio Analysis.......................................................... 24
Premium Analysis................................................................. 24
Other Factors and Comparative Analyses........................................... 24
Interests of Certain Persons in the Merger.......................................... 25
General.......................................................................... 25
Stock Options.................................................................... 25
Registration Rights Agreement.................................................... 26
PMSI Director and Officer Indemnification........................................ 27
Other Agreements................................................................. 27
Accounting Treatment................................................................ 28
Certain Federal Income Tax Consequences............................................. 28
Regulatory Approval................................................................. 30
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>
vi
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MANAGEMENT AND OPERATIONS OF BEVERLY AFTER THE MERGER................................. 39
Management.......................................................................... 39
Operations.......................................................................... 39
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS..................................... 41
DESCRIPTION OF BEVERLY CAPITAL STOCK.................................................. 44
Authorized Capital Stock............................................................ 44
Beverly Preferred Stock............................................................. 44
Beverly Common Stock................................................................ 44
Beverly Common Stock Purchase Rights................................................ 45
COMPARATIVE RIGHTS OF STOCKHOLDERS OF BEVERLY AND PMSI................................ 47
Board of Directors; Removal; Filling Vacancies...................................... 47
Beverly.......................................................................... 47
PMSI............................................................................. 47
Action by Written Consent; Special Meetings......................................... 47
Beverly.......................................................................... 47
PMSI............................................................................. 47
Business Combinations............................................................... 47
Beverly.......................................................................... 47
PMSI............................................................................. 48
DGCL............................................................................. 48
FBCA............................................................................. 48
Amendment of Certificate of Incorporation, Articles of Incorporation and Bylaws..... 49
Beverly.......................................................................... 49
PMSI............................................................................. 49
Indemnification..................................................................... 50
Beverly.......................................................................... 50
PMSI............................................................................. 50
Other Items......................................................................... 50
Beverly.......................................................................... 50
PMSI............................................................................. 50
LEGAL MATTERS......................................................................... 50
EXPERTS............................................................................... 51
APPENDIX A - Agreement and Plan of Merger............................................. 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 to Shareholders for the Fiscal Year 1994.............. G-1
APPENDIX H - The unaudited consolidated financial statements of PMSI for the nine
months ended April 30, 1994, as set forth in the PMSI Quarterly Report on
Form 10-Q for the three month period ended April 30, 1994................ I-1
APPENDIX I - PMSI Quarterly Report on Form 10-Q for the three month period ended
October 31, 1994, as amended January 4, 1995 on Form 10-Q/A (Amendment
No. 1)................................................................... H-1
APPENDIX J - Beverly Current Report on Form 8-K/A dated December 14, 1994............. J-1
</TABLE>
vii
<PAGE> 13
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 healthcare in the United
States. At September 30, 1994, Beverly operated 730 nursing facilities with
78,360 licensed beds. The facilities are located in 33 states and the District
of Columbia, and range in capacity from 20 to 388 beds. At September 30, 1994,
Beverly also operated 40 retirement and congregate living projects containing
2,524 units, 43 pharmacies and pharmacy-related outlets, six transitional
hospitals and five home health care entities. Beverly's facilities had average
occupancy of 88.4% during the nine months ended September 30, 1994 and 88.5%,
88.4% and 88.1% during the years ended December 31, 1993, 1992 and 1991,
respectively. See "-- Recent Events of Beverly."
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.
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, H and I,
respectively. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE - PMSI."
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
1
<PAGE> 14
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 January 31, 1995, there were 9,066,187 shares of
PMSI Common Stock outstanding held by approximately 299 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 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."
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, 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 AND THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER AND THE MERGER
AGREEMENT 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
2
<PAGE> 15
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
, 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."
Accounting Treatment. Both Beverly and PMSI management believe that the
Merger will qualify as a pooling of interests for accounting and financial
reporting purposes. Consummation of the Merger is conditioned upon the receipt
by Beverly of a letter from Ernst & Young LLP concurring with the opinion of
Beverly and PMSI management that the Merger will qualify for
pooling-of-interests accounting treatment. See "THE MERGER -- Accounting
Treatment" and "THE MERGER AGREEMENT -- Conditions."
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
3
<PAGE> 16
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; (vi) Beverly's receipt of an accountant's letter with respect to
qualification of the Merger as a pooling of interests for accounting purposes;
and (vii) 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. 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 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
4
<PAGE> 17
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."
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>
1992
First Quarter................................. $10 1/8 $ 8 3/8
Second Quarter................................ 8 3/4 7 1/8
Third Quarter................................. 9 5/8 7 5/8
Fourth Quarter................................ 13 1/8 8 3/8
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
</TABLE>
5
<PAGE> 18
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 none are
anticipated to be paid during 1995.
At January 31, 1995, there were 7,803 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
</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 January 31, 1995, there were 299 record holders of PMSI Common Stock.
6
<PAGE> 19
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, 1993 and selected
consolidated balance sheet data as of December 31, 1993, 1992, 1991, 1990 and
1989 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 selected consolidated statement of operations
data for the nine months ended September 30, 1994 and 1993 and the selected
consolidated balance sheet data as of September 30, 1994 and 1993 are derived
from Beverly's unaudited condensed consolidated financial statements. The
unaudited condensed consolidated financial statements include all adjustments,
consisting of normal recurring accruals, which Beverly considers necessary for a
fair presentation of the financial position and the results of operations for
these periods. Operating results for the nine months ended September 30, 1994
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1994. 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
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net operating revenues............... $2,204,527 $2,148,169 $2,884,451 $2,607,756 $2,308,307 $2,117,868 $2,105,967
Interest income...................... 10,709 11,158 15,269 14,502 20,048 24,455 22,586
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues................... 2,215,236 2,159,327 2,899,720 2,622,258 2,328,355 2,142,323 2,128,553
Costs and expenses:
Operating and administrative:
Wages and related................ 1,183,900 1,186,576 1,593,410 1,486,191 1,358,639 1,258,758 1,265,500
Other............................ 832,969 796,643 1,069,536 921,750 770,748 712,586 700,435
Interest........................... 43,974 47,904 62,453 62,717 68,690 83,210 95,023
Depreciation and amortization...... 68,359 64,978 86,681 88,452 88,610 67,347 72,702
Restructuring costs................ -- -- -- 57,000 -- -- 128,104
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses......... 2,129,202 2,096,101 2,812,080 2,616,110 2,286,687 2,121,901 2,261,764
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before provision for
(benefit from) income taxes,
extraordinary charge and cumulative
effect of change in accounting for
income taxes....................... 86,034 63,226 87,640 6,148 41,668 20,422 (133,211)
Provision for (benefit from) income
taxes.............................. 28,391 21,425 29,684 4,203 12,430 7,279 (27,701)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
charge and cumulative effect of
change in accounting for income
taxes.............................. 57,643 41,801 57,956 1,945 29,238 13,143 (105,510)
Extraordinary charge, net of income
taxes of $1,155 in 1993 and $5,415
in 1992............................ -- (2,345) (2,345) (8,835) -- -- --
Cumulative effect of change in
accounting for income taxes........ -- -- -- (5,454) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss).................... $ 57,643 $ 39,456 $ 55,611 $ (12,344) $ 29,238 $ 13,143 $ (105,510)
========= ========= ========= ========= ========= ========= =========
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............................ $ .59 $ .50 $ .66 $ .01 $ .36 $ .18 $ (1.90)
Redemption premium on Series A
preferred stock(1)............... -- (.25) (.25) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Before extraordinary charge and
cumulative effect of change in
accounting for income taxes...... .59 .25 .41 .01 .36 .18 (1.90)
Extraordinary charge............... -- (.03) (.03) (.11) -- -- --
Cumulative effect of change in
accounting for income taxes...... -- -- -- (.07) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss).................. $ .59 $ .22 $ .38 $ (.17) $ .36 $ .18 $ (1.90)
========= ========= ========= ========= ========= ========= =========
Shares used to compute per share
amounts............................ 87,014,000 79,778,000 81,207,000 77,685,000 81,218,000 66,151,000 56,003,000
</TABLE>
7
<PAGE> 20
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets......................... $2,065,094 $1,958,137 $2,000,804 $1,859,361 $1,677,851 $1,625,781 $1,641,634
Current portion of long-term
obligations........................ $ 37,336 $ 38,798 $ 43,125 $ 30,466 $ 35,846 $ 50,918 $ 263,232
Long-term obligations, excluding
current portion.................... $ 724,181 $ 686,283 $ 706,917 $ 712,896 $ 629,245 $ 694,689 $ 599,519
Stockholders' equity................. $ 810,587 $ 727,280 $ 742,862 $ 593,505 $ 600,443 $ 499,490 $ 441,147
OTHER DATA:
Patient days......................... 20,172,000 21,827,000 29,041,000 29,341,000 29,334,000 30,139,000 33,368,000
Average occupancy percentage......... 88.4% 88.5% 88.5% 88.4% 88.1% 87.3% 87.1%
Number of nursing home beds.......... 78,360 86,865 85,001 89,298 90,228 91,414 96,268
Number of employees.................. 82,000 91,000 89,000 93,000 93,000 92,000 96,000
</TABLE>
- ---------------
(1) Beverly reported a redemption premium in 1993 equal to the $20,000,000
excess paid above the $80,000,000 original recorded value of the Series A
preferred stock. Such amount was charged to Beverly's retained earnings
during the year ended December 31, 1993. Although such amount did not impact
Beverly's net income, for accounting purposes the $20,000,000 redemption
premium was treated as a reduction to income available to common
stockholders in the calculation of earnings per share for the year ended
December 31, 1993.
8
<PAGE> 21
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 three months ended October 31, 1994 and
1993 and the selected consolidated balance sheet data as of October 31, 1994 and
1993 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 three months ended
October 31, 1994 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 THREE
MONTHS ENDED OCTOBER 31, AT OR FOR THE YEARS ENDED JULY 31,
------------------------- ----------------------------------------------------------------------
1994 1993 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)......... $ 30,482 $ 27,388 $ 113,149 $ 109,934 $ 106,116 $ 81,686 $ 55,681
Gross margin............ 9,480 7,644 32,440 30,677 29,692 20,704 13,573
Operating income
(loss)................ 3,191 1,440 7,137 5,566 (1,376) 3,209 3,340
Income (loss) before
income taxes.......... 3,128 1,279 6,582 4,846 (2,771) 2,976 2,929
Net income (loss)....... 1,868 746 4,256 2,782 (2,011) 1,893 1,969
Per common share:
Net income (loss)..... $ 0.20 $ 0.08 $ 0.47 $ 0.30 $ (0.25) $ 0.21 $ 0.27
Cash dividends........ -- -- -- -- -- -- --
Weighted average number
of common shares
outstanding........... 8,887,000 8,710,000 8,721,000 8,692,000 8,725,000 8,795,000 7,161,000
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $ 55,205 $ 57,978 $ 53,962 $ 59,700 $ 61,305 $ 59,258 $ 32,672
Trade receivables,
net................... 21,213 19,149 20,690 18,274 20,810 20,506 11,409
Inventories............. 4,451 5,111 3,487 5,118 7,766 12,163 10,177
Working capital......... 16,962 7,002 16,747 12,969 21,554 23,986 26,661
Current maturities of
long-term debt........ 773 11,387 789 4,258 3,344 1,374 --
Long-term debt.......... 3,954 4,304 5,793 11,695 18,246 15,645 --
Redeemable convertible
preferred stock....... 1,200 1,200 1,200 1,200 1,200 1,200 --
Shareholders' equity.... 39,008 33,208 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.
9
<PAGE> 22
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data is
presented assuming the Merger will be accounted for as a pooling of interests,
and reflects the combination of the historical consolidated financial data of
Beverly and PMSI as if the Merger had been consummated at the beginning of the
earliest period presented. The unaudited pro forma data does not reflect
expenses expected to be incurred by Beverly and PMSI in connection with the
Merger. In addition, the following financial data does not reflect cost savings,
if any, which might be realized by Beverly after consummation of the Merger. See
"UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS."
BEVERLY ENTERPRISES, INC. AND PHARMACY MANAGEMENT SERVICES, INC.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEARS ENDED
----------------------- ------------------------------------
1994 1993 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total revenues....................... $2,299,447 $2,241,148 $3,009,812 $2,728,414 $2,410,318
Operating expenses................... 2,093,538 2,058,640 2,764,033 2,506,199 2,206,969
Interest............................. 44,518 48,837 63,645 64,120 69,176
Depreciation and amortization........ 70,875 67,123 89,648 90,621 89,529
Restructuring costs.................. -- -- -- 64,097 --
---------- ---------- ---------- ---------- ----------
2,208,931 2,174,600 2,917,326 2,725,037 2,365,674
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes and extraordinary charge..... 90,516 66,548 92,486 3,377 44,644
Provision for income taxes........... 30,230 22,931 31,748 3,443 13,528
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
charge............................. $ 60,286 $ 43,617 $ 60,738 $ (66) $ 31,116
========= ========= ========= ========= =========
Income (loss) per share of common
stock.............................. $ .56 $ .24 $ .40 $ (.01) $ .34
Shares used to compute income (loss)
per share of common stock.......... 97,270 90,033 91,451 87,968 91,584
FINANCIAL POSITION:
Total assets......................... $2,119,027
Working capital...................... 239,691
Long-term obligations, including
current portion.................... 771,373
Stockholders' equity................. 847,218
</TABLE>
10
<PAGE> 23
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 at
January 1, 1993, (c) the PMSI equivalent pro forma of one share of PMSI Common
Stock and PMSI Preferred Stock on an as-if-converted-to PMSI Common Stock basis.
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>
BEVERLY PMSI
BEVERLY PMSI PRO FORMA EQUIVALENT
HISTORICAL(3) HISTORICAL COMBINED(4) PRO FORMA(5)
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Book value per common share:
1994(1)........................................ $7.72 $ 4.05 $7.25 $ 8.55
1993(2)........................................ 7.00 3.75 6.58 7.76
Income per common share from continuing
operations:
Nine months ended 1994(1)...................... $ .59 $ .29 $ .56 $ .66
Year ended 1993(2)............................. .41 .30 .40 .47
</TABLE>
- ---------------
(1) Beverly has a calendar year end and PMSI has a July 31 fiscal year end.
Beverly historical data is as of or for the nine months ended September 30,
1994. PMSI historical data is as of or for the nine months ended April 30,
1994. The Beverly Pro Forma Combined Data reflects the combination of such
amounts.
(2) Beverly historical data is as of or for the year ended December 31, 1993.
PMSI historical data is as of or for the fiscal year ended July 31, 1993.
The Beverly Pro Forma Combined Data reflects the combination of such
amounts.
(3) The Beverly historical book value per common share amounts are calculated by
dividing historical common stockholders' equity less the assumed accretion
of the preferred stock redemption premium by the historical outstanding
common shares. The accretion amount assumes that the $20,000,000 redemption
premium above the $80,000,000 recorded amount of Beverly's Series A
Preferred Stock was treated as imputed dividends over the seven years from
1987 through 1993. Beverly recorded such $20,000,000 redemption premium in
1993 when it announced its intent to redeem the Series A Preferred Stock.
(4) The unaudited Beverly pro forma combined book value per share is based on
the outstanding shares of Beverly Common Stock at the end of each period
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
outstanding on an as-if-converted to PMSI common stock basis. The unaudited
Beverly pro forma combined earnings per common share from continuing
operations is based on the weighted average number of shares of Beverly
Common Stock outstanding for each period plus the weighted average
outstanding shares of PMSI for each period times the assumed conversion
ratio of 1.17857.
(5) PMSI Equivalent Pro Forma per share data is calculated by multiplying
Beverly Pro Forma combined per share information by 1.17857, which is the
assumed conversion ratio.
11
<PAGE> 24
RECENT EVENTS OF BEVERLY
RECENT OPERATING RESULTS
On January 30, 1995, Beverly announced its operating results for the fourth
quarter and the year ended December 31, 1994. Beverly reported income before
extraordinary charge of $19.3 million or $.20 per share and $76.9 million or
$.79 per share for the fourth quarter and the year ended December 31, 1994,
respectively, compared to $16.2 million or $.16 per share and $58.0 million or
$.66 per share (before the redemption premium on Series A preferred stock),
respectively, for the same periods in 1993. This represents a 33% increase in
income before extraordinary charge and a 20% increase in earnings per share for
the year ended December 31, 1994, as compared to the same period in 1993.
Beverly reported net income of $16.9 million or $.17 per share and $74.5 million
or $.76 per share for the fourth quarter and the year ended December 31, 1994,
respectively, compared to $16.2 million or $.16 per share and $55.6 million or
$.63 per share (before the redemption premium on Series A preferred stock), for
the corresponding periods in 1993.
Revenues increased to $768.6 million for the fourth quarter and
approximately $3 billion for the year ended December 31, 1994, compared to
$740.4 million and $2.9 billion, respectively, for the same periods in 1993.
Income before provision for income taxes and extraordinary charge was $28.8
million and $114.8 million for the fourth quarter and the year ended December
31, 1994, respectively, compared to $24.4 million and $87.6 million,
respectively, for the corresponding periods in 1993. Beverly reported
extraordinary charges in 1994 and 1993 related to the acceleration of
unamortized debt issue costs on certain debt that was refinanced. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
INSTITUTIONAL PHARMACY ACQUISITIONS
On November 15, 1994, Pharmacy Corporation of America, a California
corporation ("PCA"), and an indirect wholly-owned subsidiary of Beverly,
consummated a transaction whereby it acquired all of the issued and outstanding
shares of common stock (the "Insta-Care Shares") of Insta-Care Holdings, Inc., a
Florida corporation ("Insta-Care"), which was a subsidiary of Eckerd
Corporation, a Delaware corporation. Insta-Care provides pharmaceutical
dispensing services to approximately 65,000 patients in various institutions,
including nursing homes, transitional care facilities, correctional facilities
and group homes. On December 14, 1994, PCA consummated a transaction with
Synetic, Inc., a Delaware corporation ("Synetic"), whereby PCA acquired all the
issued and outstanding shares of common stock (the "Synetic Shares") of three
Synetic subsidiaries as follows: Dunnington Drug, Inc., a Delaware corporation;
Healthcare Prescription Services, Inc., an Indiana corporation; and Alliance
Health Services, Inc., a Delaware corporation (collectively, the "Synetic
Subsidiaries"). The Synetic Subsidiaries provide pharmaceutical dispensing
services in New England and Indiana to approximately 45,000 patients in various
institutions, including nursing homes, transitional care facilities,
correctional facilities and group homes. Neither the acquisition of Insta-Care
Shares nor the acquisition of the Synetic Shares is by and of itself an
acquisition significant to Beverly. However, because the acquisitions
collectively result in an acquisition of businesses which is deemed to be an
acquisition significant to Beverly, unaudited pro forma combined financial
statements with respect to these acquisitions are included in Beverly's Form
8-K/A filed on February 10, 1995, which amends Beverly's Form 8-K dated December
14, 1994. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
1994 CREDIT AGREEMENT
On November 1, 1994, Beverly executed a $375,000,000 Credit Agreement (the
"1994 Credit Agreement") with Morgan Guaranty Trust Company of New York which
provides for a $225,000,000 Term Loan (the "1994 Term Loan") and a $150,000,000
Revolver/Letter of Credit Facility (the "1994 Revolver/LOC Facility"). The
proceeds from the 1994 Term Loan were used to consummate the pharmacy
acquisitions discussed above. The 1994 Revolver/LOC Facility replaced Beverly's
revolving credit facility and letter of credit facility originally entered into
in 1993. Currently, the 1994 Term Loan and any Revolver borrowings will bear
interest at LIBOR, as defined, plus 1%, the Prime Rate, as defined, or the
adjusted CD rate, as defined, plus 1.125%, at Beverly's option. Such interest
rates may be adjusted quarterly based on certain financial ratio calculations.
The 1994 Term Loan requires quarterly principal and interest payments through
October 1999.
12
<PAGE> 25
CERTAIN CONSIDERATIONS
GOVERNMENTAL REGULATION AND REIMBURSEMENT
Approximately 80% of Beverly's room and board revenues were derived from
federal and state health care programs during the nine months ended September
30, 1994 and for the years ended December 31, 1993 and 1992. 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.
Periodically in the past, the health care industry, including Beverly's
long-term care facilities, has experienced a shortage of nurses to staff health
care operations. Currently, Beverly is not experiencing a nursing shortage.
Beverly competes with other health care providers for nursing personnel and a
nursing
13
<PAGE> 26
shortage could force Beverly to pay higher salaries and make greater use of
registry (temporary nursing and 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."
14
<PAGE> 27
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 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.
15
<PAGE> 28
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
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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
proxies 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.
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THE MERGER
GENERAL
The Merger Agreement provides for a business combination between Beverly
and PMSI in which Acquisition, a wholly-owned subsidiary of Beverly, would be
merged with and into PMSI and the holders of PMSI Common Stock would be issued
Beverly Shares in a transaction intended to qualify as a pooling of interests
for accounting purposes 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, although Beverly may transfer the stock of PMSI to one of its other
wholly-owned subsidiaries following the Effective Time of the Merger. 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 healthcare reform, the
rapid consolidation occurring in the healthcare 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.
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, among other factors and
information, the advice of its management, legal counsel, and financial advisor
and the following:
(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 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
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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 (vi) 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; and
(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.
In considering the foregoing factors, the PMSI Board took all the factors into
consideration as a whole without assigning any relative weight to them.
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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 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
were 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; the
respective companies' historical and projected 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 pooling of interests in
accordance with generally accepted accounting principles 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
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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 PMSI 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.
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. 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: BCBS Michigan/State Accident Fund; Value Health, Inc./Community
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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 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 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 ranges of premiums for such
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 paid 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 0.875% of the first $110 million of the total
consideration to be paid (including debt assumed) in the Merger, plus 2.5% of
the next $40 million of such consideration, plus 4% of such consideration in
excess of $150 million. PMSI also has agreed to reimburse Smith Barney for
reasonable travel and other out-of-pocket expenses incurred by Smith
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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 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 an
option 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
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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 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
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<PAGE> 39
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 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
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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
Both Beverly and PMSI believe that the Merger will qualify as a pooling of
interests for accounting and financial reporting purposes. Under this method of
accounting, the assets and liabilities of Beverly and PMSI will be combined
based on the respective carrying values of the accounts in the historical
financial statements of each entity. Results of operations of the combined
company will include income of Beverly and PMSI for the entire calender year in
which the combination occurs, with certain adjustments to account for the
differing reporting periods of the separate companies, and the historical
results of operations of the separate companies for prior years will be combined
and reported as the results of operations of the combined company based on their
respective year ends. Consummation of the Merger is conditioned upon the receipt
by Beverly of a letter from Ernst & Young LLP concurring with the opinion of
Beverly and PMSI that the Merger will qualify for pooling-of-interests
accounting treatment. See "THE MERGER AGREEMENT -- Conditions."
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 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.
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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 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 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
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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 have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied.
Beverly and PMSI have each filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division on January 30, 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. Unless a request from the
FTC for additional information and documentary material is received by Beverly
and PMSI, the waiting period with respect to such notifications to the FTC and
the Antitrust Division will terminate thirty (30) days after the filing of such
notifications, unless the FTC voluntarily terminates the waiting period prior to
such time.
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. In
addition, an Affiliate of PMSI may not sell (subject to certain de minimis
exceptions), or in any other way reduce said Affiliate's relative risk to, the
Beverly Shares received by such Affiliate in the Merger until after such time as
Beverly publishes results covering at least 30 days of combined operations of
Beverly and PMSI. The form of the Affiliate Agreement of PMSI is set forth as
Appendix D attached hereto. 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 copy 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."
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 on shares of
Beverly Common Stock or other securities represented by a Stock Certificate
until the shareholder properly surrenders the Stock Certificate for exchange.
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 such surrender,
the amount of any dividends or other distributions on the Beverly
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<PAGE> 45
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; (n) PMSI not taking any action described in
Accounting Principles Board Opinion No. 16 that would prevent Beverly from
accounting for the Merger as a pooling of interests; and (o) 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
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validly existing corporation in good standing under the laws of its state of
incorporation; (ii) conduct its affairs 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 GAAP) 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.
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 Department of Business; (ix) that Beverly shall have
received an opinion letter from its independent public
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accountants concerning the qualification of the Merger for "pooling of
interests" accounting treatment; and (x) 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.
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 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
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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 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.
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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 or the qualification of the Merger as a pooling of interests.
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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 1994 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. 2), 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 operator of skilled nursing facilities in the United
States. At September 30, 1994, Beverly operated 730 nursing facilities with
78,360 licensed beds. The facilities are located in 33 states and the District
of Columbia, and range in capacity from 20 to 388 beds. At September 30, 1994,
Beverly also operated 40 retirement and congregate living projects containing
2,524 units, 43 pharmacies and pharmacy-related outlets, six transitional
hospitals and five home health care entities. Beverly's facilities had average
occupancy of 88.4% during the nine months ended September 30, 1994 and 88.5%,
88.4% and 88.1% during the years ended December 31, 1993, 1992 and 1991,
respectively. See "SUMMARY -- Recent Events."
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 (see
"SUMMARY -- Recent Events of Beverly") 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.
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<PAGE> 53
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Statements of Income for the
years ended 1993, 1992 and 1991 and the nine months ended 1994 and 1993 are
presented to show the effects of the Merger for each of the respective periods.
Beverly has a calendar year end and PMSI has a July 31 fiscal year end. The pro
forma results combine Beverly's results of operations for the years ended
December 31 or nine-month periods ended September 30 with PMSI's results of
operations for the fiscal years ended July 31 or nine-month periods ended April
30, respectively. Such unaudited pro forma statements of income are in effect a
restatement of the historical income statements as if the combination had been
consummated as of January 1 of the earliest period presented. The Unaudited Pro
Forma Combined Balance Sheet as of 1994 combines Beverly's balance sheet as of
September 30, 1994 with PMSI's balance sheet as of April 30, 1994 and gives
effect to the Merger as if it had occurred at the balance sheet date. Net income
(loss) per share and weighted average shares outstanding give effect to the
issuance of 1.17857 Beverly Shares in exchange for each outstanding share of
PMSI on an as-if-converted to PMSI Common Stock basis. In addition, the
Unaudited Pro Forma Combined Statements of Income do not reflect expenses
expected to be incurred by Beverly and PMSI in connection with the Merger nor do
they give effect to the cost savings, if any, which may be realized by Beverly
after consummation of the Merger. Certain amounts in PMSI's historical financial
statements have been reclassified to conform with Beverly's presentation.
The unaudited pro forma financial information should be read in conjunction
with the historical consolidated financial statements in Appendix J hereto and
included or incorporated by reference herein. These unaudited pro forma
statements are not necessarily indicative of the financial position or results
of operations 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. See
Appendix J -- Beverly Current Report on Form 8-K/A dated December 14, 1994.
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<PAGE> 54
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
BEVERLY PMSI PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 69,344 $ 873 $ 70,217
Accounts receivable -- patient, less
allowance for doubtful accounts........... 361,384 19,589 380,973
Accounts receivable -- nonpatient, less
allowance for doubtful accounts........... 51,817 451 52,268
Notes receivable............................. 3,091 112 3,203
Operating supplies........................... 61,065 3,912 64,977
Deferred income taxes........................ 24,576 548 25,124
Prepaid expenses and other................... 36,874 742 37,616
---------- ---------- ----------
Total current assets................. 608,151 26,227 634,378
Property and equipment, net.................... 1,169,140 8,522 1,177,662
Other assets:
Notes receivable, less allowance for doubtful
notes..................................... 41,209 72 41,281
Designated and restricted funds.............. 41,637 -- 41,637
Goodwill, net................................ 70,529 15,467 85,996
Operating and leasehold rights and licenses,
net....................................... 23,310 -- 23,310
Other, net................................... 111,118 3,645 114,763
---------- ---------- ----------
Total other assets................... 287,803 19,184 306,987
---------- ---------- ----------
$2,065,094 $ 53,933 $2,119,027
========== ======== ==========
Current liabilities:
Accounts payable............................. $ 124,029 $ 4,057 $ 128,086
Accrued wages and related liabilities........ 128,209 1,902 130,111
Accrued interest............................. 8,859 39 8,898
Other accrued liabilities.................... 75,092 1,235 76,327
Current portion of long-term obligations..... 37,336 8,064 45,400
Income taxes payable......................... 5,865 -- 5,865
---------- ---------- ----------
Total current liabilities............ 379,390 15,297 394,687
Long-term obligations.......................... 724,181 1,792 725,973
Deferred income taxes payable.................. 74,130 213 74,343
Other liabilities and deferred items........... 76,806 -- 76,806
PMSI redeemable preferred stock................ -- 1,200 (1,200)(1) --
Stockholders' equity:
Preferred stock.............................. 150,000 2 (2)(1) 150,000
Common stock................................. 8,954 87 970(1) 10,011
Additional paid-in capital................... 607,909 26,493 232(1) 634,634
Retained earnings............................ 83,859 8,849 92,708
Treasury stock, at cost...................... (40,135) -- (40,135)
---------- ---------- ----------- ----------
810,587 35,431 1,200 847,218
---------- ---------- ----------- ----------
$2,065,094 $ 53,933 $ -- $2,119,027
========== ========= =========== ==========
</TABLE>
- ---------------
(1) Adjustment to record the issuance of 10,569,000 shares of Beverly Common
Stock, using an assumed conversion ratio of 1.17857, in exchange for all of
the outstanding shares of PMSI on an as-if-converted to PMSI Common Stock
basis.
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<PAGE> 55
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEARS ENDED
----------------------- ------------------------------------
1994 1993 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net operating revenues............... $2,288,664 $2,229,891 $2,994,385 $2,713,872 $2,389,993
Interest income...................... 10,783 11,257 15,427 14,542 20,325
---------- ---------- ---------- ---------- ----------
Total revenues............. 2,299,447 2,241,148 3,009,812 2,728,414 2,410,318
Costs and expenses:
Operating and administrative:
Wages and related............... 1,207,665 1,209,640 1,624,295 1,519,556 1,380,713
Other........................... 885,873 849,000 1,139,738 986,643 826,256
Interest........................... 44,518 48,837 63,645 64,120 69,176
Depreciation and amortization...... 70,875 67,123 89,648 90,621 89,529
Restructuring costs................ -- -- -- 64,097 --
---------- ---------- ---------- ---------- ----------
Total costs and expenses... 2,208,931 2,174,600 2,917,326 2,725,037 2,365,674
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes and extraordinary charge..... 90,516 66,548 92,486 3,377 44,644
Provision for income taxes........... 30,230 22,931 31,748 3,443 13,528
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
charge............................. $ 60,286 $ 43,617 $ 60,738 $ (66) $ 31,116
========== ========== ========== ========== ==========
Income (loss) per share of common
stock.............................. $ .56 $ .24 $ .40 $ (.01) $ .34
Shares used to compute income (loss)
per share.......................... 97,270 90,033 91,451 87,968 91,584
</TABLE>
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<PAGE> 56
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 December 31, 1994, Beverly had outstanding 85,648,614
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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<PAGE> 58
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.
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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.
Although the Beverly Certificate includes the Beverly Business Combination
provision, the Beverly Certificate does not exclude Beverly from the
requirements imposed under Section 203 of the DGCL. It is anticipated that the
provisions of Section 203 of the DGCL may encourage companies interested in
acquiring Beverly to negotiate in advance with the Beverly Board of Directors,
since the stockholder approval requirement would be avoided if a majority of the
directors then in office approve either the business combination or the
transaction which results in the stockholder becoming an interested stockholder.
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
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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 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 any provision to the Beverly Certificate or the Beverly Bylaws
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.
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 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.
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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.
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.
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EXPERTS
The consolidated financial statements of Beverly Enterprises, Inc. at
December 31, 1993 and 1992 and for each of the three years in the period ended
December 31, 1993, appearing in Beverly Enterprises, Inc.'s Annual Report on
Form 10-K, as amended, for the year ended December 31, 1993, 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 to Shareholders and incorporated in its Annual Report
on Form 10-K, as amended, for the year ended July 31, 1994, have been audited by
Coopers & Lybrand LLP, 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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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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(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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(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 by and among Beverly
Enterprises, Inc., Beverly Acquisition, Inc. and Pharmacy Management
Services, Inc. ("PMSI") included in the Prospectus/Proxy Statement as
Appendix A (the "PMSI Merger").
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.
4.7* Supplemental Indenture No. 6, dated as of December 30, 1994, to the
Senior Secured Note Indenture.
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<TABLE>
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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).
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)).
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<TABLE>
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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.
10.5* Form of Other Stock Unit Agreement under the 1993 Plan.
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.
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.
</TABLE>
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<TABLE>
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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.
10.19* Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan.
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.
</TABLE>
II-6
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -------------------------------------------------------------------------
<C> <S>
10.29* Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and its Executive Vice
Presidents.
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.
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.
10.42* Ninth Amendment dated as of November 9, 1994 to the LTCB Credit
Agreement.
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -------------------------------------------------------------------------
<C> <S>
10.43* Tenth Amendment dated as of December 6, 1994 to the LTCB Credit
Agreement.
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.
10.45* Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture").
10.46* Series Supplement dated as of December 1, 1994 to the Chemical Indenture.
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.
10.50* Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement.
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").
10.52* First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement.
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.
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.
11.1** Computation of Net Income (Loss) Per Share.
</TABLE>
II-8
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -------------------------------------------------------------------------
<C> <S>
21.1 Subsidiaries of Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 22.1 to Beverly Enterprises, Inc.'s Form 10-K, as amended, for
the year ended December 31, 1993).
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 LLP, Independent Accountants.
24.1* Power of Attorney included on the signature page.
99.1* Form of Consent for the PMSI shareholders.
</TABLE>
(b) Financial Statement Schedules: [Incorporated by Reference to Beverly
Enterprises, Inc. Annual Report on Form 10-K dated December 31, 1993, as
amended]
<TABLE>
<S> <C>
VIII. Valuation and Qualifying Accounts
</TABLE>
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.
(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
II-9
<PAGE> 73
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.
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<PAGE> 74
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 February 10, 1995.
BEVERLY ENTERPRISES, INC.
By: /s/ DAVID R. BANKS
------------------------------------
David R. Banks
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each of the undersigned hereby constitutes
and appoints David R. Banks, Robert W. Pommerville and John W. MacKenzie, and
each or any of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute, and file
with the Securities and Exchange Commission and any state securities regulatory
board or commission any documents relating to the proposed issuance and
registration of the securities offered pursuant to this Registration Statement
on Form S-4 under the Securities Act of 1933, as amended, including any and all
amendments relating thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorney, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done.
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, February 10, 1995
- --------------------------------------------- President, Chief Executive
David R. Banks Officer and Director
/s/ ROBERT D. WOLTIL Executive Vice President, February 10, 1995
- --------------------------------------------- Finance and Chief Financial
Robert D. Woltil Officer
/s/ SCOTT M. TABAKIN Vice President, Controller February 10, 1995
- --------------------------------------------- and Chief Accounting Officer
Scott M. Tabakin
/s/ BERYL F. ANTHONY, JR. Director February 10, 1995
- ---------------------------------------------
Beryl F. Anthony, Jr.
/s/ CURT F. BRADBURY Director February 10, 1995
- ---------------------------------------------
Curt F. Bradbury
Director , 1995
- ---------------------------------------------
James R. Greene
</TABLE>
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<PAGE> 75
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ JON E. M. JACOBY Director February 10, 1995
- ---------------------------------------------
Jon E. M. Jacoby
/s/ LOUIS W. MENK Director February 10, 1995
- ---------------------------------------------
Louis W. Menk
/s/ WILL K. WEINSTEIN Director February 10, 1995
- ---------------------------------------------
Will K. Weinstein
</TABLE>
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<PAGE> 76
INDEX TO EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ------------------------------------------------------------------------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger dated December 26, 1994 by and among Beverly
Enterprises, Inc., Beverly Acquisition, Inc. and Pharmacy Management
Services, Inc. ("PMSI") included in the Prospectus/Proxy Statement as
Appendix A (the "PMSI Merger")...........................................
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...................................................
4.7* Supplemental Indenture No. 6, dated as of December 30, 1994, to the
Senior Secured Note Indenture............................................
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ------------------------------------------------------------------------- ----
<C> <S> <C>
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).......................
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)).............................................
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ------------------------------------------------------------------------- ----
<C> <S> <C>
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..........................
10.5* Form of Other Stock Unit Agreement under the 1993 Plan...................
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.....................................................................
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.....................................................................
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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..........................................................
10.19* Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan..........................................................
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.............................
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10.29* Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and its Executive Vice
Presidents...............................................................
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.................................................................
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................................................................
10.42* Ninth Amendment dated as of November 9, 1994 to the LTCB Credit
Agreement................................................................
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10.43* Tenth Amendment dated as of December 6, 1994 to the LTCB Credit
Agreement................................................................
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......................
10.45* Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture")..............................................................
10.46* Series Supplement dated as of December 1, 1994 to the Chemical
Indenture................................................................
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................................................................
10.50* Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement................................................................
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")...............................................
10.52* First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement................................................................
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..................................................
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...............................................................
11.1** Computation of Net Income (Loss) Per Share...............................
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21.1 Subsidiaries of Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 22.1 to Beverly Enterprises, Inc.'s Form 10-K, as amended, for
the year ended December 31, 1993)........................................
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 LLP, Independent Accountants................
24.1* Power of Attorney included on the signature page.........................
99.1* Form of Consent for the PMSI shareholders................................
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* Filed herewith.
** To be filed by amendment.
<PAGE> 83
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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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.
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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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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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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
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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
<PAGE> 145
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
-10-
<PAGE> 154
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> 155
<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> 156
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 to
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-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 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 employers' 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
3
<PAGE> 157
APPENDIX G
Annual Report
Fiscal Year 1994
<PAGE> 158
CORPORATE PROFILE
Pharmacy Management Services, Inc. (PMSI) 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 can provide essentially all of an injured worker's healthcare
related needs, from the time of the on-the-job injury through return to work or
home care. These services enhance the quality of care for the claimant while
controlling the cost of care for the payor.
PMSI's managed care services include: first notice of injury reporting;
case management and vocational counseling; a preferred provider organization
(PPO) of hospitals, physicians and ancillary providers; a retail prescription
drug card; home delivery of medical supplies, medical equipment and prescription
drugs; and an array of computer-driven products to reduce a payor's
administrative costs.
The Company markets its services and products nationally through field
representatives who work directly with insurance companies, state insurance
funds, third-party administrators and self-insured, self-administered employers.
The Company serves over 35,000 referring claims representatives in 15,000 claims
offices, representing 4,000 payors.
PMSI is headquartered in Tampa, Florida, and the Company's common stock is
traded in the Nasdaq National Market System under the symbol PMSV.
TABLE OF CONTENTS
Selected Financial Data..................................................... 1
Letter to Shareholders...................................................... 2
Management's Discussion and Analysis........................................ 5
Consolidated Financial Statements........................................... 8
Notes to Consolidated Financial Statements.................................. 11
Report of Independent Accountants........................................... 20
Directors and Officers........................................ Inside Back Cover
Corporate Information......................................... Inside Back Cover
Notice of Annual Meeting...................................... Inside Back Cover
<PAGE> 159
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 included in this Annual
Report.
<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 3,566 (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.)
MARKET FOR COMMON STOCK AND DIVIDEND INFORMATION
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 $21.4 million at July 31, 1994. At July 31,
1994, the Company had approximately 5,500 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 $5 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>
1
<PAGE> 160
Letter to Shareholders
We are pleased to present PMSI's 1994 Annual Report for the fiscal year
ended July 31, 1994. The Company's performance during fiscal year 1994 resulted
in earnings of $.47 per common share -- a significant improvement over the
previous fiscal year, positive cash flow from operating activities of $8.6
million, and an $8.5 million reduction of bank debt to less than $5 million at
July 31, 1994. These accomplishments reflect the commitment and dedication of
the Company's employees, management and directors.
Since the Company's initial public offering in April 1990, investments in
personnel, computer system enhancements, expense monitoring and controls and the
1991 acquisitions of a preferred provider organization, two case management
companies and a software product and development company have enabled PMSI to
maintain leadership in the national workers' compensation cost containment and
managed care marketplace. Although competition has increased as the industry
reacts to national healthcare reform, we believe PMSI is properly positioned to
continue to provide cost-effective, quality healthcare services and products to
claimant and payor customers.
We are very proud of our people and of our success during the past fiscal
year. Some of our accomplishments include:
- earnings growth in excess of 50% over the previous year to $.47 per
common share;
- positive cash flow from operating activities for the third consecutive
year, reducing bank debt to less than $5 million;
- increased customer penetration due to further integration of our service
offering;
- growth of the managed care business, particularly the Company's preferred
provider organization;
- effective prescription drug management, including generic drug
substitution; and
- addition of a new board member with extensive industry knowledge.
These accomplishments, along with a long history of providing customers with
quality managed healthcare and cost containment services, allow PMSI to continue
to capitalize on the ever-growing workers' compensation market. Now, we not only
search out ways to control costs associated with work-related injuries, but also
work hand-in-hand with employees to develop programs to reduce, and even
prevent, the occurrence of work injuries. As our payor customers strive to
provide injured workers with quality services for return to health and work,
PMSI is right there with them, developing new, creative and convenient ways for
claimants to receive quality healthcare, while containing the payors' costs.
FINANCIAL ACCOMPLISHMENTS
For fiscal year 1994, PMSI's earnings were $.47 per common share on net
revenues of $113.1 million, compared to $.30 per common share on net revenues of
$109.9 million for fiscal year 1993. The increase of over 50% in earnings per
common share reflects an aggressive management of expenses, gross margin
improvement and profitable growth, particularly in the preferred provider
organization.
2
<PAGE> 161
The positive cash flow from operating activities of $8.6 million for fiscal
year 1994 allowed for a reduction in bank debt of $8.5 million, bringing bank
debt to less than $5 million outstanding at July 31, 1994. In addition, the
Company executed a new three-year, $15 million revolving credit agreement with
two banks.
Financial performance and liquidity were achieved in fiscal year 1994 while
absorbing the costs of expanding our preferred provider organization network and
developing our new case management software. These current year expenditures
will benefit future earning and drive revenue growth in fiscal year 1995 and
beyond.
CUSTOMER ACCOMPLISHMENTS
During fiscal year 1994, PMSI built upon its strategy to expand customer
utilization of its entire service offering. By all indications, workers'
compensation insurance payors like having a single-source, comprehensive
provider of services to effectively manage injured workers' healthcare and to
monitor and report results. PMSI offers the full range of integrated services
payors require to control workers' compensation expenses: first notice of injury
reporting; case management and vocational counseling; a preferred provider
organization (PPO) of physicians, hospitals and clinics; a comprehensive
prescription drug program, including retail and home delivery; home delivery of
medical supplies and equipment; and, an array of computer-driven products to
reduce administrative costs.
The managed care portion of our service offering, which includes first
notice of injury reporting, case management and the PPO network, has grown to
24% of total revenues. For fiscal year 1994, managed care revenues grew by
approximately 25%. This growth resulted from both our customer penetration
efforts and the acquisition of new customers.
Achievement of these positive results were accomplished while continuing to
invest in expansion of the PPO network and while developing a "Gatekeeper"
program that directs an injured worker to a primary care physician who monitors
his or her care. In addition, a state-of-the-art software system has been
developed to provide better and more timely data to case managers and payors and
improved controls of case management and vocational counseling, as well as the
managed care process.
Our pharmacy program, which was created almost 20 years ago and provides
claimants with prescription drugs through home delivery, now also provides
prescription drugs through a retail prescription drug card program with a
national network of 30,000 retail pharmacies. Continual evaluation of processes
and procedures for drug delivery enables the Company to stay at the forefront of
service to our customers. Generic prescription drug conversion provides
claimants with drugs compensable to their injury, while reducing prescription
drug costs to payors. Although the Company's gross margin dollars for brand-name
and generic drugs are similar, revenue growth is diminished by aggressive
generic drug substitution.
MANAGEMENT
We strengthened our Board of Directors with the addition of Peter T.
Pruitt. Peter has extensive experience within the industry, as well as knowledge
of the property and casualty insurance business, having devoted thirty-five
years to the insurance brokerage business. He is currently Executive Vice
President of Willis Corroon Corporation, an international provider of
value-added services in insurance and reinsurance brokering, risk management and
employee benefit consulting.
3
<PAGE> 162
INDUSTRY OVERVIEW
It appears that workers' compensation insurance will not be included in the
impending healthcare reform package. However, at the state government level,
there appears to be considerable effort to enact managed care legislation.
Because many of these initiatives include workers' compensation programs, PMSI
has been very active, particularly in the three major workers' compensation
states of Florida, California and Texas, to ensure that all of our services can
support these legislative programs. Managed care organizations, healthcare
organizations, health maintenance organizations and others are all searching for
ways to reduce medical costs and provide quality and appropriate care to
patients. We believe that PMSI's programs effectively do just that for workers'
compensation claimants and payors.
We are pleased with the Company's fiscal year 1994 financial results and
with PMSI's ability to continue to be a leading competitor in an increasingly
competitive marketplace. Investments for long term growth are paying off in
profitability, and with the continued dedication and perseverance of all of us,
will pay off in increased revenues.
We acknowledge and thank our employees, management, directors and you, our
shareholders, for the commitment and support you have demonstrated as we enter
fiscal year 1995.
[PICTURES]
<TABLE>
<S> <C>
Cecil S. Harrell Bertram T. Martin, Jr.
/s/ CECIL S. HARRELL /s/ BERTRAM T. MARTIN, JR.
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
4
<PAGE> 163
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
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 professionally managed solutions for
workers' compensation payors and claimants.
The operating efficiencies and improved cash flow achieved by these actions has
permitted the Company to concentrate on increasing its market share for its home
delivery service, its preferred provider 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. 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.
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 revenues from the PPO and case management
services.
5
<PAGE> 164
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
In fiscal year 1992, the Company incurred restructuring charges of
approximately $7,097,000 (before income tax benefit) due to changes in senior
management, a revaluation of the assets of TMD in anticipation of its sale,
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.
Gain on Sale of TMD
In fiscal year 1993, the Company recognized a non-recurring gain of
$950,000 on the sale of TMD. 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 to their then current market value because of the limited liquidity
resulting from resale restrictions imposed by state and federal securities laws.
(See Note 11 of Notes to Consolidated Financial Statements).
Write-Off of Goodwill
In fiscal year 1993, the Company wrote off approximately $620,000 of
goodwill allocated to the 1991 acquisition of the bill auditing business of
Insurance Software Packages, Inc. This business unit was integrated with the
Company's PPO services in November 1992, and the Company determined that it was
no longer appropriate to have this goodwill reflected on its records.
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
6
<PAGE> 165
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 has $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. Management believes that the Company's working
capital is sufficient to maintain its current and immediately foreseeable levels
of operations.
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, together with the funds available under its credit
facility, will be sufficient to satisfy the Company's anticipated capital
requirements for the foreseeable future.
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 worker's compensation.
The Company's future liquidity will continue to be dependent on its
operating cash flow and management of trade receivables and inventories.
7
<PAGE> 166
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.
8
<PAGE> 167
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.
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.
9
<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
Reduction 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.
10
<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 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 over 40 years. 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.
This business unit was integrated with the Company's PPO services in November
1992, and the Company determined that it was no longer appropriate to have this
goodwill reflected in its records.
11
<PAGE> 170
Other intangibles consist primarily on 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 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 dilative 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.
12
<PAGE> 171
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 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 $283,000,
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.
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>
13
<PAGE> 172
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>
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.
14
<PAGE> 173
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.
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>
15
<PAGE> 174
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.
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
on $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.
16
<PAGE> 175
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 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 the 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
holders 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 entitled 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
17
<PAGE> 176
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 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 Devises, Inc. (TMD), in a transaction valued at approximately $7
million. The total consideration for the sale consisted of $500,00 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 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
18
<PAGE> 177
temporary and the Company has price protection for potential declines in the
market value between November 15, 1992 and November 15, 1994.
12. RESTRUCTURING CHARGES
During the fourth quarter of fiscal year 1992, the Company recorded pre-tax
restructuring charges of $7,097,000 ($4.4 million after tax or $.50 per share)
related to the revaluation of certain assets of TMD to their realizable value in
anticipation of the sale of TMD (See note 11) and further reflects 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.
19
<PAGE> 178
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
20
<PAGE> 179
DIRECTORS AND OFFICERS
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
DIRECTORS OFFICERS SENIOR OFFICERS OF SUBSIDIARIES
Cecil S. Harrell Cecil S. Harrell Prescription Management Services, Inc.
Chairman of the Board and Chief Chairman of the Board and Chief Prescription Processing Services, Inc.
Executive Officer of PMSI Executive Officer Billing Services, Inc.
Bertram T. Martin, Jr. Bertram T. Martin, Jr. Michael W. Clark
President and Chief Operating President and Chief Operating President
Officer of PMSI Officer
Michael R. Webb
David N. Campbell* David L. Redmond Vice President of Sales
Retired Senior Officer of Teco Secretary, Treasurer, Senior Vice
Energy, Inc., Business Consultant President and Chief Financial MedView Services, Incorporated
Officer Insurance Software Packages, Inc.
W. Seymour Holt* Gerald R. Gerlach
Retired Senior Officer of Eli Lilly, Vice President and Controller Robert H. Marks
Inc. President
Linda Giordano
Peter T. Pruitt Vice President of Administration Debra Cerre-Reudisili
Executive Vice President Senior Vice President and
Willis-Corroon Corporation Chief Operating Officers
*Member of the Audit Committee Resource Opportunities, Inc.
Alice T. Hall
President
Michael J. Leep
Vice President of Operations
</TABLE>
CORPORATE INFORMATION
<TABLE>
<S> <C> <C>
INDEPENDENT AUDITORS NOTICE OF ANNUAL MEETING FORM 10-K
Coopers & Lybrand, L.L.P. The Annual Meeting of Shareholders A copy of the Company's Annual
Tampa, Florida will be held at PMSI headquarters, Report on Form 10-K for fiscal year
Sabal Park, Tampa, Florida, on 1994, as filed with the Securities
CORPORATE COUNSEL Thursday, January 19, 1995, at 9:00 and Exchange Commission, will be
A.M. provided without charge (except for
Glenn Rasmussen & Fogarty exhibits) to any shareholders upon
Tampa, Florida written request addressed to:
TRANSFER AGENT David L. Redmond
Chief Financial Officer
Chemical Bank Pharmacy Management Services, Inc.
New York, New York 3611 Queen Palm Drive
Tampa, Florida 33619
</TABLE>
<PAGE> 180
APPENDIX H
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1994
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 or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
3611 QUEEN PALM DRIVE, TAMPA, FLORIDA 33619
(Address of Principal Executive Offices)
813/626-7788
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
------- ------
NUMBER OF OUTSTANDING SHARES OF EACH CLASS OF
REGISTRANT'S COMMON STOCK AS OF JUNE 3, 1994:
COMMON STOCK, PAR VALUE $.01.....8,740,043
H-1
<PAGE> 181
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I -- Financial Information
Item 1 -- Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for
the three and nine months ended April 30, 1994 and
1993 (Unaudited)........................................................... 2
Condensed Consolidated Balance Sheets as of
April 30, 1994 and 1993 (Unaudited) and July 31, 1993...................... 3
Condensed Consolidated Statements of Cash Flow for the
three months and nine months ended April 30, 1994 and 1993
(Unaudited)................................................................ 4
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................................ 5-7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................ 8-10
PART II Other Information
Item 6 -- Exhibits and Reports on Form 8-K........................................... 11
Signatures................................................................................ 11
</TABLE>
H-2
<PAGE> 182
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
--------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues $28,670 $27,483 $84,137 $81,722
Cost of revenues 20,285 19,761 60,243 58,902
------- ------- ------- -------
Gross margin 8,385 7,722 23,894 22,820
Costs and expenses:
Selling, general and administrative 5,567 5,478 16,441 16,869
Depreciation and amortization 890 766 2,516 2,145
------- ------- ------- -------
Operating income 1,938 1,478 4,937 3,806
Other income (expense):
Interest, net (145) (265) (470) (834)
Gain on sale of TMD -- -- -- 950
Write off of goodwill -- -- -- (620)
Other 11 2 15 20
------- ------- ------- -------
Income before income taxes 1,804 1,215 4,482 3,322
Provision for income taxes 745 475 1,839 1,506
------- ------- ------- -------
Net income $ 1,059 $ 740 $ 2,643 $ 1,816
======= ======= ======= =======
Net income per common share $ 0.12 $ 0.08 $ 0.29 $ 0.19
======= ======= ======= =======
Weighted average number of common shares
outstanding 8,742 8,683 8,702 8,701
======= ======= ======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited)
H-3
<PAGE> 183
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, APRIL 30, JULY 31,
1994 1993 1993
--------- --------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 873 $ 2 $ 2,594
Trade receivables, net 19,588 17,931 18,274
Inventories 3,912 6,721 5,118
Prepaid expenses and other 1,250 1,917 1,308
------- ------- -------
TOTAL CURRENT ASSETS 25,623 26,571 27,294
PROPERTY AND EQUIPMENT, NET 8,522 9,175 8,924
GOODWILL AND OTHER INTANGIBLES 16,056 17,280 16,867
NOTES RECEIVABLE 184 2,930 3,002
EQUITY SECURITIES 1,240 1,400 1,400
OTHER ASSETS 1,816 2,361 2,213
------- ------- -------
TOTAL ASSETS $53,441 $59,717 $59,700
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 8,064 $ 5,523 $ 4,258
Accounts payable 3,857 6,090 6,947
Accrued compensation and benefits 1,902 1,230 1,457
Accrued leases costs 1,040 789 874
Other current liabilities 155 587 789
------- ------- -------
TOTAL CURRENT LIABILITIES 15,018 14,219 14,325
LONG-TERM DEBT 1,792 12,764 11,695
REDEEMABLE CONVERTIBLE PREFERRED STOCK 1,200 1,200 1,200
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Series B Cumulative Convertible Preferred Stock 1 1 1
Series C Cumulative Convertible Preferred Stock 1 1 1
Common Stock, $.01 par value; authorized -- 20,000,000
shares; issued and outstanding 8,740,043; 8,727,650 and
8,664,950 at April 30, 1994, April 30, 1993, and July
31, 1993, respectively 87 87 87
Additional paid-in capital 26,493 26,106 25,943
Retained earnings 8,849 5,792 6,448
Treasury stock, at cost -- (453) --
------- ------- -------
NET SHAREHOLDERS' EQUITY 35,431 31,534 32,480
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $53,441 $59,717 $59,700
======= ======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited)
H-4
<PAGE> 184
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
--------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,059 $ 740 $ 2,643 $ 1,816
------- ------- ------- -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 880 766 2,516 2,145
(Gain) loss on sale of property and equipment (1) -- 7 --
Decrease (increase) in trade receivables 316 808 (1,314) 2,879
Decrease (increase) in inventories 436 328 1,206 1,045
Decrease (increase) in prepaid expenses and other 297 2,090 58 2,095
Decrease (increase) in notes receivable 32 (199) 2,818 (2,930)
Decrease (increase) in other assets 312 (244) 592 (326)
Increase (decrease) in accounts payable (2,009) 2,188 (3,090) 1,310
Increase (decrease) in other current liabilities 476 (652) (23) (1,423)
------- ------- ------- -------
Total adjustments 739 5,085 2,770 4,795
------- ------- ------- -------
Net cash provided by operating activities 1,798 5,825 5,413 6,611
------- ------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (821) (316) (1,505) (2,395)
Decrease (increase) in equity securities 160 -- 160 (1,400)
Additional consideration paid on acquisitions, net of
write-downs of goodwill -- -- -- (380)
------- ------- ------- -------
Net cash used in investing activities (661) (316) (1,345) (4,175)
------- ------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease (increase) in notes payable and long term
debt (782) (5,677) (6,097) (3,303)
Issuance of Common Stock 585 4 585 4
Preferred stock dividends (142) (142) (178) (178)
Purchases of Treasury Stock (99) (76) (99) (76)
------- ------- ------- -------
Net cash used in financing activities (438) (5,891) (5,789) (3,553)
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents 699 (382) (1,721) (1,117)
Cash and cash equivalents at beginning of period 174 384 2,594 1,119
------- ------- ------- -------
Cash and cash equivalents at end of period $ 873 $ 2 $ 873 $ 2
======= ======= ======= =======
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 113 $ 286 $ 529 $ 928
======= ======= ======= =======
Income taxes $ 653 $ 24 $ 2,392 $ 57
======= ======= ======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
(Unaudited)
H-5
<PAGE> 185
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Pharmacy Management Services, Inc. and its subsidiaries have been
prepared in accordance with the Securities and Exchange Commission's
instructions to Form 10-Q and, therefore, omit or condense footnotes and
other information normally included in financial statements prepared in
accordance with generally accepted accounting principles. The accounting
policies followed for quarterly financial reporting conform with
generally accepted accounting principles for interim financial statements
and include those accounting policies disclosed in Note 1 to the Notes to
Consolidated Financial Statements included in the Company's Annual Report
on Form 10-K for the fiscal year ended July 31, 1993. In the opinion of
management, all adjustments of a normal recurring nature that are
necessary for a fair presentation of the financial information for the
interim periods reported have been made. Certain amounts for the three
and nine months ended April 30, 1993 have been reclassified to conform to
the April 30, 1994 classification. The results of operations for the
three and nine months ended April 30, 1994 are not necessarily indicative
of the results that can be expected for the entire fiscal year ending
July 31, 1994. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended July 31, 1993.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements consist of
the accounts of Pharmacy Management Services, Inc. (PMSI) and its
wholly-owned subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
(c) INCOME TAXES
Deferred income taxes (included in Other Assets and Other Current
Liabilities on the consolidated balance sheets) are provided on
significant timing differences between financial statement and income tax
reporting. These differences relate principally to inventories,
depreciation, accrued lease costs and preferred provider organization
("PPO") network development costs. Effective August 1, 1993, the Company
adopted the liability method of accounting for income taxes in accordance
with Statement of Financial Accounting Standards No. 109. The change in
the Company's accounting for income taxes did not have a material effect
on the Company's consolidated financial statements.
H-6
<PAGE> 186
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(d) NET INCOME PER COMMON SHARE
Primary net income per common share is based on net income, less
preferred stock dividend requirements of $49,261 and $147,782 for the
three and nine periods ended April 30, 1994, respectively, and $48,896 and
$146,689 for the three and nine month periods ended April 30, 1993,
respectively, divided by the weighted average number of common and
dilutive common equivalent shares outstanding during those periods. Fully
diluted net income per common share has been omitted for all reported
periods because they are not materially different than primary net income
per share or are anti-dilutive. Dilutive common equivalent shares consist
of stock options and convertible preferred stock.
(2) INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
------------------- --------
1994 1993 1993
------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Drugs $2,645 $5,561 $3,918
Medical equipment and supplies 742 730 592
Electro-medical therapy products 525 430 608
------ ------ ------
$3,912 $6,721 $5,118
====== ====== ======
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at April 30, 1994 consisted of the following (in thousands):
<TABLE>
<S> <C>
$10,000 revolving line of credit, maturing August 1, 1994 $4,470
$5,000 revolving line of credit, maturing August 1, 1994 2,000
$4,000 term loan, principal payable in quarterly installments of $200 final
installment due April, 1996 1,395
$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
Non-compete agreements, principal payable in varying amounts and
frequencies, non-interest bearing 531
Note payable, installments payable monthly through December, 1997 132
Capital lease obligations 88
------
9,856
Less current maturities 8,064
------
$1,792
======
</TABLE>
H-7
<PAGE> 187
At April 30, 1994, the Company had two revolving lines of credit in a
combined amount of $15 million and a term loan with two banks under a credit
agreement entered into during 1993. Borrowings under the credit agreement were
secured by receivables and inventories. Under the revolving lines of credit,
the Company could borrow up to 85% of its outstanding eligible consolidated
trade receivable and up to 50% of its eligible consolidated inventories.
Interest was payable monthly on the lines of credit and term loan at
approximately the lenders' prime rate (6 3/4% at April 30, 1994). At April 30,
1994, approximately $8.3 million was available for borrowing under this credit
agreement.
On May 26, 1994, the Company amended and restated its fifteen million
dollar ($15,000,000) revolving credit loan agreement. Borrowings under the new
agreement are secured by receivables and inventories. Under the new revolving
credit loan agreement, the Company may borrow up to 75% of its outstanding
eligible consolidated outstanding trade receivables and up to 50% of eligible
consolidated inventories. Interest is payable monthly on the line of credit
balance at rates varying from the lenders' prime rate less 1/8 to 3/8 of a
percent or LIBOR (London Interbank Offered Rate) plus 125.0 to 137.5 basis
points, depending on the Company's ratio of liabilities to tangible net worth,
as defined in the credit loan agreement. In accordance with the terms of the
agreement, the Company secured advances to immediately retire revolving lines
of credit maturing August 1, 1994 and the term loan maturing in April, 1996.
The Company's credit agreement with the banks contains restrictive loan
covenants regarding tangible net worth, payment of dividends, purchase of
treasury shares, and the acquisition and disposition of assets. The Company is
in compliance with all of its loan covenants.
H-8
<PAGE> 188
APPENDIX I
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 31, 1994
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
December 13, 1994:
Common Stock, par value $.01 . . . . . . 8,888,687
<PAGE> 189
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I -- Financial Information
Item 1 -- Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for the three and nine months
ended April 30, 1994 and 1993 (Unaudited).................................. 2
Condensed Consolidated Balance Sheets as of April 30, 1994 and 1993
(Unaudited) and July 31, 1993.............................................. 3
Condensed Consolidated Statements of Cash Flow for the three and nine months
ended April 30, 1994 and 1993 (Unaudited).................................. 4
Notes to Condensed Consolidated Financial Statements (Unaudited)............. 5-7
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results
of Operations.............................................................. 8-10
Part II -- Other Information
Item 1 -- Legal Proceedings............................................................ 11
Item 2 -- Changes in Securities........................................................ 11
Item 3 -- Defaults Upon Senior Securities.............................................. 11
Item 4 -- Submission of Matters to a Vote of Security-Holders.......................... 11
Item 5 -- Other Information............................................................ 11
Item 6 -- Exhibits and Reports on Form 8-K............................................. 11
Signatures ................................................................................ 12
</TABLE>
<PAGE> 190
PART I -- FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
---------------------
1994 1993
------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net revenues $30,482 $27,388
Cost of revenues 21,002 19,744
------- -------
Gross margin 9,480 7,644
Costs and expenses:
Selling, general and administrative 5,355 5,377
Depreciation and amortization 934 827
------- -------
Operating income 3,191 1,440
Other income (expense):
Interest, net (55) (170)
Other (8) 9
------- -------
Income before income taxes 3,128 1,279
Provision for income taxes 1,260 533
------- -------
Net income $ 1,868 $ 746
======= =======
Net income per common share $ 0.20 $ 0.08
======= =======
Weighted average number of common shares outstanding 8,887 8,710
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited)
2
<PAGE> 191
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1994 1994
Assets ----------- -------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1 $ 1
Trade receivables, net 21,213 20,690
Inventories 4,451 3,487
Income tax refunds receivable -- 584
Deferred income taxes 1,121 1,121
Prepaid expenses and other 1,219 742
----------- -------
TOTAL CURRENT ASSETS 28,005 26,625
PROPERTY AND EQUIPMENT, NET 8,642 8,679
GOODWILL AND OTHER INTANGIBLES 15,493 15,682
EQUITY SECURITIES 1,240 1,240
OTHER ASSETS 1,825 1,736
----------- -------
TOTAL ASSETS $55,205 $53,962
======== =======
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Current portion of long-term debt $ 773 $ 789
Accounts payable 6,486 6,132
Accrued compensation and benefits 1,761 1,457
Accrued lease costs 1,133 1,086
Other current liabilities 890 414
----------- -------
TOTAL CURRENT LIABILITIES 11,043 9,878
LONG-TERM DEBT 3,954 5,793
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 -- 8,761,093 and 8,749,793 shares at
October 31, and July 31, 1994, respectively 88 87
Additional paid-in capital 26,625 26,559
Retained earnings 12,293 10,443
----------- -------
TOTAL SHAREHOLDERS' EQUITY 39,008 37,091
----------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $55,205 $53,962
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited)
3
<PAGE> 192
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
---------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,868 $ 746
------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 934 827
Decrease (increase) in trade receivables (523) (875)
Decrease (increase) in inventories (964) 7
Decrease (increase) in income taxes receivable 584 --
Decrease (increase) in prepaid expenses and other (477) 58
Decrease (increase) in other assets (89) 40
Increase (decrease) in accounts payable 354 (2,773)
Increase (decrease) in accrued compensation, accrued lease costs
and other current liabilities 827 585
------- -------
Total adjustments 646 (2,131)
------- -------
Net cash provided by operating activities 2,514 (1,385)
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment (708) (173)
Proceeds from the sale of property and equipment -- 2
------- -------
Net cash used in investing activities (708) (171)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Reductions in notes payable and long-term debt (1,855) (262)
Issuance of common stock 67 --
Preferred stock dividends (18) (18)
------- -------
Net cash used in financing activities (1,806) (280)
------- -------
Net increase (decrease) in cash and cash equivalents -- (1,836)
Cash and cash equivalents at beginning of period 1 2,594
------- -------
Cash and cash equivalents at end of period $ 1 $ 758
======= =======
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 76 $ 210
======= =======
Income taxes $ 63 $ 351
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited)
4
<PAGE> 193
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Pharmacy Management Services, Inc. and its subsidiaries have been
prepared in accordance with the Securities and Exchange Commission's
instructions to Form 10-Q and, therefore, omit or condense footnotes and
certain other information normally included in financial statements
prepared in accordance with generally accepted accounting principles.
The accounting policies followed for quarterly financial reporting
conform with generally accepted accounting principles for interim
financial statements and include those accounting policies disclosed in
Note 1 to the Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1994. In the opinion of management, all adjustments of a normal
recurring nature that are necessary for a fair presentation of the
financial information for the interim periods reported have been made.
Certain amounts for the three months ended October 31, 1993 have been
reclassified to conform to the October 31, 1994 classification. The
results of operations for the three months ended October 31, 1994 are
not necessarily indicative of the results that can be expected for the
entire fiscal year ending July 31, 1995. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1994.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements consist of
the accounts of Pharmacy Management Services, Inc. ("PMSI") and its
wholly-owned subsidiaries (together, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) INCOME TAXES
In February 1992, the Financial Accounting Standards Board (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 were recognized for income and expense items that
were reported in different years for financial reporting purposes than
for income tax purposes using the tax rate applicable for the year of
calculation. Under the deferred method, deferred taxes were not adjusted
for subsequent changes in tax rates.
5
<PAGE> 194
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(d) NET INCOME PER COMMON SHARE
Primary net income per common share is based on net income, less
preferred stock dividend requirements of $49,261 for the three months
ended October 31, 1994 and 1993, respectively, divided by the weighted
average number of common and dilutive common equivalent shares
outstanding during those periods. Fully diluted net income per common
share has been omitted for all reported periods because it is are not
materially different from primary net income per share or is
anti-dilutive. Dilutive common equivalent shares consist of stock
options and convertible preferred stock.
(2) INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1994 1994
------------ --------
(UNAUDITED)
<S> <C> <C>
Drugs $3,340 $ 2,474
Medical equipment and supplies 416 597
Electro-medical therapy products 695 416
------------ --------
$4,451 $ 3,487
========= ======
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at October 31, 1994 consisted of the following (in
thousands):
<TABLE>
<S> <C>
$7,500 revolving bank line of credit, maturing November 30, 1997 $ 1,373
$7,500 revolving bank line of credit, maturing November 30, 1997 1,858
$1,120 installment note, principal payable in four equal annual installments
of $280 commencing October 30, 1993, non-interest bearing 560
$600 note, principal payable in three equal annual installments of $200
commencing December 31, 1993, interest payable annually at 7% 400
Non-compete agreements, principal payable in varying amounts and
frequencies, non-interest bearing 365
Note payable, installments payable monthly through December, 1997 118
Capital lease obligations 53
-------
4,727
Less current maturities 773
-------
$ 3,954
======
</TABLE>
6
<PAGE> 195
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(3) LONG-TERM DEBT (CONT.)
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 minus 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 October 31, 1994, amounts available for
borrowing under the credit agreement were approximately $11.1 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.
The Company's credit agreement with the banks contains certain covenants
relating to tangible net worth, payment of dividends, 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 its loan covenants.
(4) SUBSEQUENT EVENT
Each share of both the Series B $.98 Convertible Preferred Stock (Series B)
and Series C $.98 Convertible Preferred Stock (Series C) is mandatorily and
automatically convertible into one share of Common Stock on the earlier of (i)
the first date on or after April 1, 1994 on which the per share market price of
the Common Stock is greater than or equal to $16.25 or (ii) April 1, 1996. On
November 14, 1994, the market price of the Company's Common Stock exceeded
$16.25 per share. Accordingly, all 73,846 outstanding shares of Series B
preferred stock and all 53,748 outstanding shares of Series C preferred stock,
respectively, were converted into a total of 127,594 shares of Common Stock.
7
<PAGE> 196
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 months ended October 31, 1994 and 1993:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
-------------------
1994 1993
----- -----
<S> <C> <C>
Net revenues 100.0% 100.0%
Cost of revenues 68.9 72.1
----- -----
Gross margin 31.1 27.9
Costs and expenses:
Selling, general and administrative 17.6 19.6
Depreciation and amortization 3.1 3.0
----- -----
Operating income 10.4 5.3
Interest expense, net (0.1) (0.6)
----- -----
Income before income taxes 10.3 4.7
Provision for income taxes 4.2 2.0
----- -----
Net income 6.1% 2.7%
===== =====
</TABLE>
RESULTS OF OPERATIONS
NET REVENUES
Net revenues for the first quarter of fiscal year 1995 were approximately
$30.5 million compared to $27.4 million for the comparable period in fiscal year
1994. Slightly more than 70% of the increase in revenues for the period was
attributable to increased revenues from the Company's preferred provided
organization ("PPO"), home delivery and case management services. The remaining
increase in revenues was attributable to increased volumes in the home delivery
of prescription drugs and medical equipment and supplies.
COST OF REVENUES
Cost of revenues as a percentage of net revenues was approximately 3.2%
lower for the first quarter of fiscal year 1995 than it was for the first
quarter of fiscal year 1994. This reduction 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.
8
<PAGE> 197
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of net
revenues declined approximately 2% to 17.6% for the three months ended October
31, 1994, compared to 19.6% for the three months ended October 31, 1993. The
decrease is primarily attributable to higher revenues with substantially no
charge in expenses as a result of improved management controls and systems.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the three months ended October 31, 1994
was $934,000, compared to $827,000 for the three months ended October 31, 1993.
The increase is attributable to capital expenditures for computer equipment and
software during fiscal years 1994 and 1993.
INTEREST EXPENSE
Net interest expenses for the three months ended October 31, 1994 was
$55,000 compared to $170,000 for the comparable period in fiscal year 1994. The
significant decrease is mostly attributable to the reduction in bank debt during
the relevant periods.
PROVISION FOR INCOME TAXES
The combined effective federal and state income tax rate for the first
quarter of fiscal year 1995 was 40.3% compared to an effective income tax rate
of 41.7% for the same period in fiscal year 1994. The decrease is primarily
attributable to a reduction of the impact of goodwill amortization on the
effective tax rate.
SPECIAL EXPENSES
The company incurred during the first quarter of fiscal year 1995
approximately $150,000 of expenses associated with its consideration of
acquisition overtures (See Part II, Item 5. Other Information). The expenses
consist primarily of professional fees. The Company expects to continue to incur
expenses associated with this process, and the total amount could be
significant, particularly if the Company were to pursue an acquisition
transaction. The Company expects to fund the payment of these nonrecurring
expenses from cash flow from operating activities, and to the extent necessary,
its bank credit lines.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is relatively unchanged since the end of
fiscal year 1994 with approximately $17.0 million available at October 31, 1994,
compared to approximately $16.7 million at July 31, 1994. Management believes
that the Company's working capital is sufficient to maintain its current and
immediately foreseeable level of operations.
The Company had positive cash flow from operating activities of $2.5
million for the fiscal quarter ended October 31, 1994, compared to negative cash
flow from operating activities of ($1.4) million for the fiscal quarter ended
October 31, 1993. The primary difference was an improvement in net income of
approximately $1.1 million and an increase in accounts payable to $0.4 million
compared to a reduction of $2.8 million in accounts payable in the comparable
period in fiscal year 1994.
9
<PAGE> 198
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)
LIQUIDITY AND CAPITAL RESOURCES
Net trade receivables increased $.5 million from $20.7 at July 31, 1994 to
$21.2 million at October 31, 1994. The increase is primarily attributable to a
$1.5 million increase in revenues for the quarter ended October 31, 1994 as
compared to the quarter ended July 31, 1994.
Inventories at October 31, 1994 approximated $4.5 million compared to $3.5
million at July 31, 1994. The increase is attributable to several large advance
purchases of prescription drugs at favorable prices and terms.
Capital expenditures during the quarter ended October 31, 1994 were
approximately $708,000 or about 20% of the total $3.5 million that is
anticipated for the entire fiscal year, and were financed by cash flow from
operating activities. The Company further reduced its bank debt by approximately
$1.8 million during the first quarter of fiscal year 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 October 31, 1994 was $11.1
million. The Company believes that cash generated from future operations
together with the funds available under its lines of credit will be sufficient
to finance the Company's operations and its anticipated capital requirements for
at least the next 12 to 24 months, depending on the level of business expansion.
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.
10
<PAGE> 199
PART II -- OTHER INFORMATION
ITEM 1. 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
its business.
ITEM 2. CHANGES IN SECURITIES
As discussed more fully in Note (4) of the Notes to Condensed Consolidated
Financial Statements (Unaudited) included in this report, all the Company's
outstanding Series B and Series C Convertible Preferred Stock was mandatorily
converted into an equal number of shares of Common Stock, effective November 14,
1994.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
As previously announced, the Company's Board of Directors is engaged in the
process of considering the expressed interest of a limited number of companies
in a possible acquisition of the Company. There is no assurance that this
process will result in an acquisition of the Company by any interested party.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
REPORTS ON FORM 8-K
The Company did not file a current report on Form 8-K during the first
quarter of fiscal year 1995.
11
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMACY MANAGEMENT
SERVICES, INC.
Date: December 13, 1994 By: /s/ DAVID L. REDMOND
David L. Redmond
Senior Vice President and
Chief Financial Officer
(Its Duly Authorized Officer)
12
<PAGE> 201
APPENDIX J
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
December 14, 1994
-----------------------
Date of Report
(Date of earliest event reported)
Beverly Enterprises, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
1-9550 95-4100309
---------- --------------
(Commission file number) (IRS employer identification no.)
1200 South Waldron Road, No. 155
Fort Smith, Arkansas 72903
------------------------------------ --------------
(Address of principal executive offices) (Zip code)
(501) 452-6712
-----------------------
(Registrant's telephone number, including area code)
<PAGE> 202
ITEM 5. Other Events
On December 26, 1994, Beverly Enterprises, Inc., a Delaware
corporation ("Beverly"), Beverly Acquisition Corporation, a Delaware
corporation ("Acquisition"), a wholly-owned subsidiary of Beverly, and Pharmacy
Management Services, Inc., a Florida corporation ("PMSI"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") whereby PMSI will be
merged with and into Acquisition (the "Merger"). Acquisition will be the
surviving corporation in the Merger. 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 Merger Agreement. The stockholders of Beverly are
not required to and will not vote on the Merger, the Merger Agreement or the
transactions contemplated thereby.
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 common stock of PMSI will be converted into the right to
receive 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 common stock of Beverly 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 a Prospectus/Consent
Solicitation Statement to be filed with respect to the Merger; 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 common stock of Beverly multiplied by the fractional
percentage of a share of common stock of Beverly to which such holder would
otherwise be entitled.
PMSI is a leading independent nationwide provider of medical cost
containment and managed care services to workers 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. PMSI's telephone number is (813) 626- 7788.
2
<PAGE> 203
ITEM 7. Financial Statements and Exhibits
a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Not Applicable.
b) PRO FORMA FINANCIAL INFORMATION. As permitted by Item 7(b)(2),
the Registrant hereby amends this Form 8-K in order to include pro forma
financial information with respect to the transactions previously reported
herein.
c) EXHIBITS.
7.1 Unaudited Pro Forma Combined Financial Statements.
3
<PAGE> 204
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BEVERLY ENTERPRISES, INC.
/s/ SCOTT M. TABAKIN
--------------------------
Scott M. Tabakin
Vice President, Controller and
Chief Accounting Officer
Date: February 10, 1995
4
<PAGE> 205
EXHIBIT 7.1
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements are
presented to show the effects of (i) the November 15, 1994 acquisition of
Insta-Care, Inc. and its subsidiaries ("Insta-Care") and the December 14, 1994
acquisition of three subsidiaries of Synetic ("Synetic"), together referred to
as the "acquired businesses" and accounted for using the purchase method of
accounting and (ii) the contemplated merger with PMSI (the "Merger") using the
pooling-of-interests method of accounting.
Beverly and Insta-Care have December 31 year ends, Synetic has a June
30 year end and PMSI has a July 31 year end. Synetic's results of operations,
adjusted to a calendar-year basis, are reflected in the Unaudited Pro Forma
Combined Statements of Income. The combined operating results for Beverly,
Insta-Care and Synetic, as adjusted based on the accompanying notes, are
further combined with PMSI's operating results for the year ended July 31, 1993
and nine-month period ended April 30, 1994 in the Unaudited Pro Forma Combined
Statements of Income for the year ended 1993 and for the nine months ended
1994, respectively. The Unaudited Pro Forma Combined Statements of Income do
not reflect expenses expected to be incurred by Beverly and PMSI in connection
with the Merger nor do they give effect to the cost savings, if any, which may
be realized by Beverly after the consummation of the Merger.
The Unaudited Pro Forma Combined Balance Sheet for 1994 combines
Beverly's, Insta-Care's and Synetic's historical balance sheets as of September
30, 1994, with PMSI's balance sheet as of April 30, 1994, giving effect to the
adjustments described in the accompanying notes. Certain amounts in the
historical financial statements of Insta-Care, Synetic and PMSI have been
reclassified to conform with Beverly's presentation.
These pro forma statements are not necessarily indicative of the
financial position or results of operations which actually would have been
obtained if the transactions, as described herein, had been consummated in the
past or of results which may be obtained in the future.
<PAGE> 206
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INSTA-CARE & PRO FORMA
BEVERLY SYNETIC COMBINED PMSI PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS SUBTOTAL HISTORICAL TOTAL
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $2,884,451 $186,285 ($2,578)a) $3,068,158 $109,934 $3,178,092
Interest income 15,269 434 (62)b) 15,641 158 15,799
----------------------------------------------------------------------------
Total revenues 2,899,720 186,719 (2,640) 3,083,799 110,092 3,193,891
Costs and expenses:
Operating and administrative:
Wages and related 1,593,410 41,487 (7,850)c) 1,626,487 30,885 1,657,372
(560)a)
Other 1,069,536 133,324 (1,780)c) 1,198,467 70,202 1,268,669
(2,613)a)
Interest 62,453 1,952 16,610 d) 79,063 1,192 80,255
(1,952)b)
Depreciation and amortization 86,681 2,528 4,886 e) 94,017 2,967 96,984
(78)a)
----------------------------------------------------------------------------
2,812,080 179,291 6,663 2,998,034 105,246 3,103,280
----------------------------------------------------------------------------
Income before extraordinary charge and
provision for income taxes 87,640 7,428 (9,303) 85,765 4,846 90,611
Provision for income taxes 29,684 3,125 (3,721)f) 29,088 2,064 31,152
----------------------------------------------------------------------------
Income before extraordinary charge $57,956 $ 4,303 ($5,582) $ 56,677 $ 2,782 $ 59,459
============================================================================
Income per share of common stock before
extraordinary charge $.41 $.40 $.38
========== ========== ==========
Shares used to compute income per share
before extraordinary charge 81,207 81,207 91,451
========== ========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE> 207
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INSTA-CARE & PRO FORMA
BEVERLY SYNETIC COMBINED PMSI PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS SUBTOTAL HISTORICAL TOTAL
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $2,204,527 $143,009 $2,347,536 $84,137 $2,431,673
Interest income 10,709 289 (26)b) 10,972 74 11,046
-------------------------------------------------------------------------------
Total revenues 2,215,236 143,298 (26) 2,358,508 84,211 2,442,719
Costs and expenses:
Operating and administrative:
Wages and related 1,183,900 31,811 (5,888)c) 1,209,823 23,765 1,233,588
Other 832,969 100,989 (1,335)c) 932,623 52,904 985,527
Interest 43,974 1,495 12,458 d) 56,432 544 56,976
(1,495)b)
Depreciation and amortization 68,359 2,289 3,665 e) 74,313 2,516 76,829
-------------------------------------------------------------------------------
2,129,202 136,584 7,405 2,273,191 79,729 2,352,920
-------------------------------------------------------------------------------
Income before extraordinary charge and
provision for income taxes 86,034 6,714 (7,431) 85,317 4,482 89,799
Provision for income taxes 28,391 2,711 (2,972)f) 28,130 1,839 29,969
-------------------------------------------------------------------------------
Income before extraordinary charge $57,643 $4,003 ($4,459) $57,187 $2,643 $59,830
===============================================================================
Income per share of common stock before
extraordinary charge $.59 $.59 $.55
========== ========== ==========
Shares used to compute income per share
before extraordinary charge 87,014 87,014 97,270
========== ========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE> 208
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSTA-CARE & PRO FORMA
BEVERLY SYNETIC COMBINED PMSI PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS SUBTOTAL HISTORICAL ADJUSTMENTS TOTAL
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Current assets:
Cash and cash equivalents $69,344 $4,891 $225,000 g) $77,117 $873 $77,990
(219,314)h)
(2,804)h)
Accounts receivable - patient, net 361,384 41,948 (3,000)h) 400,332 19,589 419,921
Accounts receivable - nonpatient, net 51,817 616 52,433 451 52,884
Notes receivable 3,091 246 3,337 112 3,449
Operating supplies 61,065 12,824 73,889 3,912 77,801
Deferred income taxes 24,576 - 24,576 548 25,124
Prepaid expenses and other 36,874 575 37,449 742 38,191
---------------------------------------------------------------------------------------
Total current assets 608,151 61,100 (118) 669,133 26,227 695,360
Property and equipment, net 1,169,140 8,643 (1,655)h) 1,176,128 8,522 1,184,650
Other assets:
Notes receivable, net 41,209 - 41,209 72 41,281
Designated and restricted funds 41,637 - 41,637 - 41,637
Goodwill, net 70,529 6,152 168,377 h) 245,058 15,467 260,525
Operating and leasehold rights and
licenses, net 23,310 - 23,310 - 23,310
Other, net 111,118 315 500 h) 114,670 3,645 118,315
(263)h)
3,000 i)
---------------------------------------------------------------------------------------
Total other assets 287,803 6,467 171,614 465,884 19,184 485,068
---------------------------------------------------------------------------------------
$2,065,094 $76,210 $169,841 $2,311,145 $53,933 $2,365,078
=======================================================================================
Current liabilities:
Accounts payable $124,029 $4,686 $128,715 $4,057 $132,772
Accrued wages and related liabilities 128,209 2,930 131,139 1,902 133,041
Accrued interest 8,859 - 8,859 39 8,898
Other accrued liabilities 75,092 1,659 8,784 h) 88,511 1,235 89,746
(24)h)
3,000 i)
Current portion of long-term obligations 37,336 77 22,500 g) 59,836 8,064 67,900
(77)h)
Income taxes payable 5,865 2,846 (2,846)h) 5,865 - 5,865
---------------------------------------------------------------------------------------
Total current liabilities 379,390 12,198 31,337 422,925 15,297 438,222
Long-term obligations 724,181 3,343 202,500 g) 926,681 1,792 928,473
(3,343)h)
Deferred income taxes payable 74,130 1,044 (1,044)h) 74,130 213 74,343
Other liabilities and deferred items 76,806 26,179 (26,163)h) 76,822 - 76,822
PMSI redeemable preferred stock 1,200 (1,200)j) -
Stockholders' equity:
Preferred stock 150,000 - 150,000 2 (2)j) 150,000
Common stock 8,954 842 (842)h) 8,954 87 970 j) 10,011
Additional paid-in capital 607,909 27,580 (27,580)h) 607,909 26,493 232 j) 634,634
Retained earnings 83,859 5,024 (5,024)h) 83,859 8,849 92,708
Treasury stock (40,135) - (40,135) - (40,135)
---------------------------------------------------------------------------------------
810,587 33,446 (33,446) 810,587 35,431 1,200 847,218
---------------------------------------------------------------------------------------
$2,065,094 $76,210 $169,841 $2,311,145 $53,933 - $2,365,078
=======================================================================================
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE> 209
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
a) Reflects elimination of the operations for an Insta-Care pharmacy
location that was disposed of during 1993. Included in this
adjustment are revenues and expenses directly attributable to the
operations of such pharmacy.
b) Reflects elimination of interest income and interest expense on
intercompany receivables/payables recorded in Insta-Care's historical
financial statements.
c) Reflects elimination of costs incurred by certain acquired facilities
which duplicate facilities previously operated by Pharmacy Corporation
of America ("PCA"), an indirect wholly-owned subsidiary of Beverly.
PCA will operate the acquired businesses and, as such, performed a
study to assess the operations of each acquired location and determine
which locations were in close proximity with those previously operated
by PCA, and whose business could be consolidated into one location,
thereby, reducing overhead and other costs. Such eliminated costs are
directly attributable to the duplicate facilities to be merged.
d) Reflects additional interest expense resulting from the issuance of a
$225,000,000 variable interest rate term loan, the proceeds from which
were used to finance the acquisitions. This adjustment assumes an
annual interest rate of 7.38% which was the average interest rate for
the term loan on December 31, 1994.
e) Reflects amortization of goodwill (40 years straight-line) and a
covenant not to compete (5 years straight- line) resulting from the
acquisitions and the amortization of debt issue costs (5 years
accelerated) incurred from the issuance of the $225,000,000 term loan
used to finance the acquisitions.
f) Reflects the income tax effect of the pro forma adjustments using an
estimated effective tax rate of 40%.
g) Reflects the issuance of a $225,000,000 term loan, the proceeds from
which were used to finance the acquisitions.
h) Reflects allocation of the purchase price for the acquired businesses,
as follows (in thousands):
<TABLE>
<S> <C> <C>
Cash purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . $219,314
Cash paid for tax liability of Synetic . . . . . . . . . . . . . . . . . . . 2,804
Estimated acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . 8,784
--------
230,902
Adjustments to acquired businesses' balance sheets:
Accounts receivable - patient, net . . . . . . . . . $ 3,000
Property and equipment, net . . . . . . . . . . . . 1,655
Other, net . . . . . . . . . . . . . . . . . . . . . 263
Other accrued liabilities . . . . . . . . . . . . . (24)
Current portion of long-term obligations . . . . . . (77)
Income taxes payable . . . . . . . . . . . . . . . . (2,846)
Long-term obligations . . . . . . . . . . . . . . . (3,343)
Deferred income taxes payable . . . . . . . . . . . (1,044)
Other liabilities and deferred items . . . . . . . . (26,163)
Common stock . . . . . . . . . . . . . . . . . . . . (842)
Additional paid-in capital . . . . . . . . . . . . . (27,580)
Retained earnings . . . . . . . . . . . . . . . . . (5,024)
--------
(62,025)
--------
168,877
Less: Covenant not to compete . . . . . . . . . . . . . . . . . . . . . . . 500
--------
Excess cost over fair market value of net assets acquired . . . . . . . . . $168,377
========
</TABLE>
Beverly believes that the recorded values of the acquired businesses'
assets and liabilities approximates their fair values.
i) Reflects the estimated costs associated with issuing the $225,000,000
term loan used to finance the acquisitions.
j) Reflects the merger of PMSI and Beverly using a conversion rate of
1.17857 shares of Beverly common stock for each share of PMSI stock on
an as-if-converted to PMSI Common Stock basis.
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
SUPPLEMENTAL INDENTURE NO. 5 TO INDENTURE
SUPPLEMENTAL INDENTURE NO. 5 dated as of November 1, 1994
among BEVERLY CALIFORNIA CORPORATION, a California corporation (the "Company"),
BEVERLY ENTERPRISES, INC., a Delaware corporation (the "Parent"), each of the
Guarantors (as that term is defined in the Indenture defined below), and STATE
STREET BANK AND TRUST COMPANY, as successor trustee (the "Trustee") under the
Indenture defined below.
W I T N E S S E T H :
WHEREAS, the Company, the Parent and Yasuda Bank and Trust
Company (U.S.A.) have heretofore entered into an Indenture dated as of December
27, 1990 (as supplemented from time to time, the "Indenture") providing for the
issuance by the Company of $50,000,000 original principal amount of Senior
Secured Floating Rate Notes Due 1995 (the "Floating Rate Notes") and
$37,750,000 original principal amount of 14 1/4% Senior Secured Fixed Rate
Notes Due 1997 (the "Fixed Rate Notes");
WHEREAS, the Floating Rate Notes have been prepaid in full
pursuant to the terms of the Indenture and are no longer outstanding;
WHEREAS, Yasuda Bank and Trust Company (U.S.A.), has resigned
as original trustee pursuant to the terms of Section 610 of the Indenture and
State Street Bank and Trust Company has accepted an appointment as successor
Trustee pursuant to Section 611 of the Indenture;
WHEREAS, the parties hereto, desire to amend the Indenture as
herein provided and pursuant to Section 902 of the Indenture the requisite
Holders (as defined in the Indenture) of Securities (as defined in the
Indenture) issued under the Indenture have heretofore consented thereto by
executing and delivering to the Trustee a consent (the "Consent"),
substantially in the form of Exhibit A hereto, and, on the basis of the
foregoing, the Trustee is willing to enter into such amendments as herein
provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Indenture shall have the meaning assigned to such term in the Indenture. Each
reference to
<PAGE> 2
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
contained in the Indenture or any Security shall, from and after the date
hereof, refer to the Indenture or such Security, as the case may be, as amended
hereby.
SECTION 2. Amendment of Indenture. Subject to the
satisfaction of the conditions precedent contained in Section 3 hereof, the
Indenture is amended as follows:
A. Section 101 is amended: (i) by the addition of the following
definitions in alphabetical order:
"'PERMITTED RECEIVABLES FINANCING SECURITIES' means debt
securities or preferred stock issued by a Special Purpose Receivables Financing
Subsidiary pursuant to a Receivables Financing Program and borrowings by a
Special Purpose Receivables Financing Subsidiary under a related Receivables
Financing Backstop Facility."
"'RECEIVABLES FINANCING BACKSTOP FACILITY' means a credit
facility entered into by a Special Purpose Receivables Financing Subsidiary for
the purposes of providing liquidity with respect to securities issued by such
Special Purpose Receivables Financing Subsidiary and of financing transactions
of the type intended to be financed with the proceeds of such securities."
"'RECEIVABLES FINANCING PROGRAM' means a program pursuant to
which a Special Purpose Receivables Financing Subsidiary issues debt securities
or preferred stock secured by (i) Medicaid, Medicare or other patient accounts
receivable or Permitted Receivables Financing Securities purchased from the
Parent and its Subsidiaries or (ii) security interests in Medicaid, Medicare or
other patient accounts receivable or Permitted Receivables Financing Securities
granted by the Parent and its Subsidiaries."
"'SPECIAL PURPOSE RECEIVABLES FINANCING SUBSIDIARY' means a
Wholly-Owned Subsidiary of the Parent the sole purpose of which is to issue
debt securities and/or preferred stock and to purchase Medicare, Medicaid or
other patient accounts receivable of the Parent and its Subsidiaries and/or
Permitted Receivables Financing Securities and make advances to the Parent and
its Subsidiaries secured by security interests in such Medicare, Medicaid or
other patient accounts receivable and/or Permitted Receivables Financing
Securities, which accounts
2
<PAGE> 3
receivable, Permitted Receivables Financing Securities and/or security
interests therein may be pledged to secure such debt securities and/or
preferred stock and/or borrowings by such Special Purpose Receivables Financing
Subsidiary under a Receivables Financing Backstop Facility.';
(ii) by deleting clause (xi) of the definition of "Permitted Liens"
and substituting therefor the following:
"(xi) Liens on Medicare, Medicaid or other patient accounts
receivable of the Parent or any of its Subsidiaries, or on
Permitted Receivables Financing Securities, granted to secure
Permitted Receivables Financing Securities, provided that the
net amount of all uncollected accounts receivable owing to the
Parent or any of its Subsidiaries over which such a Lien is
granted, together, without duplication, with the net amount of
all uncollected accounts receivable owing to the Parent or any
of its Subsidiaries that are assigned to secure such Permitted
Receivables Financing Securities, shall not exceed, at any
time, 200% of the aggregate principal or redemption amount of
all Permitted Receivables Financing Securities then
outstanding.";
(iii) by adding the following clause (xvii) to the definition of
"Permitted Liens":
"(xvii) any pledge of the stock of Pharmacy Corporation of
America and any of its subsidiaries now existing or hereafter
acquired to secure obligations under the Credit Agreement
dated as of November 1, 1994 among the Company, the Parent,
the banks listed therein and Morgan Guaranty Trust Company of
New York, as issuing bank and as agent, in the original amount
of $375,000,000 and as at any time amended, supplemented, or
refinanced."; and
(iii) by adding the following clause (o) to the definition of
Permitted Indebtedness:
"(o) Permitted Receivables Financing Securities, provided that
the aggregate principal and redemption amount of all Permitted
Receivables
3
<PAGE> 4
Financing Securities outstanding at any time shall not exceed
$100,000,000."
B. Section 1018 is amended by deleting clause (m) of such section
in its entirety and replacing it with the following:
"(m) investments made by the Parent or any of its Subsidiaries
in one or more Special Purpose Receivables Financing
Subsidiaries by means of the sale of, or the granting of
security interests in, Medicare, Medicaid or other patient
accounts receivable owing to the Parent or such Subsidiary, in
either case to such Special Purpose Receivables Financing
Subsidiaries pursuant to a Receivables Financing Program,
provided that the net amount of all uncollected accounts
receivable owing to the Parent or any of its Subsidiaries that
have been so sold or in which a security interest has been so
granted shall not exceed 200% of the aggregate principal or
redemption amount of all Permitted Receivables Financing
Securities then outstanding;"
SECTION 3. Conditions for Effectiveness. This Supplemental
Indenture No. 5 shall become effective as of the date hereof, after the Trustee
shall have received:
(a) duly executed counterparts hereof signed by each
party hereto;
(b) Consents signed by a majority in aggregate principal
amount of the Outstanding Securities or, in the case of any party as to which
an executed counterpart or Consent shall not have been received, the Trustee
shall have received telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof, or Consent, as the case may be, by
such party (such Act by such Holders being delivered to the Trustee on behalf
of the Trustee, the Company and each Guarantor);
(c) a written request from the Company and the Guarantors
requesting the execution and delivery of this Supplemental Indenture No. 5;
(d) certified copies of the resolutions of the Board of
Directors of the Company and the Parent, approving
4
<PAGE> 5
this Supplemental Indenture No. 5, and all other documents delivered hereunder
to which it is a party;
(e) favorable opinions of Weil, Gotshal & Manges, special
New York counsel for the Company, and the General Counsel of the Company in the
form of Exhibits B and C hereto respectively; and
(f) a certificate of an officer of the Company to the effect
that the execution of Supplemental Indenture No. 5 is authorized or permitted
by the Indenture and all conditions precedent, if any, required by the
Indenture relating to a supplemental indenture have been complied with.
SECTION 4. Miscellaneous. (a) The Trustee shall be entitled
to the protections of Section 603, and other applicable provisions, of the
Indenture, with respect to its receipt, examination and handling of the
documents delivered pursuant to Section 3 hereof and the resulting
effectiveness of this Supplemental Indenture No. 5.
(b) The recitals contained herein shall be taken as
statements of the Company, the Parent and the Guarantors and not of the
Trustee.
(c) Each Guarantor hereby waives any right it may have
pursuant to Section 902 of the Indenture to receive a copy of the instrument or
instruments evidencing the Act of the Holders approving this Agreement and the
transactions contemplated hereby.
SECTION 5. Addition of Subsidiary Guarantors. Any subsidiary
of the Guarantor which is not currently a party to the Subsidiary Guaranty but
which is a signatory of this Supplemental Indenture No. 5 is hereby made a
party to the Subsidiary Guaranty.
SECTION 6. Governing Law. This Supplemental Indenture No. 5
shall be governed by and construed in accordance with the law of the State of
New York.
SECTION 7. Current Guarantors. Each of the Company and
Parent hereby certify that all of the entities executing this Supplemental
Indenture No. 5 as "Guarantors" constitute all of the current Guarantors within
the meaning of that term under the Indenture.
5
<PAGE> 6
SECTION 8. Counterparts. This Supplemental Indenture No. 5
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
SUPPLEMENTAL INDENTURE NO. 5 to be duly executed as of the date hereof.
COMPANY
-------
BEVERLY CALIFORNIA CORPORATION
By____________________________
Title:
Parent
------
BEVERLY ENTERPRISES, INC.
By____________________________
Title:
GUARANTORS
----------
BEVERLY ENTERPRISES JAPAN LIMITED
ADVINET, INC.
AMERICAN TRANSITIONAL CARE CENTERS OF
TEXAS, INC.
AMERICAN TRANSITIONAL CARE DALLAS - FORT
WORTH, INC.
AMERICAN TRANSITIONAL HEALTH CARE, INC.
AMERICAN TRANSITIONAL HOSPITALS, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
INDIANA, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
OKLAHOMA, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
TENNESSEE, INC.
ATH DEL ORO, INC.
ATH HEIGHTS, INC.
ATH TUCSON, INC.
AGI-CAMELOT, INC.
AGI-MCDONALD COUNTY HEALTH CARE, INC.
AGI-VILLA CAPRI MANOR, INC.
6
<PAGE> 7
AHP, INC.
ASSOCIATED HEALTHCARE PROFESSIONALS,
INC.
BEVERLY ADVISORS, LIMITED
BEVERLY CREST CORPORATION
BEVERLY ENTERPRISES-ALABAMA, INC.
BEVERLY ENTERPRISES-ARIZONA, INC.
BEVERLY ENTERPRISES-ARKANSAS, INC.
BEVERLY ENTERPRISES-CALIFORNIA, INC.
BEVERLY ENTERPRISES-COLORADO, INC.
BEVERLY ENTERPRISES-CONNECTICUT, INC.
BEVERLY ENTERPRISES-DELAWARE, INC.
BEVERLY ENTERPRISES - DISTRIBUTION
SERVICES, INC.
BEVERLY ENTERPRISES-DISTRICT OF
COLUMBIA, INC.
BEVERLY ENTERPRISES-FLORIDA, INC.
BEVERLY ENTERPRISES-GARDEN TERRACE, INC.
BEVERLY ENTERPRISES-GAYLORD, INC.
BEVERLY ENTERPRISES-GEORGIA, INC.
BEVERLY ENTERPRISES-HAWAII, INC.
BEVERLY ENTERPRISES-IDAHO, INC.
BEVERLY ENTERPRISES-ILLINOIS, INC.
BEVERLY ENTERPRISES-INDIANA, INC.
BEVERLY ENTERPRISES-IOWA, INC.
BEVERLY ENTERPRISES-KANSAS, INC.
BEVERLY ENTERPRISES-KENTUCKY, INC.
BEVERLY ENTERPRISES-LANSING CENTRAL,
INC.
BEVERLY ENTERPRISES-LOUISIANA, INC.
BEVERLY ENTERPRISES-MAINE, INC.
BEVERLY ENTERPRISES-MARYLAND, INC.
BEVERLY ENTERPRISES-MASSACHUSETTS, INC.
BEVERLY ENTERPRISES-MICHIGAN, INC.
BEVERLY ENTERPRISES-MINNESOTA, INC.
BEVERLY ENTERPRISES-MISSISSIPPI, INC.
BEVERLY ENTERPRISES-MISSOURI, INC.
BEVERLY ENTERPRISES-MONTANA, INC.
BEVERLY ENTERPRISES-NEBRASKA, INC.
BEVERLY ENTERPRISES-NEVADA, INC.
BEVERLY ENTERPRISES-NEW HAMPSHIRE, INC.
BEVERLY ENTERPRISES-NEW JERSEY, INC.
BEVERLY ENTERPRISES-NEW MEXICO, INC.
BEVERLY ENTERPRISES-NEW YORK, INC.
BEVERLY ENTERPRISES-NORTH CAROLINA, INC.
BEVERLY ENTERPRISES-NORTH DAKOTA, INC.
BEVERLY ENTERPRISES-OHIO, INC.
BEVERLY ENTERPRISES-OKLAHOMA, INC.
7
<PAGE> 8
BEVERLY ENTERPRISES-OREGON, INC.
BEVERLY ENTERPRISES-PENNSYLVANIA, INC.
BEVERLY ENTERPRISES-PORTAGE, INC.
BEVERLY REHABILITATION SERVICES, INC.
BEVERLY ENTERPRISES-RHODE ISLAND, INC.
BEVERLY ENTERPRISES-SHOREHAM TERRACE,
INC.
BEVERLY ENTERPRISES-SOUTH CAROLINA, INC.
BEVERLY ENTERPRISES-TAWAS CITY, INC.
BEVERLY ENTERPRISES-TENNESSEE, INC.
BEVERLY ENTERPRISES-TEXAS, INC.
BEVERLY ENTERPRISES-UTAH, INC.
BEVERLY ENTERPRISES-VERMONT, INC.
BEVERLY ENTERPRISES-VIRGINIA, INC.
BEVERLY ENTERPRISES-WASHINGTON, INC.
BEVERLY ENTERPRISES-WEST VIRGINIA, INC.
BEVERLY ENTERPRISES-WISCONSIN, INC.
BEVERLY ENTERPRISES-WYOMING, INC.
BEVERLY ENTERPRISES MEDICAL EQUIPMENT
CORPORATION
BEVERLY INDEMNITY LTD.
BEVERLY MANOR INC. OF HAWAII
BEVERLY MANOR INC. OF LAS VEGAS
BEVERLY REHABILITATION SERVICES, INC.
BEVERLY REMIC DEPOSITOR, INC.
BEVERLY SAVANA CAY MANOR, INC.
COLONIAL MANORS OF KINGSLEY, INC.
COLUMBIA-VALLEY NURSING HOME, INC.
COMMERCIAL MANAGEMENT, INC.
COMPUTRAN SYSTEMS, INC.
CONTINENTAL CARE CENTERS OF COUNCIL
BLUFFS, INC.
FOREST CITY BUILDING LTD.
GERIATRIC CONSULTANTS, INC.
HALLMARK CONVALESCENT HOMES, INC.
HAMDEN SURGICAL, INC.
HOSPICE PREFERRED CHOICE, INC.
HOSPITAL FACILITIES CORPORATION
INSTA-CARE HOLDINGS, INC.
INSTA-CARE PHARMACY SERVICES CORPORATION
HOME MEDICAL SYSTEMS, INC.
HOMEMAKERS OF VIRGINIA, INC.
KD INVESTMENT CO.
KENWOOD VIEW NURSING HOME, INC.
LIBERTY NURSING HOMES, INCORPORATED
MEDICAL ARTS HEALTH FACILITY OF
LAWRENCEVILLE, INC.
MODERNCARE OF LUMBERTON, INC.
8
<PAGE> 9
NEBRASKA CITY S-C-H, INC.
NORTHWEST CARE CENTER, INC.
NURSING HOME OPERATORS, INC.
PCA PHARMACIES, INC.
PETERSEN HEALTH CARE, INC.
PHARMACY DYNAMICS GROUP
PHARMACY CORPORATION OF AMERICA
SALEM NO. 1, INC.
ST. JOSEPH NURSING HOME, INC.
SOUTH ALABAMA NURSING HOME, INC.
SOUTH DAKOTA-BEVERLY ENTERPRISES, INC.
SYNERGOS, INC.
SYNERGOS - SCOTTSDALE, INC.
SYNERGOS - PLEASANTHILL, INC.
SYNERGOS - NORTH HOLLYWOOD, INC.
TAYLOR COUNTY HEALTH FACILITY,
INCORPORATED
VANTAGE HEALTHCARE CORPORATION
BEVERLY RIVERVIEW PARTNERSHIP
By____________________________
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By___________________________
Title:
9
<PAGE> 10
Exhibit A
CONSENT AND DIRECTION
Reference is made to an Indenture (as heretofore supplemented
and amended, the "Indenture") dated as of December 27, 1990 among Beverly
California Corporation (the "Company"), Beverly Enterprises, Inc. (the "Parent")
and Yasuda Bank and Trust Company (U.S.A.), as original trustee thereunder,
providing for, among other things, the issuance by Beverly California
Corporation of $37,750,000 original principal amount of 14 1/4% Senior Secured
Fixed Rate Notes Due 1997 (the "Fixed Rate Notes"), and to a Supplemental
Indenture No. 5 to Indenture, dated as of November 1, 1994 by and among Beverly
California Corporation, Beverly Enterprises, Inc., the Guarantors (as defined
therein) and State Street Bank and Trust Company, as successor trustee (the
"Trustee"), under the Indenture, a copy of which Supplemental Indenture No. 5 is
attached as Exhibit A.
The undersigned confirms that it is registered holder of
$__________ principal amount of the Fixed Rate Notes, and the undersigned
consents to the execution and delivery by the Company, the Parent, the Guarantor
and the Trustee of said Supplemental Indenture No. 5 and the amendments to the
Indenture contemplated thereby.
______________________________
Insert Full Legal Name
of Registered Holder
By____________________________
Title:
Dated as of __________, 1994
<PAGE> 1
EXHIBIT 4.7
SUPPLEMENTAL INDENTURE NO. 6 TO INDENTURE
SUPPLEMENTAL INDENTURE NO. 6 dated as of December 30, 1994
among BEVERLY CALIFORNIA CORPORATION, a California corporation (the "Company"),
BEVERLY ENTERPRISES, INC., a Delaware corporation (the "Parent"), each of the
Guarantors (as that term is defined in the Indenture defined below), and STATE
STREET BANK AND TRUST COMPANY,as successor trustee (the "Trustee") under the
Indenture defined below.
W I T N E S S E T H :
WHEREAS, the Company, the Parent and Yasuda Bank and Trust
Company (U.S.A.) have heretofore entered into an Indenture dated as of December
27, 1990 (as supplemented from time to time, the "Indenture") providing for the
issuance by the Company of $50,000,000 original principal amount of Senior
Secured Floating Rate Notes Due 1995 (the "Floating Rate Notes") and
$37,750,000 original principal amount of 14 1/4% Senior Secured Fixed Rate
Notes Due 1997 (the "Fixed Rate Notes");
WHEREAS, the Floating Rate Notes have been prepaid in full
pursuant to the terms of the Indenture and are no longer outstanding;
WHEREAS, Yasuda Bank and Trust Company (U.S.A.), has resigned
as original trustee pursuant to the terms of Section 610 of the Indenture and
State Street Bank and Trust Company has accepted an appointment as successor
Trustee pursuant to Section 611 of the Indenture;
WHEREAS, the parties hereto desire to amend the Indenture as
herein provided and pursuant to Section 902 of the Indenture the requisite
Holders (as defined in the Indenture) of Securities (as defined in the
Indenture) issued under the Indenture have heretofore consented thereto by
executing and delivering to the Trustee a consent (the "Consent"),
substantially in the form of Exhibit A hereto, and, on the basis of the
foregoing, the Trustee is willing to enter into such amendments as herein
provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Indenture shall have the meaning assigned to such term in the Indenture. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference contained in the Indenture or any Security
<PAGE> 2
shall, from and after the date hereof, refer to the Indenture or such Security,
as the case may be, as amended hereby.
SECTION 2. Amendment of Indenture. Subject to the
satisfaction of the conditions precedent contained in Section 3 hereof, the
Indenture is amended as follows:
A. Section 101 is amended by deleting the definitions of Base
Financials and Capital Expenditures in their entirety and replacing them
respectively with the following:
"'Base Financials' means the consolidated balance sheet of the
Parent and its Consolidated Subsidiaries as of December 31, 1993 and
the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended, together with the notes
thereto, included in the Parent's 1993 Form 10-K and reported on
without qualification by Ernst & Young.
"Capital Expenditures" means, for any period, the sum, without
duplication, of (i) the total amount of additions to property and
equipment of the Parent and its Consolidated Subsidiaries during such
period of the types classified as "Capital Expenditures" on the
consolidated statement of cash flows included in the Base Financials
and (ii) all investments (whether by means of share purchase, capital
contribution, loan, time deposit or otherwise) made by the Parent or
any of its Subsidiaries during such period in Beverly Japan
Corporation; provided that "Capital Expenditures" shall exclude (A)
the application of insurance or condemnation proceeds to rebuilding
facilities and (B) the amount of any Debt incurred or assumed for the
purpose of financing all or any part of the cost of constructing any
asset to the extent that such amount does not exceed 75% of the cost
of acquiring or constructing such asset."
B. Section 1020 is amended by deleting it in its entirety
and replacing it with the following:
"Section 1020 - Consolidated Capital Expenditures. The Parent
and its Subsidiaries will not pay or incur Capital Expenditures in any
fiscal year set forth below which exceed in aggregate amount for such
year the amount set forth opposite such year below:
<TABLE>
<S> <C>
Fiscal year ending December 31, 1993 $110,000,000
Fiscal year ending December 31, 1994 125,000,000
Fiscal year ending December 31, 1995 130,000,000
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Fiscal year ending December 31, 1996 135,000,000; and
Fiscal year ending December 31, 1997 140,000,000
</TABLE>
provided, however, that if in any fiscal year the Capital Expenditures
are less than the amount permitted by this Section 1020 (without
giving effect to any additional amount permitted by this proviso), the
amount of Capital Expenditures permitted in the next succeeding fiscal
year will be increased by an amount equal to such shortfall."
SECTION 3. Conditions for Effectiveness. This Supplemental
Indenture No. 6 shall become effective as of the date hereof, after the Trustee
shall have received:
(a) duly executed counterparts hereof signed by each
party hereto;
(b) Consents signed by a majority in aggregate principal
amount of the Outstanding Securities or, in the case of any party as to which
an executed counterpart or Consent shall not have been received, the Trustee
shall have received telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof, or Consent, as the case may be, by
such party (such Act by such Holders being delivered to the Trustee on behalf
of the Trustee, the Company and each Guarantor);
(c) a written request from the Company and the Guarantors
requesting the execution and delivery of this Supplemental Indenture No. 6;
(d) certified copies of the resolutions of the Board of
Directors of the Company and the Parent, approving this Supplemental Indenture
No. 6, and all other documents delivered hereunder to which it is a party;
(e) favorable opinions of Weil, Gotshal & Manges, special
New York counsel for the Company, and the General Counsel of the Company in the
form of Exhibits B and C hereto respectively; and
(f) a certificate of an officer of the Company to the
effect that the execution of Supplemental Indenture No. 6 is authorized or
permitted by the Indenture and all conditions precedent, if any, required by
the Indenture relating to a supplemental indenture have been complied with.
SECTION 4. Miscellaneous. (a) The Trustee shall be entitled
to the protections of Section 603, and other applicable provisions, of the
Indenture, with respect to
3
<PAGE> 4
its receipt, examination and handling of the documents delivered pursuant to
Section 3 hereof and the resulting effectiveness of this Supplemental Indenture
No. 6.
(b) The recitals contained herein shall be taken as
statements of the Company, the Parent and the Guarantors and not of the
Trustee.
(c) Each Guarantor hereby waives any right it may have
pursuant to Section 902 of the Indenture to receive a copy of the instrument or
instruments evidencing the Act of the Holders approving this Agreement and the
transactions contemplated hereby.
SECTION 5. Addition of Subsidiary Guarantors. Any subsidiary
of the Guarantor which is not currently a party to the Subsidiary Guaranty but
which is a signatory of this Supplemental Indenture No. 6 is hereby made a
party to the Subsidiary Guaranty.
SECTION 6. Governing Law. This Supplemental Indenture No. 6
shall be governed by and construed in accordance with the law of the State of
New York.
SECTION 7. Current Guarantors. Each of the Company and
Parent hereby certify that all of the entities executing this Supplemental
Indenture No. 6 as "Guarantors" constitute all of the current Guarantors within
the meaning of that term under the Indenture.
SECTION 8. Counterparts. This Supplemental Indenture No. 6
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
SUPPLEMENTAL INDENTURE NO. 6 to be duly executed as of the date hereof.
COMPANY
-------
BEVERLY CALIFORNIA CORPORATION
By
____________________________
Title:
4
<PAGE> 5
Parent
------
BEVERLY ENTERPRISES, INC.
By
-------------------------------
Title:
GUARANTORS
----------
BEVERLY ENTERPRISES JAPAN LIMITED
ADVINET, INC.
ALLIANCE HEALTH SERVICES, INC.
AMERICAN TRANSITIONAL CARE CENTERS OF
TEXAS, INC.
AMERICAN TRANSITIONAL CARE DALLAS -
FORT WORTH, INC.
AMERICAN TRANSITIONAL HEALTH CARE, INC.
AMERICAN TRANSITIONAL HOSPITALS, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
INDIANA, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
OKLAHOMA, INC.
AMERICAN TRANSITIONAL HOSPITALS OF
TENNESSEE, INC.
ATH DEL ORO, INC.
ATH HEIGHTS, INC.
ATH TUCSON, INC.
AGI-CAMELOT, INC.
AGI-MCDONALD COUNTY HEALTH CARE, INC.
AGI-VILLA CAPRI MANOR, INC.
AHP, INC.
ASSOCIATED HEALTHCARE PROFESSIONALS,
INC.
BEVERLY ADVISORS, LIMITED
BEVERLY CREST CORPORATION
BEVERLY ENTERPRISES-ALABAMA, INC.
BEVERLY ENTERPRISES-ARIZONA, INC.
BEVERLY ENTERPRISES-ARKANSAS, INC.
BEVERLY ENTERPRISES-CALIFORNIA, INC.
5
<PAGE> 6
BEVERLY ENTERPRISES-COLORADO, INC.
BEVERLY ENTERPRISES-CONNECTICUT, INC.
BEVERLY ENTERPRISES-DELAWARE, INC.
BEVERLY ENTERPRISES - DISTRIBUTION
SERVICES, INC.
BEVERLY ENTERPRISES-DISTRICT OF
COLUMBIA, INC.
BEVERLY ENTERPRISES-FLORIDA, INC.
BEVERLY ENTERPRISES-GARDEN TERRACE, INC.
BEVERLY ENTERPRISES-GAYLORD, INC.
BEVERLY ENTERPRISES-GEORGIA, INC.
BEVERLY ENTERPRISES-HAWAII, INC.
BEVERLY ENTERPRISES-IDAHO, INC.
BEVERLY ENTERPRISES-ILLINOIS, INC.
BEVERLY ENTERPRISES-INDIANA, INC.
BEVERLY ENTERPRISES-IOWA, INC.
BEVERLY ENTERPRISES-KANSAS, INC.
BEVERLY ENTERPRISES-KENTUCKY, INC.
BEVERLY ENTERPRISES-LANSING CENTRAL,
INC.
BEVERLY ENTERPRISES-LOUISIANA, INC.
BEVERLY ENTERPRISES-MAINE, INC.
BEVERLY ENTERPRISES-MARYLAND, INC.
BEVERLY ENTERPRISES-MASSACHUSETTS, INC.
BEVERLY ENTERPRISES-MICHIGAN, INC.
BEVERLY ENTERPRISES-MINNESOTA, INC.
BEVERLY ENTERPRISES-MISSISSIPPI, INC.
BEVERLY ENTERPRISES-MISSOURI, INC.
BEVERLY ENTERPRISES-MONTANA, INC.
BEVERLY ENTERPRISES-NEBRASKA, INC.
BEVERLY ENTERPRISES-NEVADA, INC.
BEVERLY ENTERPRISES-NEW HAMPSHIRE, INC.
BEVERLY ENTERPRISES-NEW JERSEY, INC.
BEVERLY ENTERPRISES-NEW MEXICO, INC.
BEVERLY ENTERPRISES-NEW YORK, INC.
BEVERLY ENTERPRISES-NORTH CAROLINA, INC.
BEVERLY ENTERPRISES-NORTH DAKOTA, INC.
BEVERLY ENTERPRISES-OHIO, INC.
BEVERLY ENTERPRISES-OKLAHOMA, INC.
BEVERLY ENTERPRISES-OREGON, INC.
6
<PAGE> 7
BEVERLY ENTERPRISES-PENNSYLVANIA, INC.
BEVERLY ENTERPRISES-PORTAGE, INC.
BEVERLY REHABILITATION SERVICES, INC.
BEVERLY ENTERPRISES-RHODE ISLAND, INC.
BEVERLY ENTERPRISES-SHOREHAM TERRACE,
INC.
BEVERLY ENTERPRISES-SOUTH CAROLINA, INC.
BEVERLY ENTERPRISES-TAWAS CITY, INC.
BEVERLY ENTERPRISES-TENNESSEE, INC.
BEVERLY ENTERPRISES-TEXAS, INC.
BEVERLY ENTERPRISES-UTAH, INC.
BEVERLY ENTERPRISES-VERMONT, INC.
BEVERLY ENTERPRISES-VIRGINIA, INC.
BEVERLY ENTERPRISES-WASHINGTON, INC.
BEVERLY ENTERPRISES-WEST VIRGINIA, INC.
BEVERLY ENTERPRISES-WISCONSIN, INC.
BEVERLY ENTERPRISES-WYOMING, INC.
BEVERLY ENTERPRISES MEDICAL EQUIPMENT
CORPORATION
BEVERLY INDEMNITY LTD.
BEVERLY MANOR INC. OF HAWAII
BEVERLY MANOR INC. OF LAS VEGAS
BEVERLY REHABILITATION SERVICES, INC.
BEVERLY REMIC DEPOSITOR, INC.
BEVERLY SAVANA CAY MANOR, INC.
COLONIAL MANORS OF KINGSLEY, INC.
COLUMBIA-VALLEY NURSING HOME, INC.
COMMERCIAL MANAGEMENT, INC.
COMPUTRAN SYSTEMS, INC.
CONTINENTAL CARE CENTERS OF COUNCIL
BLUFFS, INC.
DUNNINGTON DRUG, INC.
FOREST CITY BUILDING LTD.
GERIATRIC CONSULTANTS, INC.
HALLMARK CONVALESCENT HOMES, INC.
HAMDEN SURGICAL, INC.
HEALTHCARE PRESCRIPTION SERVICES, INC.
HOSPICE PREFERRED CHOICE, INC.
HOSPITAL FACILITIES CORPORATION
INSTA-CARE HOLDINGS, INC.
7
<PAGE> 8
INSTA-CARE PHARMACY SERVICES
CORPORATION
HOME MEDICAL SYSTEMS, INC.
HOMEMAKERS OF VIRGINIA, INC.
KD INVESTMENT CO.
KENWOOD VIEW NURSING HOME, INC.
LIBERTY NURSING HOMES, INCORPORATED
MEDICAL ARTS HEALTH FACILITY OF
LAWRENCEVILLE, INC.
MODERNCARE OF LUMBERTON, INC.
NEBRASKA CITY S-C-H, INC.
NORTHWEST CARE CENTER, INC.
NURSING HOME OPERATORS, INC.
PCA PHARMACIES, INC.
PETERSEN HEALTH CARE, INC.
PHARMACY DYNAMICS GROUP
PHARMACY CORPORATION OF AMERICA
SALEM NO. 1, INC.
ST. JOSEPH NURSING HOME, INC.
SOUTH ALABAMA NURSING HOME, INC.
SOUTH DAKOTA-BEVERLY ENTERPRISES, INC.
SYNERGOS, INC.
SYNERGOS - SCOTTSDALE, INC.
SYNERGOS - PLEASANTHILL, INC.
SYNERGOS - NORTH HOLLYWOOD, INC.
TAYLOR COUNTY HEALTH FACILITY,
INCORPORATED
VANTAGE HEALTHCARE CORPORATION
BEVERLY RIVERVIEW PARTNERSHIP
By
---------------------------
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By
---------------------------
Title:
8
<PAGE> 9
Exhibit A
CONSENT AND DIRECTION
Reference is made to an Indenture (as heretofore supplemented
and amended, the "Indenture") dated as of December 27, 1990 among Beverly
California Corporation (the "Company"), Beverly Enterprises, Inc. (the
"Parent") and Yasuda Bank and Trust Company (U.S.A.), as original trustee
thereunder, providing for, among other things, the issuance by Beverly
California Corporation of $37,750,000 original principal amount of 14 1/4%
Senior Secured Fixed Rate Notes Due 1997 (the "Fixed Rate Notes"), and to a
Supplemental Indenture No. 6 to Indenture, dated as of December 30, 1994 by and
among Beverly California Corporation, Beverly Enterprises, Inc., the Guarantors
(as defined therein) and State Street Bank and Trust Company, as successor
trustee (the "Trustee"), under the Indenture, a copy of which Supplemental
Indenture No. 6 is attached as Exhibit A.
To the extent that any Default would exist under the Indenture
as of December 31, 1994 but for (and only but for) the amendments to the
Indenture set forth in said Supplemental Indenture No. 6, such Default and its
consequences are hereby waived by the undersigned pursuant to Section 513 of the
Indenture (and this waiver shall not extend to any other Default).
The undersigned confirms that it is registered holder of
$__________ principal amount of the Fixed Rate Notes, and the undersigned
consents to the execution and delivery by the Company, the Parent, the Guarantor
and the Trustee of said Supplemental Indenture No. 6 and the amendments to the
Indenture contemplated thereby.
------------------------------
Insert Full Legal Name
of Registered Holder
By
----------------------------
Title:
Dated as of December 30, 1994
<PAGE> 1
EXHIBIT 10.4
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
(Effective as of January 1, 1994)
<PAGE> 2
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
(Effective as of January 1, 1994)
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article I. Establishment and Purpose
1.1 Establishment of Plan 1
1.2 Purpose 1
1.3 Applicability of the Plan 1
1.4 Effective Date 1
Article II. Definitions and Construction
2.1 Definitions 2
2.2 Gender and Number; Headings 3
Article III. Participation
3.1 Participation 4
Article IV. Annual AIP Program; Administration of Plan
4.1 Annual AIP Program 5
4.2 Compensation Committee 6
4.3 Expenses 7
4.4 Indemnification and Exculpation 8
Article V. AIP Awards; Payment of Awards
5.1 AIP Awards 9
5.2 Eligibility for AIP Award 9
5.3 Time and Form of Payment 10
5.4 Death of Participant 10
5.5 Other Benefit Payments 10
5.6 Award Payments in Stock 11
Article VI. Funding of the Plan
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
6.1 Funding 12
Article VII. Merger; Amendment; Termination
7.1 Merger, Consolidation, or Acquisition 13
7.2 Amendment 13
7.3 Termination 13
</TABLE>
-ii-
<PAGE> 4
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
(Effective as of January 1, 1994)
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C> <C>
Article VIII. Special Provisions
Applicable to Covered Participants
8.1 Provisions Applicable to Covered Participants 14
Article IX. General Provisions
9.1 Shareholder Approval 16
9.2 Nonalienation 16
9.3 Beneficiary Designation 16
9.4 Effect on Other Benefit Plans 17
9.5 Employer-Employee Relationship 17
9.6 Incompetence 17
9.7 Binding on Employer, Participants and Their
Successors
9.8 Status Under ERISA 18
9.10 Severability 18
9.11 Applicable Law 18
</TABLE>
-iii-
<PAGE> 5
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
(Effective as of January 1, 1994)
Article I. Establishment and Purpose
1.1 Establishment of Plan. BEVERLY ENTERPRISES, INC., a Delaware
corporation ("Company") hereby establishes this incentive award plan for
Participants, which plan as amended from time to time shall be known as the
"BEVERLY ENTERPRISES, INC. ANNUAL INCENTIVE PLAN" ("Plan").
1.2 Purpose. The purpose of the Plan is to provide its Participants
with incentive awards where they have contributed to their Employer's success,
and to do so through an ongoing program designed to reinforce such Employer's
strategic plan and related financial and operating objectives.
1.3 Applicability of the Plan. The provisions of this Plan shall be
applicable only with respect to those Participants who are designated for
participation in this Plan from and after January 1, 1994, the effective date
of this Plan.
1.4 Effective Date. This Plan shall be effective as of January 1,
1994, subject to the approval of this Plan by the Board of Directors and the
Company's shareholders, as provided in this Section 1.4. To become effective,
this Plan must be approved by the Board of Directors and by the affirmative
vote of the holders of a majority of shares of the common stock of the
-1-
<PAGE> 6
Company present, or represented, and entitled to vote at a meeting of the
Company's shareholders called for such purpose. Absent such approvals prior to
January 1, 1995, this Plan shall terminate and cease to be of any further force
or effect and all awards hereunder shall be null and void.
-2-
<PAGE> 7
Article II. Definitions and Construction
2.1 Definitions. Whenever used as a capitalized term in the Plan,
the following terms shall have the respective meanings set forth below, unless
otherwise expressly provided:
(a) "Affiliate" means "affiliate" as defined in Rule 12b-2 under the
Exchange Act.
(b) "AIP Award" means the annual incentive plan award approved by
the Compensation Committee for an eligible Participant for a
particular Plan Year, as provided in Section 5.1.
(c) "AIP Award Guidelines" means the standards, targets, performance
measurement and evaluation criteria and guidelines to be used to
determine AIP Awards for a particular Plan Year, as provided in
Section 4.1.
(d) "AIP Program" means the program for determining the awarding of
AIP Awards for a particular Plan Year, consisting of the AIP
Award Guidelines for such Plan Year, as provided in Section 4.1.
(e) "Beneficiary" means the person, persons or trust designated by a
Participant as provided in Section 9.3.
(f) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and
the regulations issued thereunder, as the same may be amended
from time to time.
(h) "Company" means Beverly Enterprises, Inc., or any successor
thereto.
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<PAGE> 8
(i) "Compensation Committee" means the Compensation Committee of the
Board of Directors, which Committee is a standing committee of
such Board. The general powers, duties and responsibilities of
the Compensation Commit tee as regards this Plan are described
in Section 4.2.
(j) "Covered Participant" means a Participant who is a "covered
employee" as defined in Section 162(m)(3) ofthe Code, or who the
Compensation Committee believes will be such a covered employee
for a Plan Year.
(k) "Employee" means an individual who is an employee of the Company
or an Affiliat.
(l) "Employer" means the Company or any Affiliate which is
participating under the Plan with the consent of the Board of
Directors.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(n) "Long-Term Incentive Stock Plan" means the "Beverly Enterprises,
Inc. 1993 Long-Term Incentive Stock Option Plan", as amended
from time to time.
(o) "Participant" means an Employee of an Employer who has been
designated as a Participant under this Plan, as provided in
Section 3.1.
(p) "Plan" means the "Beverly Enterprises, Inc. Annual Incentive
Plan" as set forth in this document, and as the same may be
amended from time to time.
(q) "Plan Year" means the 12-month period beginning each January 1
and ending on December 31 of such year. The
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<PAGE> 9
first Plan Year shall be the period beginning January 1, 1994
and ending December 31, 1994.
2.2 Gender and Number; Headings. Except when otherwise indicated by
the context, any masculine terminology when used in this Plan shall also
include the feminine gender, and the defi nition of any term in the singular
shall also include the plural. Headings of Articles and Sections herein are
included solely for convenience, and if there is any conflict between such
headings and the text of the Plan, the text shall control.
-5-
<PAGE> 10
Article III. Participation
3.1 Participation. The Compensation Committee shall designate the
Employees of each participating Employer who are to be the Participants under
this Plan. Such designations may be based on participation criteria
established by the Compensation Committee from time to time. The designation
of Participants shall be made for each Plan Year, and the Participants
designated for a particular Plan Year may be identified by reference to the
subject Plan Year (e.g., the Participants designated for the 1994 Plan Year may
be referred to as "1994 Participants"). The Compensation Committee may
establish such procedures as it deems appropriate for notifying each
Participant of his status as a Participant under the Plan. Section 5.5
contains additional provisions relating to the designation of Participants
under the Plan.
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<PAGE> 11
Article IV. Annual AIP Program; Administration of Plan
4.1 Annual AIP Program. For each Plan Year, the Compensation
Committee shall establish the AIP Program for that Plan Year. Such AIP Program
for the particular Plan Year shall consist of such standards, targets,
performance measurement and evaluation criteria and guidelines as the
Compensation Committee determines to be applicable in awarding AIP Awards for
the relevant Plan Year, all of which shall collectively be known as the "AIP
Award Guidelines" for that Plan Year. The AIP Program established for a
particular Plan Year may include any of the following elements, as determined
in the sole discretion of the Compensation Committee:
(a) An incentive award pool for purposes of determining the dollar
amount which shall be available for AIP Awards and other
benefits under the Plan for the Plan Year;
(b) Financial and strategic performance goals for each participating
Employer;
(c) Performance measurement and weighting criteria and guidelines
for each Employer, including corporate-wide performance, where
applicable;
(d) Individual target and maximum incentive opportunities for
Participants or groups of Participants;
(e) Performance measurement and weighting criteria and guidelines
for Participants or groups of Participants;
(f) Guidelines and requirements for the development of Participant
goals and objectives; and
(g) Such other standards, criteria, measurements, requirements and
guidelines as the Compensation
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<PAGE> 12
Committee may from time to time determine shall be
applicable with respect to the subject Plan Year.
The AIP Program established for each Plan Year, including the AIP Award
Guidelines applicable thereto, may be identified by reference to the subject
Plan Year (e.g., the AIP Program for 1994 may be referred to as the "1994 AIP
Program"). The AIP Program so established for each Plan Year shall be
communicated to such Company and other participating Employer personnel as the
Compensation Committee deems necessary to assist in the maintenance of the AIP
Program for such Plan Year. The AIP Program for each Plan Year (including the
AIP Award Guidelines included therein) shall be maintained with the records of
the Plan for reference purposes. The Compensation Committee may change or
modify the AIP Program established for a particular Plan Year in any respect,
and at any time.
4.2 Compensation Committee. The Plan shall be administered by the
Compensation Committee. The Compensation Committee shall have the full general
power, authority and discretion to administer the Plan and construe, interpret
and apply its provisions. Without limiting the generality thereof, the
Compensation Committee shall have the following powers, duties and authorities
as regards its administration and activities as regards the Plan:
(a) To establish an AIP Program for each Plan Year, as provided in
Section 4.1;
-8-
<PAGE> 13
(b) To approve AIP Awards or other benefit payments for Participants
for each Plan Year, as provided in Section 5.1;
(c) To establish, maintain and interpret such rules, regulations and
requirements as it deems necessary or advisable as regards the
administration and maintenance of the Plan, including the
amendment and modification of such rules, regulations and
requirements;
(d) To resolve all questions relating to the eligibility of
Participants;
(e) To resolve all questions relating to a Participant's right to
receive any AIP Award payment or other benefits under the Plan;
(f) To determine the time, manner and form of payment with respect
to any AIP Award payments or other benefits under the Plan;
(g) To engage any administrative, legal, consulting, clerical or
other services it deems appropriate in administering the Plan;
(h) To construe and interpret the Plan, and any administrative rules
relating thereto, as necessary and to carry out the purposes of
this Plan;
(i) To resolve all questions of fact relating to any questions or
determinations relating to the administration of the Plan;
(j) To compile and maintain all records it determines to be
necessary, appropriate and convenient in connection with the
administration of the Plan;
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<PAGE> 14
(k) To delegate or appoint such other parties as it determines to be
necessary to carry out a general or specific function as regards
the administration of the Plan; and
(l) To take all such other actions, and to make such determinations,
as are necessary to administer the Plan and carry out its
purposes.
All actions taken or determinations made by the Compensation Committee as
regards the Plan shall be final, binding and conclusive upon all parties. The
membership of the Compensation Committee, and the rules relating to its
conduct, voting and actions, shall be governed by the rules establishing the
Compensation Committee as a standing committee of the Board of Directors.
Members of the Compensation Committee shall not participate directly in any
action or determination regarding their own interests under the Plan.
4.3 Expenses. Any expenses relating to the administration of this
Plan shall be borne by the Employers as may be determined by the Compensation
Committee.
4.4 Indemnification and Exculpation. The members of the
Compensation Committee, its agents, and officers, directors, and employees of
the Company or any other Employer shall be indemnified and held harmless by the
Company against and from any and all loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by them in connection with or resulting
from any claim, action, suit, or proceeding to which they may be a party or in
which they may be involved by reason of
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<PAGE> 15
any action taken or failure to act under this Plan and against and from any and
all amounts paid by them in settlement (with the Company's written approval) or
paid by them in satisfaction of a judgment in any such action, suit, or
proceeding. The foregoing provision shall not be applicable to any person if
the loss, cost, liability, or expense is due to such person's gross negligence
or willful misconduct.
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<PAGE> 16
Article V. AIP Awards; Payment of Awards
5.1 AIP Awards. Each Plan Year, the Compensation Committee shall
approve such individual AIP Awards for the Participants covered under the Plan
for the Plan Year as the Compensation Committee in its sole discretion shall
deem appropriate. Company personnel acting at the direction of the
Compensation Committee shall prepare such preliminary calculations and reports
regarding proposed AIP Award amounts as the Compensation Committee may request.
Such information shall be prepared in accordance with the Compensation
Committee's AIP Award Guidelines for the subject Plan Year, and in accordance
with such other performance measure ment standards as the Compensation
Committee may direct from time to time. The Compensation Committee shall
provide that each Participant for a Plan Year be notified of the amount and
terms of his AIP Award for the subject Plan Year. Such notification shall be
at such time and in such manner as determined by the Compensation Committee.
5.2 Eligibility for AIP Award. To be eligible to receive any AIP
Award as may be approved for the Participant for a particular Plan Year, as
provided in Section 5.1, such Participant must satisfy one of the following
eligibility conditions:
(a) He must be employed as an Employee on the last day of the Plan
Year;
(b) He must have retired, died or incurred a disability during the
Plan Year if he is not employed as an Employee on the last day
of the Plan Year; or
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<PAGE> 17
(c) He must have terminated employment as an Employee before the
last day of the Plan Year for another reason as recognized by
the Compensation Committee.
Unless the Compensation Committee otherwise specifically provides, a
Participant who does not meet one of the foregoing employment eligibility
conditions for a particular Plan Year shall not be eligible to receive payment
of an AIP Award for such Plan Year.
5.3 Time and Form of Payment. All AIP Awards for a particular Plan
Year shall be paid to or with respect to the eligible Participants for such
Plan Year at such time or times as the Compensation Committee may determine,
which may be before or following the close of the particular Plan Year to which
such AIP Awards relate. Normally, all AIP Award payments shall be in a lump
sum; however, the Compensation Committee may from time to time direct the
payment of any AIP Award in a different payment form. The Compensation
Committee shall designate whether an AIP Award is to be paid in cash, Company
stock, other form of property or benefit, or any combination thereof.
5.4 Death of Participant. In the event a Participant who is
eligible to receive an AIP Award dies before payment thereof is made to him,
the payment of such AIP Award shall be made to his designated Beneficiary.
5.5 Other Benefit Payments. From time to time, the Compensation
Committee may grant a special benefit award under
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<PAGE> 18
this Plan to any Employee that it considers to have made a key contribution to
the continuing success of his Employer. The Compensation Committee may grant
such benefit awards with respect to a Plan Year at any time during or following
the particular Plan Year. All such benefit awards so granted under the Plan
shall be in addition to any AIP Awards otherwise awarded under the Plan. An
Employee who is designated as a Participant as regards eligibility for an AIP
Award for a Plan Year may also be granted a benefit award under this Section
5.5. Any Employee who is not otherwise designated as a Participant eligible
for an AIP Award, but who is designated to receive a benefit award under this
Section 5.5, shall be considered a Participant under the Plan for the relevant
Plan Year as regards such benefit award. The Compensation Committee shall
designate the time, form and medium of payment of any benefit award granted
pursuant to this Section 5.5.
5.6 Award Payments in Stock. To the extent any AIP Award (or
portion thereof) or other benefit under the Plan is paid in Company stock, as
may be directed under Section 5.3 or Section 5.5, such payment shall be
considered to be an award under Article IX of the Long-Term Incentive Stock
Plan. As such an award, any Participant receiving such award under this Plan
and Article IX of such Plan who is also covered by the Long-Term Incentive
Stock Plan shall be subject to any applicable sale, transfer, exercise, or
vesting restrictions, and to such other terms and provisions under such Plan or
award agreements issued pursuant thereto, as regards such stock and the award,
exercise and payment thereof. Any such term, condition or provisions in
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<PAGE> 19
such Plan or award agreement as regards such stock, or the Participant's rights
thereto, shall control over any provision in this Plan to the contrary.
-15-
<PAGE> 20
Article VI. Funding of the Plan
6.1 Funding. All amounts paid under this Plan shall be paid from
the general assets of the participating Employers. AIP Award payments and
other benefit payments under this Plan shall be reflected on the accounting
records of the Employers, but neither this Plan nor the maintenance of such
accounting records shall be construed to create, or require the creation of, a
trust, custodial account, or escrow account with respect to any Participant.
No Participant shall have any right, title, or interest whatsoever in or to any
investment reserves, accounts, or funds, that the Employers may purchase,
establish, or accumulate to aid in providing the unfunded AIP Award payments or
other benefits described in the Plan. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create, or be construed to
create, a trust or fiduciary relationship of any kind between an Employer, the
Compensation Committee and a Participant or any other person. Participants
shall not acquire any interest under the Plan greater than that of an unsecured
general creditor of an Employer.
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<PAGE> 21
Article VII. Merger; Amendment; Termination
7.1 Merger, Consolidation, or Acquisition. In the event of a
merger, consolidation, or acquisition where an Employer is not the surviving
organization, unless the successor or acquiring organization shall elect to
continue and carry on the Plan, this Plan shall terminate with respect to such
Employer, and no addi tional benefits shall accrue for the Participants of such
organ ization. Unpaid AIP Award payments or other benefits shall continue to
be paid as scheduled unless the successor or acquiring organization elects to
accelerate payment.
7.2 Amendment. The Compensation Committee may amend or modify this
Plan at any time, for any reason, and in any manner. Such actions by the
Compensation Committee shall be binding upon all other Employers. Any such
amendment or modification of the Plan shall not require shareholder approval,
except to the extent that such approval is required pursuant to the rules under
Section 16 of the Exchange Act, by any national securities exchange or system
on which the Company's stock is listed or reported, or under any other
applicable Federal or state law. Notice of any amendment or modification of the
Plan shall be given to Participants and other interested parties in such manner
and at such time as provided by the Compensation Committee.
7.3 Termination. The Board of Directors may terminate this Plan at
any time, for any reason, and in any manner. In the event of the termination
of the Plan pursuant to this Section 7.3, no further AIP Award payments or
other benefits shall accrue
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<PAGE> 22
under this Plan, and amounts which are then payable with respect to a prior
Plan Year shall continue to be an obligation of the Employer and shall be paid
as scheduled. No AIP Award payments or other payments shall be made with
respect to the Plan Year in which the Plan is terminated, unless otherwise
provided by the Board of Directors.
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<PAGE> 23
Article VIII. Special Provisions
Applicable to Covered Participants
8.1 Provisions Applicable to Covered Participants. Notwith standing
any other provision of this Plan to the contrary, any AIP Awards and other
benefits paid to Covered Participants under this Plan shall be subject to the
following conditions:
(a) All AIP Guidelines or other performance measures, goals,
standards, formulas, or criteria relating to Covered
Participants ("Performance Measures") for a Plan Year shall be
established by the Compensation Committee in writing prior to
the beginning of the Plan Year, or by such other later date for
such Plan Year as may be permitted under Section 162(m) of the
Code. Performance Measures may include alternate and multiple
Performance Measures, and may be based on one or more business
criteria. In establishing Performance Measures, the
Compensation Committee shall consider an internal budget for
factors such as earnings per share, return on equity, revenue
growth, cash flow, income and operating margins.
(b) The Performance Measures must be objective and must satisfy the
third party "objectivity" standards under Section 162(m) of the
Code.
(c) The Performance Measures shall not allow for any discretion by
the Compensation Committee as to an increase in any AIP Award or
other benefit, but discretion to lower an AIP Award or other
benefit is permissible.
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<PAGE> 24
(d) The award and payment of any AIP Award or other benefit under
this Plan to a Covered Participant with respect to a Plan Year
shall be contingent upon the attainment of the Performance
Measures that are applicable to such Covered Participant. The
Compensation Committee shall certify in writing prior to the
payment of any such AIP Award or other benefit that such
applicable Performance Measures relating to the AIP Award or
other benefit were satisfied. Approved minutes of a meeting of
the Compensation Committee may be used for this purpose.
(e) As provided in Sections 1.4 and 9.1, this Plan is subject to
shareholder approval, and all AIP Awards or other benefits to
Covered Participants under this Plan are expressly contingent on
and subject to such shareholder approval.
(f) The maximum AIP Award or other benefit that may be paid to any
Covered Participant under the Plan for any Plan Year is 100
percent of the Covered Participant's base salary as of the first
day of that Plan Year.
(g) All AIP Awards or other benefits to Covered Participants under
this Plan shall be further subject to such other conditions,
restrictions, and requirements as the Compensation Committee may
determine to be necessary to carry out the purposes of this
Article VIII.
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<PAGE> 25
Article IX. General Provisions
9.1 Shareholder Approval. The effectiveness of the Plan and of the
grant of AIP awards or other benefits under this Plan are subject to
shareholder approval of the Plan as provided in Section 1.4.
9.2 Nonalienation. No AIP Award or other benefit payable at any
time under the Plan shall be subject in any manner to aliena tion, sale,
transfer, assignment, pledge, attachment, garnish ment, or encumbrance of any
kind, and shall not be subject to or reached by any legal or equitable process
(including execution, garnishment, attachment, pledge, or bankruptcy) in
satisfaction of any debt, liability, or obligation, prior to receipt. Any
attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any
such benefit, whether presently or thereafter pay able, shall be void.
Notwithstanding the foregoing provisions of this Section 9.2, no AIP Award or
other benefit amount payable under the Plan shall be payable until and unless
any and all amounts representing debts or other obligations owed to the Com
pany or other Employer by the Participant with respect to whom such amount
would otherwise be payable shall have been fully paid.
9.3 Beneficiary Designation. A Participant may designate a
Beneficiary who upon his death is to receive an AIP Award payment that
otherwise would have been paid to him under the Plan. All Beneficiary
designations shall be in writing and on a form approved by the Compensation
Committee for such purpose, and any
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<PAGE> 26
such designation shall only be effective if and when delivered to the
Compensation Committee or its representative during the lifetime of the
Participant. Absent any specific Beneficiary designation with respect to this
Plan, a Participant's designated Beneficiary for purposes of this Plan shall be
the same person or persons as designated as his beneficiary to receive life
insurance proceeds under the Employer's group term life insurance coverage for
such Participant. In the event there is not a Beneficiary designation on file
for the Participant, such Participant's Beneficiary shall be deemed to be the
Participant's surviving spouse, or if there is no such spouse, the
Participant's estate.
9.4 Effect on Other Benefit Plans. AIP Award or other benefit
amounts paid under this Plan shall only be considered as compensation under the
employee benefit plans of the Employers as determined and provided under the
provisions of such plans.
9.5 Employer-Employee Relationship. The establishment of this Plan
shall not be construed as conferring any legal or other rights upon any
Employee or any person for a continuation of employment, nor shall it interfere
with the rights of an Employer to discharge any Employee or otherwise act with
relation to the Employee. An Employer may take any action (including
discharge) with respect to any Employee or other person and may treat such
person without regard to the effect which such action or treat ment might have
upon such person as a Participant under this Plan.
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<PAGE> 27
9.6 Incompetence. Every person receiving or claiming AIP Award or
other benefit payments under the Plan shall be conclusively presumed to be
mentally competent until the date on which the Compensation Committee receives
a written notice, in a form and manner acceptable to the Compensation
Committee, that such person is incompetent, and that a guardian, conservator,
or other person legally vested with the care of such person's person or estate
has been appointed; provided, however, that if the Compen sation Committee
shall find that any person to whom an AIP Award or other benefit payment is
payable under the Plan is unable to care for such person's affairs because of
incompetency, any pay ment due (unless a prior claim therefor shall have been
made by a duly appointed legal representative) may be paid in a manner as
approved by the Compensation Committee. Any such payment so made shall be a
complete discharge of any liability therefor under the Plan.
9.7 Binding on Employer, Participants and Their Successors. This
Plan shall be binding upon and inure to the benefit of the Employers, their
successors and assigns and the Participants, their heirs, executors,
administrators and legal representatives. The provisions of this Plan shall be
applicable with respect to each Employer separately, and AIP Award or other
benefit amounts payable hereunder shall be paid by the Employer of the
particular Participant.
9.8 Status Under ERISA. This Plan is not maintained as and is not
intended to be an "employee benefit plan" under the Employee Retirement Income
Security Act of 1974, as amended.
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<PAGE> 28
9.9 Tax Liability. An Employer may withhold from any payment
hereunder any taxes required to be withheld and such sum as the Employer may
reasonably estimate to be necessary to cover any taxes for which the Employer
may be liable and which may be assessed with regard to such payment.
9.10 Severability. In the event any provision of this Plan shall be
held invalid or illegal for any reason, any illegality or invalidity shall not
affect the remaining parts of this Plan, but this Plan shall be construed and
enforced as if the illegal or invalid provision had never been inserted, and the
Company shall have the privilege and opportunity to correct and remedy such
questions of illegality or invalidity by amendment as provided in this Plan.
9.11 Applicable Law. This Plan shall be governed by, construed, and
administered in accordance with the laws of the State of Arkansas, except to
the extent such laws are preempted by the laws of the United States.
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<PAGE> 29
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers effective as of January 1, 1994.
BEVERLY ENTERPRISES, INC.
By:
ATTEST: ---------------------------
Its:
-------------------------
By:
--------------------------
Its:
----------------------
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<PAGE> 1
EXHIBIT 10.5
OTHER STOCK UNIT AGREEMENT UNDER
THE 1993
BEVERLY ENTERPRISES, INC. LONG-TERM INCENTIVE STOCK PLAN
This Other Restricted Stock Unit Award Agreement is entered into
effective as of the 15th day of February, 1994 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Corporation" herein), and Name (the
"Participant"), under the following terms and conditions:
I.
DEFINITIONS
Terms capitalized and not defined herein shall have the respective
meanings set forth in the 1993 Beverly Enterprises, Inc. Long-Term Incentive
Stock Plan (the "Plan").
II.
GRANT OF STOCK
The Corporation has, on February 15, 1994 (the "Award Date"), granted
to the Participant an Other Stock Unit Award of shares of Stock in
-----------
accordance with Article IX of the Plan, and the terms of this Other Stock Unit
Award Agreement (the "Agreement') as part of Participant's 1993 performance
bonus.
III.
RELEASE OF STOCK
Except as otherwise expressly provided in this Agreement and the Plan,
the Stock granted as an Other Stock Unit Award will be held for the Participant
by the Corporation and shall be released, subject to receipt by the corporation
of appropriate Federal, state and local taxes required to be withheld, on
February 15, 1995. The Corporation shall, as of the Award Date, cause to be
issued in the name of the Participant and maintained in a separate special
account on the books of the Corporation the number of shares awarded by this
Agreement. The unreleased share certificates shall be held for the account of
the Participant by the Secretary of the Corporation and shall be released to
the Participant pursuant to the terms of this Agreement.
Any Stock to be released as provided for in this Agreement during the
lifetime of the Participant shall be released only to him, his guardian or
personal representative, and such Stock is nontransferable other than by the
Employee's will or by the laws of descent and distribution.
IV.
RIGHTS TO VOTE AND DIVIDENDS
The Participant shall have the right to vote the shares of unreleased
Stock and to receive all dividends as though all shares of Stock granted were
released.
<PAGE> 2
V.
TAXES
The Participant acknowledges that the release of the Stock will give
rise to income tax liability to the Participant. The Participant agrees that
the Corporation may utilize any released shares to satisfy its withholding
obligations with respect to such income tax liability of the Participant if
other arrangements acceptable to the Corporation have not been made by the
Participant and that the Corporation may hold any released shares until it has
been satisfied that the conditions to its obtaining an appropriate deduction
have been met.
VI.
CHANGE IN CAPITAL STRUCTURE
The number and kinds of shares subject to this Agreement shall be
subject to adjustment as provided by the Plan.
VII.
GENERAL PROVISIONS
The Plan provides important details governing Other Stock Unit Awards
under the Plan. The terms and provisions of the Plan are part of this Other
Stock Unit Award Agreement and shall control over any conflicting terms herein.
IN WITNESS WHEREOF, the Corporation has caused this Other Stock Unit
Award Agreement to be duly executed by its officers thereunto duly authorized,
and the Participant has hereunto set his hand on the date first above written.
BEVERLY ENTERPRISES, INC.
By
-----------------------------------------
Chairman of the Board and Chief
Executive Officer
ATTEST:
- ------------------------------
Senior Vice President, General
Counsel and Secretary
------------------------------------
Participant
(SEAL)
------------------------------------
Social Security Number
<PAGE> 1
Exhibit 10.10
AMENDMENT NUMBER ONE
TO THE
BEVERLY ENTERPRISES, INC.
EXECUTIVE LIFE INSURANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1993)
This Amendment is made this _____ day of December, 1994, by
Beverly Enterprises, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company sponsors the Beverly Enterprises, Inc.
Executive Life Insurance Plan (As Amended and Restated Effective as of December
31, 1993) (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to add certain
protections in the event of the Change of Control of the Company; and
WHEREAS, the Plan may be amended at any time pursuant to
Section 8(b) thereof;
NOW, THEREFORE, the Plan is hereby amended as follows,
effective as of September 29, 1994.
1. A new section 15 is hereby added to read as
follows:
"15. CHANGE IN CONTROL PROVISIONS
Notwithstanding anything to the contrary herein, if, on or
after a Change of Control of the Company (as hereinafter defined), an
Employee's employment is terminated under circumstances in which he would be
entitled to a severance benefit under either the Company's Change in Control
Severance Agreement, Severance Program for Executives, or an individual
Employment Contract, then, regardless of the Employee's age as of his
termination date, the Company shall maintain in force, at its own expense, for
the remainder of the Employee's life, the vested life insurance benefits in
effect hereunder as of the Change of Control date or as of the date of
termination of employment, whichever is greater.
For purposes of this Section, a "Change of Control" shall be
deemed to have taken place if: (i) any person, corporation, or other entity or
group, including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than any employee benefit plan of the Company,
becomes the beneficial owner of shares of the Company having 30 percent or more
of the total number of votes that may be cast for the election of Directors of
the Company; (ii) as the result of, or in connection with, any contested
election for the Board of Directors of the Company, or any tender or exchange
offer, merger or other business combination, or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were Directors
of the Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company or its
assets, or (iii) at any time a the Company shall consolidate with, or merge
with, any other Person and the Company shall not be the continuing or surviving
corporation, b any Person shall consolidate with, or merge with, the Company,
and the Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, c the Company shall be a party to a statutory share
exchange with any other Person after which the Company is a subsidiary of any
other Person, or d the Company shall sell or otherwise transfer 50% or more of
the assets or earning power of the Company and its subsidiaries (taken as a
whole) to any Person or Persons."
2. A new Section 16 is hereby added to read as
follows:
"16. RABBI TRUST
The Company, at its discretion, may place assets in a trust
fund that may be used to meet all or a portion of the Company's obligations
hereunder. If any such trust is established with respect to this Plan, the
full funding of such trust to satisfy all liabilities hereunder (whether
<PAGE> 2
or not then due and payable) shall become mandatory immediately prior to any
Change of Control of the Company, as defined in Section 15. However, the
assets of any such trust shall be available to the general creditors of the
Company in the event of the Company's insolvency or bankruptcy."
IN WITNESS WHEREOF, this Amendment has been executed by the
Company's duly authorized officer, as of the day and year first above written,
but to be effective as of September 29, 1994.
BEVERLY ENTERPRISES, INC.
By: ______________________________
Its: ______________________________
2
<PAGE> 1
Exhibit 10.13
AMENDMENT NUMBER ONE
TO THE
BEVERLY ENTERPRISES, INC.
DEFERRED COMPENSATION PLAN
This Amendment is made this _____ day of December, 1994, by
Beverly Enterprises, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company sponsors the Beverly Enterprises, Inc.
Deferred Compensation Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to accelerate
certain payments and add certain other protections in the event of the Change
of Control of the Company; and
WHEREAS, the Plan may be amended at any time pursuant to
Paragraph 13 thereof;
NOW, THEREFORE, the Plan is hereby amended as follows,
effective as of September 29, 1994.
1. A new Paragraph 15 is hereby added to read as
follows:
"15. CHANGE OF CONTROL PROVISIONS
a. Notwithstanding anything to the contrary
herein, immediately prior to a Change of Control of the Company (as hereinafter
defined), all benefits hereunder shall be accelerated and immediately paid out
to a Designated Participant (as hereinafter defined) in a single lump sum cash
payment, regardless of the amount of such benefit, and regardless of whether or
not the Participant has incurred a Termination Date. For purposes of this
Paragraph 15, a "Designated Participant" means any Plan Participant who is
covered under the Company's Change in Control Severance Agreement, Severance
Program for Executives, or an individual Employment Contract.
b. Notwithstanding anything to the contrary
herein, on and after any Change of Control of the Company (as hereinafter
defined), with respect to all Plan Participants not covered by Paragraph 15 a.
above, the minimum interest accrued under Paragraph 12 hereof shall in no event
be less than a per annum rate, compounded quarterly, equal to a percentage
computed by dividing (i) the Consumer Price Index of the Bureau of Labor
Statistics, U.S. Department of Labor, for All Cities (the "Consumer Price
Index") for the month of December immediately preceding the year in question
(the "Look Back Year"), by (ii) the Consumer Price Index for the month of
December immediately preceding the Look Back Year. This minimum interest rate
shall override Paragraph 12 c. hereof to the extent that a lower interest rate
would otherwise have been used. However, this Paragraph 15 b. shall not
override Paragraph 12 d. with respect to a Participant's Special Ledger
"Lock-In" account value to the extent that no interest would otherwise be
payable thereon prior to the Participant's Termination Date, unless otherwise
specifically provided for in said Paragraph 12, as hereby modified.
<PAGE> 2
c. For purposes of this Paragraph, a "Change of
Control" shall be deemed to have taken place if: (i) any person, corporation,
or other entity or group, including any "group" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, other than any employee benefit plan of
the Company, becomes the beneficial owner of shares of the Company having 30
percent or more of the total number of votes that may be cast for the election
of Directors of the Company; (ii) as the result of, or in connection with, any
contested election for the Board of Directors of the Company, or any tender or
exchange offer, merger or other business combination, or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were Directors
of the Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company or its
assets, or (iii) at any time a the Company shall consolidate with, or merge
with, any other Person and the Company shall not be the continuing or surviving
corporation, b any Person shall consolidate with, or merge with, the Company,
and the Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, c the Company shall be a party to a statutory share
exchange with any other Person after which the Company is a subsidiary of any
other Person, or d the Company shall sell or otherwise transfer 50% or more of
the assets or earning power of the Company and its subsidiaries (taken as a
whole) to any Person or Persons."
IN WITNESS WHEREOF, this Amendment has been executed by the
Company's duly authorized officer, as of the day and year first above written,
but to be effective as of September 29, 1994.
BEVERLY ENTERPRISES, INC.
By: ______________________________
Its: ______________________________
2
<PAGE> 1
EXHIBIT 10.29
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of September 29, 1994 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and FIELD(NAME) (the "Executive").
WHEREAS, the Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries;
WHEREAS, the Company recognizes that the Executive's contribution to
the Company's growth and success has been and continues to be substantial;
WHEREAS, the Company wishes to encourage the Executive to remain with
and devote full time and attention to the business affairs of the Company and
wishes to provide income protection to the Executive for a period of time in
the event of a Change in Control;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. Definitions.
(a) "Base Salary" shall mean the Executive's
regular annual rate of base pay as of the date in question.
(b) "Cause" shall mean the Executive's (i)
conviction of a crime involving moral turpitude, (ii) theft or
embezzlement of property from the Company or (iii) willful misconduct
or willful failure substantially to perform the duties of his
position, but only if such has continued after receipt of such notices
and cure periods as are provided for by the Company's disciplinary
process as in effect on the Change in Control Date.
(c) A "Change of Control" shall be deemed to have
taken place if: (i) any person, corporation, or other entity or group,
including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than any employee benefit plan then
maintained by the Company, becomes the beneficial owner of shares of
the Company having 30 percent or more of the total number of votes
that may be cast for the election of Directors of the Company; (ii) as
the result of, or in connection with, any contested election for the
Board of Directors of the Company, or any tender or exchange offer,
merger or other business combination or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were
Directors of the Company before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company or any
successor to the Company or its assets, or (iii) at any time a the
Company shall consolidate with, or merge with, any other Person and
the Company shall not be the continuing or surviving corporation, b
any Person shall consolidate with, or merge with, the Company, and the
Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock
shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, c the Company shall be
a party to a statutory share exchange with any other Person after
which the Company is a subsidiary of any other Person, or d the
Company shall sell or otherwise transfer 50% or more of the assets or
earning power of the Company and its subsidiaries (taken as a whole)
to any Person or Persons.
<PAGE> 2
(d) The "Change in Control Date" shall mean
the date immediately prior to the effectiveness of the Change in
Control.
(e) The Executive shall have "Good Reason" to
terminate employment if: (i) the Executive's duties, responsibilities
or authority are materially reduced or diminished from those in effect
on the Change in Control Date without the Executive's consent; (ii)
the Executive's compensation or benefits are reduced (other than
pursuant to a uniform reduction applicable to all executives of the
Company); or (iii) the Company requires that the Executive's
employment be based other than at Fort Smith, Arkansas.
(f) "Person" shall have the meaning ascribed to
such term in Section 3(a)(9) of the Securities Exchange Act of 1934
and used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d).
(g) "Target Bonus" shall mean the target bonus
(100% level) established for the Executive for the year in question
under the Company's "Annual Incentive Plan" or "Performance Unit
Plan," as applicable.
(h) "Termination of Employment" shall mean the
termination of the Executive's employment by the Company other than
such a termination in connection with an offer of immediate
reemployment by a successor or assign of the Company or purchaser of
the Company or its assets under terms and conditions which would not
permit the Executive to terminate his employment for Good Reason.
2. Term. The initial term of this Agreement shall be
for the period commencing on September 29, 1994 (the "Effective Date") and
ending after a period of three years. The Term shall be automatically extended
by one additional day for each day beyond the Effective Date of this Agreement
that the Executive remains employed by the Company until such time as the
Company elects to cease such extension by giving written notice of such to the
Executive. (In such event, the Agreement shall thus terminate on the third
anniversary of the effective date of such notice).
3. Eligibility for Severance Benefits. The Executive
shall be eligible for the benefits described in Paragraph 4 (the "Severance
Benefits") if, during the Term there has been a Change in Control and:
(a) during the two year period commencing on the
Change in Control Date, the Executive has a Termination of Employment
initiated (i) by the Company without Cause or (ii) by the Executive
for Good Reason, or
(b) during the 31 day period commencing on the
first day of the 13th calendar month following the Change in Control
Date (e.g. the period April 1, 1996 - May 1, 1996, inclusive, for a
Change in Control which is effective in the month of March, 1995), the
Executive has a Termination of Employment initiated by the Executive
without Good Reason.
4. Severance Benefit. Upon satisfaction of the
requirements set forth in Paragraph 3, and subject to Paragraph 5, the Executive
shall be entitled to the following Severance Benefits:
(a) Cash Payment. The Executive shall be entitled
to receive an amount of cash equal to Three (3) times the greater of
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<PAGE> 3
(i) the sum of the Executive's Base
Salary and Target Bonus, in each case as in effect upon the
Termination of Employment, or,
(ii) the sum of the Executive's Base
Salary and Target Bonus, in each case as in effect on the
Change in Control Date.
The payment shall be made in a single lump sum upon the Executive's
Termination of Employment unless the Executive shall have elected
another method on the signature page hereof.
(b) Long-Term Incentive Award; Equity-Based
Compensation. To the extent not already vested pursuant to the Terms
of said plan, the Executive's interest under the Company's Long-Term
Stock Incentive Plan shall be fully vested. To the extent not already
vested pursuant to the terms of any option plans then in effect, any
and all (i) options, phantom units, and other awards granted to
Executive pursuant to any such plan to purchase Company stock or which
is measured by the current market value of Company stock and (ii)
restricted stock of the Company, owned by the Executive, shall be
fully vested.
(c) Continuation of Benefits.
(i) For a period of Three (3) years
following the Termination of Employment, the Executive shall
be treated as if he or she had continued to be an employee for
all purposes under the Company's Medical Plan, Executive
Medical Reimbursement Plan and Dental Plan. Following this
period the Executive shall be entitled to receive continuation
coverage under part 6 of Title I of ERISA ("COBRA Benefits)
treating the end of this period as a termination of the
Executive's employment (other than for gross misconduct).
(ii) The Company shall maintain in force,
at its own expense, for the remainder of the Executive's life,
the vested life insurance in effect under the Company's
Executive Life Insurance Plan as of the Change in Control Date
or as of the date of Termination of Employment, whichever is
greater.
(d) Relocation Benefit. If the Executive's next
full-time employment commences within Three (3) years after the
Executive's Termination of Employment with the Company and is based
more than 25 miles from Fort Smith, Arkansas, and within the
continental United States, the Company will reimburse the Executive
for any reasonable relocation expenses (in accordance with the
Company's general relocation policy for executives as then in effect,
or, at the Executive's election, as in effect on the Change in Control
Date) in connection with accepting or continuing such employment.
(e) Executive Retirement Plan. For the year of
the Executive's Termination of Employment, the Company will make the
contribution to its Executive Retirement Plan (the "Retirement Plan"),
that it would have made if the Executive had not had a Termination of
Employment, but in no event less than the percentage contribution it
made for the Executive in the immediately preceding year (and
increased to take account of the additional year of service), in each
case taking account of the Executive's annualized rate of
"Compensation" (as defined in the Retirement Plan) and the percentage
of such Compensation that the Executive is contributing to the
Retirement Plan, as of the date of Termination of Employment, and the
Company's matching
3
<PAGE> 4
contribution rate for such year (or, if greater, the preceding year).
The portion of the Company'smatching contribution which is based on
the preceding year's contribution percentage shall be paid to the
Executive immediately upon his Termination of Employment and any
additional contribution shall be paid as soon as it is determined.
(f) Disability. For the two year period following
the Executive's Termination of Employment for any reason other than
Cause, the Company shall provide disability insurance benefits
coverage to Executive equivalent to the coverage that the Executive
would have had had he remained employed under the Company's disability
insurance plan applicable to Executive on the date of Termination of
Employment, or, at the Executive's election, the plan applicable to
Executive as of the Change in Control Date. Should Executive become
disabled during such period, Executive shall be entitled to receive
such benefits, and for such duration, as the applicable plan provides.
(g) Plan Amendments. The Company shall adopt such
amendments to its employee benefit plans as are necessary to
effectuate the provisions of this Agreement.
5. Golden Parachute Limitation. If, in the written
opinion of a Big 6 accounting firm engaged by the Company for this purpose,
which opinion is concurred with by an expert engaged by the Executive (at the
Company's expense), the aggregate of the benefit payments under Paragraph 4
would cause the payment of one or more of such benefits to constitute an
"excess parachute payment" as defined in Section 280G(b) of the Internal
Revenue Code, then such benefits or payments shall be reduced, in whole or in
part, in a manner designated by the Executive, in such manner that, in such
opinion, none of such benefits would constitute an "excess parachute payment."
Any dispute concerning the application of this paragraph shall be resolved
pursuant to Paragraph 8.
6. Employment At-Will. Notwithstanding anything to the
contrary contained herein, the Executive's employment with the Company is not
for any specified term and may be terminated by the Executive or by the Company
at any time, for any reason, with or without cause, without liability except
with respect to the payments provided hereunder or as required by law or any
other contract or employee benefit plan.
7. Waiver of Other Severance Benefits. The benefits
payable pursuant to this Agreement are in lieu of any other severance benefits
which may otherwise be payable to the Executive upon termination following a
Change in Control, (including, without limitation, any benefits to which
Executive might otherwise have been entitled under the "Agreement Concerning
Benefits Upon Severance" dated as of September 1, 1990 to which Executive and
the Company are parties), except those benefits which are to be made available
to the Executive as required by applicable law.
8. Disputes. Any dispute or controversy arising under,
out of, in connection with or in relation to this Agreement shall, at the
election and upon written demand of either party, be finally determined and
settled by binding arbitration in the city of Fort Smith, Arkansas in
accordance with the Labor Arbitration rules and procedures of the American
Arbitration Association, and judgment upon the award may be entered in any
court having jurisdiction thereof. The Company shall pay all costs of the
arbitration and all reasonable attorney's and accountant's fees of the
Executive in connection therewith.
9. Successors; Binding Agreement. This Agreement shall
not be terminated by the voluntary or involuntary dissolution of the Company or
by any merger or consolidation where the Company is not the surviving
corporation, or upon any transfer of all or substantially all of the Company's
assets, or any other Change in Control. In the event of such merger or
consolidation or transfer of assets, or other
4
<PAGE> 5
Change in Control, the provisions of this Agreement shall be binding upon and
shall inure to the benefit of the surviving corporation or corporation to which
such assets shall be transferred.
10. Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, or other similar means of communication, as follows:
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him or her at the
address set forth below under the Executive's signature; or at any
such other address as either party shall have specified by notice in
writing to the other.
11. Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Executive and by a duly authorized representative of the Board of
Directors. By an instrument in writing similarly executed, either party may
waive compliance by the other party with any provision of this Agreement that
such other party was or is obligated to comply with or perform; provided,
however, that such waiver shall not operate as a waiver of, or estoppel with
respect to, any other or subsequent failure. No failure to exercise and no
delay in exercising any right, remedy, or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
or power hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, or power provided herein or by law or in
equity.
12. Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto. The
parties further intend that this Agreement shall constitute the complete and
exclusive statement of its terms and that no extrinsic evidence whatsoever may
be introduced in any judicial, administrative, or other legal proceeding
involving this Agreement.
13. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance
shall be held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such provisions as applied to
other persons, places and circumstances shall remain in full force and effect.
14. Indemnification. The Company shall indemnify,
defend, and hold the Executive harmless from and against any liability,
damages, costs, or expenses (including attorney's fees) in connection with any
claim, cause of action, investigation, litigation, or proceeding involving him
by reason of his having been an officer, director, employee, or agent of the
Company, unless it is judicially determined that the Executive was guilty of
gross negligence or willful misconduct. The Company also agrees to maintain
adequate directors and officers liability insurance for the benefit of
Executive for the term of this Agreement and for at least three years
thereafter.
15. ERISA. This Agreement is pursuant to the Company's
Severance Plan for Executives (the "Plan") which is unfunded and maintained by
the Company primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees. The Plan
constitutes an employee welfare benefit plan ("Welfare Plan") within the
meaning of Section 3(1) of
5
<PAGE> 6
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Any
payments pursuant to this Agreement which could cause the Plan not to
constitute a Welfare Plan shall be deemed instead to be made pursuant to a
separate "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA as to which the applicable portions of the document constituting the Plan
shall be deemed to be incorporated by reference. None of the benefits
hereunder may be assigned in any way.
16. Governing Law. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of Arkansas,
except to the extent pre-empted by Federal law.
The parties have duly executed this Agreement as of the date
first written above.
BEVERLY ENTERPRISES, INC. EXECUTIVE
By:
-------------------------------- -----------------------------
David R. Banks FIELD(NAME)
Chairman, President and FIELD(ADDRESS)
Chief Executive Officer FIELD(CITYSTZP)
By:
--------------------------------
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155
Attention: Secretary
Form of Cash Benefit Payment Paragraph 4(a):
- -- One lump sum payment
- -- Equal monthly installment payments each in the amount of Executive's
monthly Base Salary as of the date of termination of employment.
6
<PAGE> 1
EXHIBIT 10.30
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of September 29, 1994 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and FIELD (NAME) (the
"Executive").
WHEREAS, the Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries;
WHEREAS, the Company recognizes that the Executive's contribution to
the Company's growth and success has been and continues to be substantial;
WHEREAS, the Company wishes to encourage the Executive to remain with
and devote full time and attention to the business affairs of the Company and
wishes to provide income protection to the Executive for a period of time in
the event of a Change in Control;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. Definitions.
(a) "Base Salary" shall mean the Executive's
regular annual rate of base pay as of the date in question.
(b) "Cause" shall mean the Executive's (i)
conviction of a crime involving moral turpitude, (ii) theft or
embezzlement of property from the Company or (iii) willful misconduct
or willful failure substantially to perform the duties of his
position, but only if such has continued after receipt of such notices
and cure periods as are provided for by the Company's disciplinary
process as in effect on the Change in Control Date.
(c) A "Change of Control" shall be deemed to have
taken place if: (i) any person, corporation, or other entity or group,
including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than any employee benefit plan then
maintained by the Company, becomes the beneficial owner of shares of
the Company having 30 percent or more of the total number of votes
that may be cast for the election of Directors of the Company; (ii) as
the result of, or in connection with, any contested election for the
Board of Directors of the Company, or any tender or exchange offer,
merger or other business combination or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were
Directors of the Company before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company or any
successor to the Company or its assets, or (iii) at any time a the
Company shall consolidate with, or merge with, any other Person and
the Company shall not be the continuing or surviving corporation, b
any Person shall consolidate with, or merge with, the Company, and the
Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock
shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, c the Company shall be
a party to a statutory share exchange with any other Person after
which the Company is a subsidiary of any other Person, or d the
Company shall sell or otherwise transfer 50% or more of the assets or
earning power of the Company and its subsidiaries (taken as a whole)
to any Person or Persons.
<PAGE> 2
(d) The "Change in Control Date" shall
mean the date immediately prior to the effectiveness of the Change
in Control.
(e) The Executive shall have "Good Reason" to
terminate employment if: (i) the Executive's duties, responsibilities
or authority are materially reduced or diminished from those in effect
on the Change in Control Date without the Executive's consent; (ii)
the Executive's compensation or benefits are reduced (other than
pursuant to a uniform reduction applicable to all executives of the
Company); or (iii) the Company requires that the Executive's
employment be based other than at Fort Smith, Arkansas.
(f) "Person" shall have the meaning ascribed to
such term in Section 3(a)(9) of the Securities Exchange Act of 1934
and used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d).
(g) "Target Bonus" shall mean the target bonus
(100% level) established for the Executive for the year in question
under the Company's "Annual Incentive Plan" or "Performance Unit
Plan," as applicable.
(h) "Termination of Employment" shall mean the
termination of the Executive's employment by the Company other than
such a termination in connection with an offer of immediate
reemployment by a successor or assign of the Company or purchaser of
the Company or its assets under terms and conditions which would not
permit the Executive to terminate his employment for Good Reason.
2. Term. The initial term of this Agreement shall be
for the period commencing on September 29, 1994 (the "Effective Date") and
ending after a period of three years. The Term shall be automatically extended
by one additional day for each day beyond the Effective Date of this Agreement
that the Executive remains employed by the Company until such time as the
Company elects to cease such extension by giving written notice of such to the
Executive. (In such event, the Agreement shall thus terminate on the third
anniversary of the effective date of such notice).
3. Eligibility for Severance Benefits. The Executive
shall be eligible for the benefits described in Paragraph 4 (the "Severance
Benefits") if, during the Term there has been a Change in Control during the
two year period commencing on the Change in Control Date, the Executive has a
Termination of Employment initiated (i) by the Company without Cause or (ii)
by the Executive for Good Reason.
4. Severance Benefit. Upon satisfaction of the
requirements set forth in Paragraph 3, and subject to Paragraph 5, the
Executive shall be entitled to the following Severance Benefits:
(a) Cash Payment. The Executive shall be entitled
to receive an amount of cash equal to Three (3) times the greater of
(i) the sum of the Executive's Base
Salary and Target Bonus, in each case as in effect upon the
Termination of Employment, or,
(ii) the sum of the Executive's Base
Salary and Target Bonus, in each case as in effect on the
Change in Control Date.
2
<PAGE> 3
The payment shall be made in a single lump sum upon the Executive's
Termination of Employment unless the Executive shall have elected
another method on the signature page hereof.
(b) Long-Term Incentive Award; Equity-Based
Compensation. To the extent not already vested pursuant to the Terms
of said plan, the Executive's interest under the Company's Long-Term
Stock Incentive Plan shall be fully vested. To the extent not already
vested pursuant to the terms of any option plans then in effect, any
and all (i) options, phantom units, and other awards granted to
Executive pursuant to any such plan to purchase Company stock or which
is measured by the current market value of Company stock and (ii)
restricted stock of the Company, owned by the Executive, shall be
fully vested.
(c) Continuation of Benefits.
(i) For a period of Three (3) years
following the Termination of Employment, the Executive shall
be treated as if he or she had continued to be an employee for
all purposes under the Company's Medical Plan, Executive
Medical Reimbursement Plan and Dental Plan. Following this
period the Executive shall be entitled to receive continuation
coverage under part 6 of Title I of ERISA ("COBRA Benefits)
treating the end of this period as a termination of the
Executive's employment (other than for gross misconduct).
(ii) The Company shall maintain in force,
at its own expense, for the remainder of the Executive's life,
the vested life insurance in effect under the Company's
Executive Life Insurance Plan as of the Change in Control Date
or as of the date of Termination of Employment, whichever is
greater.
(d) Relocation Benefit. If the Executive's next
full-time employment commences within Three (3) years after the
Executive's Termination of Employment with the Company and is based
more than 25 miles from Fort Smith, Arkansas, and within the
continental United State, the Company will reimburse the Executive for
any reasonable relocation expenses (in accordance with the Company's
general relocation policy for executives as then in effect, or, at the
Executive's election, as in effect on the Change in Control Date) in
connection with accepting or continuing such employment.
(e) Executive Retirement Plan. For the year of
the Executive's Termination of Employment, the Company will make the
contribution to its Executive Retirement Plan (the "Retirement Plan"),
that it would have made if the Executive had not had a Termination of
Employment, but in no event less than the percentage contribution it
made for the Executive in the immediately preceding year (and
increased to take account of the additional year of service), in each
case taking account of the Executive's annualized rate of
"Compensation" (as defined in the Retirement Plan) and the percentage
of such Compensation that the Executive is contributing to the
Retirement Plan, as of the date of Termination of Employment, and the
Company's matching contribution rate for such year (or, if greater,
the preceding year). The portion of the Company's matching
contribution which is based on the preceding year's contribution
percentage shall be paid to the Executive immediately upon his
Termination of Employment and any additional contribution shall be
paid as soon as it is determined.
(f) Disability. For the two year period following
the Executive's Termination
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<PAGE> 4
of Employment for any reason other than Cause, the Company shall
provide disability insurance benefits coverage to Executive equivalent
to the coverage that the Executive would have had had he remained
employed under the Company's disability insurance plan applicable to
Executive on the date of Termination of Employment, or, at the
Executive's election, the plan applicable to Executive as of the
Change in Control Date. Should Executive become disabled during such
period, Executive shall be entitled to receive such benefits, and for
such duration, as the applicable plan provides.
(g) Plan Amendments. The Company shall adopt such
amendments to its employee benefit plans as are necessary to
effectuate the provisions of this Agreement.
5. Golden Parachute Limitation. If, in the written
opinion of a Big 6 accounting firm engaged by the Company for this purpose,
which opinion is concurred with by an expert engaged by the Executive (at the
Company's expense), the aggregate of the benefit payments under Paragraph 4
would cause the payment of one or more of such benefits to constitute an
"excess parachute payment" as defined in Section 280G(b) of the Internal
Revenue Code, then such benefits or payments shall be reduced, in whole or in
part, in a manner designated by the Executive, in such manner that, in such
opinion, none of such benefits would constitute an "excess parachute payment."
Any dispute concerning the application of this paragraph shall be resolved
pursuant to Paragraph 8.
6. Employment At-Will. Notwithstanding anything to the
contrary contained herein, the Executive's employment with the Company is not
for any specified term and may be terminated by the Executive or by the Company
at any time, for any reason, with or without cause, without liability except
with respect to the payments provided hereunder or as required by law or any
other contract or employee benefit plan.
7. Waiver of Other Severance Benefits. The benefits
payable pursuant to this Agreement are in lieu of any other severance benefits
which may otherwise be payable to the Executive upon termination following a
Change in Control, (including, without limitation, any benefits to which
Executive might otherwise have been entitled under the "Agreement Concerning
Benefits Upon Severance" dated as of September 1, 1990 to which Executive and
the Company are parties), except those benefits which are to be made available
to the Executive as required by applicable law.
8. Disputes. Any dispute or controversy arising under,
out of, in connection with or in relation to this Agreement shall, at the
election and upon written demand of either party, be finally determined and
settled by binding arbitration in the city of Fort Smith, Arkansas in
accordance with the Labor Arbitration rules and procedures of the American
Arbitration Association, and judgment upon the award may be entered in any
court having jurisdiction thereof. The Company shall pay all costs of the
arbitration and all reasonable attorney's and accountant's fees of the
Executive in connection therewith.
9. Successors; Binding Agreement. This Agreement shall
not be terminated by the voluntary or involuntary dissolution of the Company or
by any merger or consolidation where the Company is not the surviving
corporation, or upon any transfer of all or substantially all of the Company's
assets, or any other Change in Control. In the event of such merger or
consolidation or transfer of assets, or other Change in Control, the provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
surviving corporation or corporation to which such assets shall be transferred.
10. Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and
4
<PAGE> 5
delivered personally or sent by telex, telecopy, or certified or registered
mail, postage prepaid, or other similar means of communication, as follows:
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him or her at the
address set forth below under the Executive's signature; or at any
such other address as either party shall have specified by notice in
writing to the other.
11. Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Executive and by a duly authorized representative of the Board of
Directors. By an instrument in writing similarly executed, either party may
waive compliance by the other party with any provision of this Agreement that
such other party was or is obligated to comply with or perform; provided,
however, that such waiver shall not operate as a waiver of, or estoppel with
respect to, any other or subsequent failure. No failure to exercise and no
delay in exercising any right, remedy, or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
or power hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, or power provided herein or by law or in
equity.
12. Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto. The
parties further intend that this Agreement shall constitute the complete and
exclusive statement of its terms and that no extrinsic evidence whatsoever may
be introduced in any judicial, administrative, or other legal proceeding
involving this Agreement.
13. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance
shall be held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such provisions as applied to
other persons, places and circumstances shall remain in full force and effect.
14. Indemnification. The Company shall indemnify,
defend, and hold the Executive harmless from and against any liability,
damages, costs, or expenses (including attorney's fees) in connection with any
claim, cause of action, investigation, litigation, or proceeding involving him
by reason of his having been an officer, director, employee, or agent of the
Company, unless it is judicially determined that the Executive was guilty of
gross negligence or willful misconduct. The Company also agrees to maintain
adequate directors and officers liability insurance for the benefit of
Executive for the term of this Agreement and for at least three years
thereafter.
15. ERISA. This Agreement is pursuant to the Company's
Severance Plan for Executives (the "Plan") which is unfunded and maintained by
the Company primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees. The Plan
constitutes an employee welfare benefit plan ("Welfare Plan") within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Any payments pursuant to this Agreement which could
cause the Plan not to constitute a Welfare Plan shall be deemed instead to be
made pursuant to a separate "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA as to which the applicable portions of the document
constituting the Plan shall be deemed to be
5
<PAGE> 6
incorporated by reference. None of the benefits hereunder may be assigned in
any way.
16. Governing Law. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of Arkansas,
except to the extent pre-empted by Federal law.
The parties have duly executed this Agreement as of the date
first written above.
BEVERLY ENTERPRISES, INC. EXECUTIVE
By:
-------------------------------- -----------------------------
David R. Banks FIELD(NAME1)
Chairman, President and FIELD(ADDRESS)
Chief Executive Officer FIELD(CITYSTZP)
By:
--------------------------------
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155
Attention: Secretary
Form of Cash Benefit Payment Paragraph 4(a):
- -- One lump sum payment
- -- Equal monthly installment payments each in the amount of Executive's
monthly Base Salary as of the date of termination of employment.
6
<PAGE> 1
EXHIBIT 10.41
EIGHTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY CALIFORNIA CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
BANK OF MONTREAL, AS CO-AGENT,
AND
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
LOS ANGELES AGENCY, AS AGENT
DATED AS OF NOVEMBER 1, 1994
THIS EIGHTH AMENDMENT dated as of November 1, 1994 (the "Amendment"), is
entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation
("BEI"), BEVERLY CALIFORNIA CORPORATION, a California corporation ("Borrower"),
the SUBSIDIARY GUARANTORS listed on the signature pages hereof (together with
BEI, the "Guarantors"), the LENDERS listed on the signature pages hereof (such
lenders, together with each Person that may or has become a party to the Credit
Agreement (as defined below) pursuant to subsection 10.8 thereof, are referred
to herein individually as a "Lender" and collectively as the "Lenders"), BANK OF
MONTREAL as co-agent for the Lenders (in such capacity, the "Co-Agent"), and THE
LONG-TERM CREDIT BANK OF JAPAN, LTD., Los Angeles Agency ("LTCB"), as agent for
the Lenders (in such capacity, the "Agent"). This Amendment amends the Credit
Agreement dated March 24, 1992 by and among BEI, Borrower, Co-Agent, Agent and
Lenders, as amended by that First Amendment to Credit Agreement dated April 7,
1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further
amended by that Second Amendment to Credit Agreement dated as of May 11, 1992 by
and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Third Amendment to Credit Agreement dated as of March 1, 1993 by and among
BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that
Fourth Amendment to Credit Agreement dated as of November 1, 1993 by and among
BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Fifth
Amendment to Credit Agreement dated as of March 21, 1994 by and among BEI,
Borrower, Co-Agent, Agent and the Lenders, as further amended by that Sixth
Amendment to Credit Agreement dated as of April 22, 1994 by and among BEI,
Borrower, Co-Agent, Agent and the Lenders, as further amended by that Seventh
Amendment to Credit Agreement dated as of May 2, 1994 by and among BEI,
Borrower, Co-Agent, Agent and the Lenders (said Credit Agreement, as so amended,
the "Credit Agreement"), as set forth herein. Capitalized terms used
1
<PAGE> 2
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
WHEREAS, Lenders, Co-Agent and Agent have agreed to approve such
amendments;
WHEREAS, Guarantors desire to reaffirm the effectiveness respectively of
the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement;
NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Co-Agent, Agent and Lenders agree as
follows:
AGREEMENT
SECTION 1. AMENDMENTS TO DEFINITIONS
(a) Subsection 1.1 of the Credit Agreement is hereby amended by deleting
therefrom the definition of "Morgan Credit Agreement" and replacing such
definition with the following:
" 'MORGAN CREDIT AGREEMENT' means that certain Credit Agreement, dated
as of November 1, 1994, among Borrower, BEI, the banks party thereto,
Morgan, as issuing bank and as agent, as amended, supplemented or
modified."
(b) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Effective Date" in its entirety and
replacing such definition with the following:
" 'MORGAN EFFECTIVE DATE' means the November 1, 1994."
(c) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Financing Documents" in its
entirety and replacing such definition with the following:
" 'MORGAN FINANCING DOCUMENTS' means the Morgan Credit Agreement and
the Notes, the Subsidiary Guaranty and the Pledge Agreement (each as
defined in the Morgan Credit Agreement)."
2
<PAGE> 3
(d) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Collateral" in its entirety and
replacing such definition with the following:
" 'MORGAN COLLATERAL' means the personal property that constitutes
Collateral (as defined in the Morgan Credit Agreement), that is required to
be pledged under the Morgan Credit Agreement as of the Morgan Effective
Date."
SECTION 2. AMENDMENTS TO SUBSECTIONS 5.13A AND 5.15 OF
THE CREDIT AGREEMENT
Subsection 5.13A(iii) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(iii) Liens on the Nippon Collateral securing the obligations
("Nippon Obligations") of BEI and its Subsidiaries under the Nippon
Financing Documents and Liens on the Morgan Collateral securing obligations
("Morgan Obligations") of BEI and its Subsidiaries under the Morgan
Financing Documents; provided that, in each case the amount of Debt
(including, without limitation, any obligation with respect to any letter
of credit or similar instrument) and contingent obligations secured thereby
does not exceed the amount that has been or may be borrowed thereunder,
subject to conditions precedent, as of the Morgan Effective Date."
Subsection 5.15(a) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(a) Debt (including, without limitation, any obligation with respect
to any letter of credit or similar instrument) and contingent obligations
outstanding on the Morgan Effective Date and listed on Schedule IV attached
to the Morgan Credit Agreement."
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Agent, Co-Agent and Lenders to enter into this
Amendment, each of BEI and Borrower represents and warrants to Agent, Co-Agent
and Lenders that:
(a) The representations and warranties of each Loan Party contained in the
Credit Agreement are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of the date
hereof
3
<PAGE> 4
except to the extent that such representations and warranties specifically
relate to an earlier date, in which case they are true, correct and complete in
all material respects as of such earlier date;
(b) No event has occurred and is continuing or would result from the
execution of this Amendment that constitutes an Event of Default or Potential
Event of Default;
(c) Each Loan Party has performed in all material respects all agreements
and satisfied all conditions that the Credit Agreement and this Amendment
provide shall be performed by it on or before the date hereof;
(d) The execution, delivery and performance of this Amendment and the
Credit Agreement as amended by this Amendment, by each Loan Party are within the
corporate power and authority of each such Loan Party and, as of the Eighth
Amendment Effective Date (as hereinafter defined), will be duly authorized by
all necessary corporate action on the part of each Loan Party, and this
Amendment, as of the Eighth Amendment Effective Date, is duly executed and
delivered by each of such Loan Parties and will constitute a valid and binding
agreement of each of such Loan Parties, enforceable against such Loan Parties in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. The Credit Agreement constitutes and, as of the Eighth Amendment
Effective Date, the Credit Agreement, as amended by this Amendment, will
constitute, a valid and binding agreement of BEI and Borrower, enforceable
against BEI and Borrower in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles, relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(e) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to any Loan Party, the Certificate or
Articles of Incorporation or Bylaws of any Loan Party or any order, judgment or
decree of any court or other agency of government binding on any Loan Party,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any instrument that is material,
individually or in the aggregate, and that is binding on such Loan Party, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of any Loan Party (other than any Liens
4
<PAGE> 5
created under any of the Loan Documents in favor of Agent on behalf of Lenders)
or (iv) require any approval or consent of any Person under any instrument that
is material, individually or in the aggregate, and that is binding on such Loan
Party.
(f) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body.
SECTION 4. CONDITIONS TO EFFECTIVENESS
Sections 1 and 2 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Eighth
Amendment Effective Date"):
A. On or before the Eighth Amendment Effective Date, BEI, Borrower and each
Subsidiary Guarantor shall deliver to Lenders (or to Agent for Lenders with
sufficient originally executed copies, as appropriate, for each Lender and its
counsel) the following, each, unless otherwise noted, dated the Eighth Amendment
Effective Date:
(i) Resolutions of its Board of Directors approving and authorizing
the execution, delivery, and performance of this Amendment, certified as of
the Eighth Amendment Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(ii) Signature and incumbency certificates of its officers executing
this Amendment certified by its secretary or an assistant secretary; and
(iii) Executed counterparts of this Amendment.
B. On or before the Eighth Amendment Effective Date, Requisite Lenders
shall have delivered to Agent a counterpart of this Amendment originally
executed by a duly authorized officer of each such Lender or by telex or
telephonic confirmation.
C. On or before the Eighth Amendment Effective Date:
(i) Borrower shall have caused payment to Agent of all amounts
regarding the costs and expenses
5
<PAGE> 6
reasonably incurred by Agent in connection with this Amendment which
Borrower has agreed to pay; and
(ii) The Morgan Credit Agreement (as defined in the Credit Agreement
as amended by this Amendment) shall have become effective in all respects.
D. On or before the Eighth Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and Agent and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Agent may reasonably request.
SECTION 5. THE GUARANTIES
Each Guarantor acknowledges that it has reviewed the terms and provisions
of the Credit Agreement and this Amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Guarantor hereby
confirms that the Guaranty Agreement and the Collateral Documents to which it is
a party or otherwise bound and all Collateral encumbered thereby will continue
to guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all Obligations, Guarantied Obligations (as defined
in the applicable Guaranty Agreements) and Secured Obligations (as defined in
the Collateral Documents), as the case may be, including, without limitation,
the payment and performance of all Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement as amended by this
Amendment and the Notes defined therein.
Each Guarantor acknowledges and agrees that any of the Guaranty Agreements
and the Collateral Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Guarantor represents and
warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and the Guaranty Agreements and the
Collateral Documents to which it is a party or otherwise bound are true, correct
and complete in all material respects on and as of the Eighth Amendment
Effective Date to the same extent as through made on and as of that date except
to the extent that such representations and warranties specifically relate to an
earlier date, in which case they are true, correct and complete in all material
respects as of such earlier date.
6
<PAGE> 7
Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document and (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed to
require the consent of any Guarantor to any future amendments to the Credit
Agreement.
SECTION 6. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment (other
than the provisions of Sections 1 and 2 hereof) shall become effective upon the
execution of a counterpart hereof by all Lenders and each of the Loan Parties
and receipt of written or telephonic notification of such execution and
authorization of delivery thereof.
SECTION 7. FEES AND EXPENSES
Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.4 of the Credit Agreement incurred by Agent and its counsel with
respect to this Amendment and the documents and transactions contemplated hereby
shall be for the account of Borrower.
SECTION 8. EFFECT OF AMENDMENT
It is hereby agreed that, except as specifically provided herein, this
Amendment does not in any way affect or impair the terms and conditions of the
Credit Agreement, and all terms and conditions of the Credit Agreement are to
remain in full force and effect unless otherwise specifically amended or changed
pursuant to the terms and conditions of this Amendment.
SECTION 9. APPLICABLE LAW
This Amendment and the rights and obligations of the parties hereto and all
other aspects hereof shall be deemed to be made under, shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York without regard to principles of conflicts of laws.
7
<PAGE> 8
WITNESS the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
By: /s/ SCHUYLER HOLLINGSWORTH JR.
------------------------------------
Title: SVP and Treasurer
------------------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By: /s/ SCHUYLER HOLLINGSWORTH JR.
------------------------------------
Title: SVP and Treasurer
------------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By: /s/ Y. KAMISAWA
------------------------------------
Title: Deputy General Manager
------------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By: /s/ DANIEL A. BROWN
------------------------------------
Title: Director
------------------------------------
S-1
<PAGE> 9
Lenders:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ ILLEGIBLE
-----------------------------------
Title: Managing Director
--------------------------------
NIPPON SANSO NETHERLANDS B.V.
By: /s/ K. JAZANS
-----------------------------------
Title: General Manager
--------------------------------
U.S. NATIONAL BANK OF OREGON
By:
-----------------------------------
Title:
--------------------------------
NICHIJUKIN (USA), LTD.
By: /s/ ILLEGIBLE
-----------------------------------
Title: President
--------------------------------
NIPPON SHINPAN FINANCE
(U.S.A.) CO., LTD.
By:
-----------------------------------
Title:
--------------------------------
S-2
<PAGE> 10
THE SUBSIDIARY GUARANTORS:
--------------------------
Beverly Enterprises --
Alabama, Inc.
Beverly Enterprises --
Arkansas, Inc.
Beverly Enterprises --
Florida, Inc.
Beverly Enterprises --
Georgia, Inc.
Beverly Enterprises --
Maryland, Inc.
Beverly Enterprises --
Massachusetts, Inc.
Beverly Enterprises --
Minnesota, Inc.
Beverly Enterprises --
Mississippi, Inc.
Beverly Enterprises --
Missouri, Inc.
Beverly Enterprises --
Nebraska, Inc.
Beverly Enterprises --
North Carolina, Inc.
Beverly Enterprises --
Oregon
Beverly Enterprises --
Wisconsin, Inc.
Commercial Management,
Inc.
Hallmark Convalescent
Homes, Inc.
Hospital Facilities
Corporation
Moderncare of Lumberton,
Inc.
S-3
<PAGE> 11
Nebraska City S-C-H, Inc.
South Dakota -- Beverly
Enterprises, Inc.
Vantage Healthcare
Corporation
AGI-Camelot, Inc.
AGI-McDonald County
Health Care, Inc.
Beverly Enterprises --
Arizona, Inc.
Beverly Enterprises --
California, Inc.
Beverly Enterprises --
Colorado, Inc.
Beverly Enterprises --
Connecticut, Inc.
Beverly Enterprises --
Garden Terrace, Inc.
Beverly Enterprises --
Hawaii, Inc.
Beverly Enterprises --
Idaho, Inc.
Beverly Enterprises --
Illinois, Inc.
Beverly Enterprises --
Indiana, Inc.
Beverly Enterprises --
Kansas, Inc.
Beverly Enterprises --
Kentucky, Inc.
Beverly Enterprises --
Louisiana, Inc.
Beverly Enterprises --
Michigan, Inc.
Beverly Enterprises --
S-4
<PAGE> 12
New Jersey, Inc.
Beverly Enterprises --
Ohio, Inc.
Beverly Enterprises --
Pennsylvania, Inc.
Beverly Enterprises --
South Carolina, Inc.
Beverly Enterprises --
Tennessee, Inc.
Beverly Enterprises --
Texas, Inc.
Beverly Enterprises --
Utah, Inc.
Beverly Enterprises --
Virginia, Inc.
Beverly Enterprises --
Washington, Inc.
Beverly Enterprises --
West Virginia, Inc.
Beverly Indemnity, Ltd.
Beverly Manor Inc. of
Hawaii
Beverly Savana Cay Manor,
Inc.
Columbia-Valley Nursing
Home, Inc.
Computran Systems, Inc.
Continental Care Centers
of Council Bluffs, Inc.
Forest City Building Ltd.
Home Medical Systems,
Inc.
Kenwood View Nursing
Home, Inc.
S-5
<PAGE> 13
Liberty Nursing Homes,
Incorporated
Medical Arts Health
Facility of
Lawrenceville, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of
America
Salem No. 1, Inc.
South Alabama Nursing
Home, Inc.
Taylor County Health
Facility, Incorporated
By: /s/ SCHUYLER HOLLINGSWORTH, JR.
-----------------------------------
Title: SVP and Treasurer
--------------------------------
S-6
<PAGE> 1
EXHIBIT 10.42
EXECUTION COPY
NINTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY CALIFORNIA CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
BANK OF MONTREAL, AS CO-AGENT,
AND
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
LOS ANGELES AGENCY, AS AGENT
DATED AS OF NOVEMBER 9, 1994
THIS NINTH AMENDMENT dated as of November 9, 1994 (this "Amendment") is
entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation
("BEI") BEVERLY CALIFORNIA CORPORATION, a California corporation ("Borrower"),
the SUBSIDIARY GUARANTORS listed on the signature pages hereof (together with
BEI, the "Guarantors"), the LENDERS listed on the signature pages hereof (such
lenders, together with each Person that may or has become a party to the Credit
Agreement (as defined below) pursuant to subsection 10.8 thereof, are referred
to herein individually as a "Lender" and collectively as the "Lenders"), BANK OF
MONTREAL as co-agent for the Lenders (in such capacity, the "Co-Agent"), and THE
LONG-TERM CREDIT BANK OF JAPAN, LTD., Los Angeles Agency ("LTCB"), as agent for
the Lenders (in such capacity, the "Agent"). This Amendment amends the Credit
Agreement dated March 24, 1992 by and among BEI, Borrower, Co-Agent, Agent and
Lenders, as amended by that First Amendment to Credit Agreement dated April
7, 1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further
amended by that Second Amendment to Credit Agreement dated as of May 11, 1992 by
and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Third Amendment to Credit Agreement dated as of March 1, 1993 by and among
BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that
Fourth Amendment to Credit Agreement dated as of November 1, 1993 by and among
BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Fifth
Amendment to Credit Agreement dated as of March 21, 1994 by and among BEI,
Borrower, Co-Agent, Agent and the Lenders, as further amended by that Sixth
Amendment to Credit Agreement dated as of April 22, 1994 by and among BEI,
Borrower, Co-Agent, Agent and the Lenders, as further amended by that Seventh
Amendment to Credit Agreement dated as of
<PAGE> 2
May 2, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Eighth Amendment to Credit Agreement dated as of
November 1, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders
(said Credit Agreement, as so amended, the "Credit Agreement"), as set forth
herein. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
WHEREAS, Lenders, Co-Agent and Agent have agreed to approve such
amendments;
WHEREAS, Guarantors desire to reaffirm the effectiveness respectively of
the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement;
NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Co-Agent, Agent and Lenders agree as
follows:
AGREEMENT
SECTION 1. AMENDMENTS TO DEFINITIONS
(a) Subsection 1.1 of the Credit Agreement is hereby amended by the
addition of the following definitions in alphabetical order:
"ACD/CC RATIO" means the ratio of Adjusted Consolidated Debt to
Consolidated Capital.
"ADJUSTED CONSOLIDATED DEBT" means at any date the sum, without
duplication, of (i) all liabilities of BEI and its Subsidiaries at such
date of the types classified as "current liabilities: short-term
borrowings," "current liabilities: current portion of long-term
obligations" and "long-term obligations" on the consolidated balance sheet
included in the Coverage Base Financials (other than any Consolidated
Subordinated Debt), (ii) all guarantees at such date of obligations of
other issuers of the type listed in Schedule VII to the Coverage Base
Financials (other than guarantees outstanding on the Morgan Effective Date
of obligations outstanding on the Morgan Effective Date, in amounts not in
excess of the amounts set forth in Schedule VII to the
2
<PAGE> 3
Coverage Base Financials) and (iii) an amount equal to the product of (A)
Consolidated Rental Expense for the four fiscal quarters of BEI most
recently completed on or prior to such date multiplied by (B) 8.
"CASH COVERAGE RATIO" means, on any date, the ratio of (i) the sum of
Consolidated EBIT and Rental Expense for the four consecutive fiscal
quarters most recently ended on or prior to such date minus Consolidated
Interest Income for such four fiscal quarters to (ii) the sum of
Consolidated Net Interest Expense, Rental Expense and Preferred Dividends
for such four fiscal quarters.
"CONSOLIDATED CAPITAL" means at any date the sum of (i) Consolidated
Net Worth at such date plus (ii) Adjusted Consolidated Debt at such date.
"CONSOLIDATED EBIT" means, for any period, Consolidated Net Income for
such period plus, without duplication, any amounts deducted in determining
such Consolidated Net Income in respect of (a) Consolidated Interest
Charges for such period and (b) expenses for such period of the types
classified as "income taxes" on the consolidated statement of operations
included in the Coverage Base Financials.
"CONSOLIDATED INTEREST INCOME" means, for any period, all items for
such period of the types classified as "interest income" on the
consolidated statement of operations included in the Coverage Base
Financials.
"CONSOLIDATED NET INTEREST EXPENSE" means, for any period,
Consolidated Interest Charges minus Consolidated Interest Income.
"EFFECTIVE DATE" means the Ninth Amendment Effective Date as that term
is defined in Section 11 of the Ninth Amendment to Credit Agreement among
BEI, Borrower, the Guarantors, the Lenders, Co-Agent and Agent, dated as of
November 9, 1994.
"EURODOLLAR MARGIN" means, for any day, the rate per annum set forth
under the column heading "Eurodollar Margin" below for the ACD/CC Ratio and
Cash Coverage Ratio in effect on such day or, if the ACD/CC Ratio and Cash
Coverage Ratio in effect on such day do not coincide within one of the
groupings below, the higher rate per annum set forth opposite the ACD/CC
Ratio and Cash Coverage Ratio in effect on such day under the column
heading "Eurodollar Margin" below:
3
<PAGE> 4
<TABLE>
<CAPTION>
EURODOLLAR
RATIO RATE MARGIN
----- ------------
<S> <C>
ACD/CC Ratio less than 0.68; and Cash Coverage Ratio greater than
or equal to 1.66............................................... 0.750%
ACD/CC Ratio greater than or equal to 0.68 and less than 0.72;
and Cash Coverage Ratio greater than or equal to 1.56 and less
than 1.66...................................................... 0.875%
ACD/CC Ratio greater than or equal to 0.68 and less than 0.72;
and Cash Coverage Ratio greater than or equal to 1.45 and less
than 1.56...................................................... 1.125%
ACD/CC Ratio greater than or equal to 0.72 and less than 0.74;
and Cash Coverage Ratio greater than or equal to 1.40 and less
than 1.45...................................................... 1.500%
ACD/CC Ratio greater than or equal to 0.74; or Cash Coverage
Ratio greater than or equal to 1.40............................ 2.000%
</TABLE>
Any change in the Eurodollar Margin shall become effective on the day
on which Borrower has delivered a Compliance Certificate pursuant to
subsection 5.1D which Compliance Certificate sets forth in reasonable
detail the calculations required to establish a change in the ACD/CC Ratio
or Cash Coverage Ratio that requires a change in the Eurodollar Margin in
accordance with this definition. The Eurodollar Margin in effect as of the
Effective Date shall be established by the delivery of a certificate of
Borrower on the Effective Date showing the ACD/CC Ratio and Cash Coverage
Ratio as of September 30, 1994.
"LEASE CONVERSION" means any acquisition by BEI or any of its
Subsidiaries of a facility and related property that had theretofore been
leased by BEI or any such Subsidiary and that BEI or any of its
Subsidiaries continues to operate.
"PERMITTED RECEIVABLES FINANCING SECURITIES" means debt securities or
preferred stock issued by a Special
4
<PAGE> 5
Purpose Receivables Financing Subsidiary pursuant to a Receivables
Financing Program and borrowings by a Special Purpose Receivables Financing
Subsidiary under a related Receivables Financing Backstop Facility.
"PREFERRED DIVIDENDS" means, for any period, without duplication, all
dividends and distributions accrued or paid in respect of such period on
shares of BEI's preferred.
"PRIME MARGIN" means, for any day, the rate per annum set forth under
the column heading "Prime Margin" below for the ACD/CC Ratio and Cash
Coverage Ratio in effect on such day or, if the ACD/CC Ratio and Cash
Coverage Ratio in effect on such day do not coincide within one of the
groupings below, the higher rate per annum set forth opposite the ACD/CC
Ratio and Cash Coverage Ratio in effect on such day under the column
heading "Prime Margin" below.
<TABLE>
<CAPTION>
PRIME
RATIO MARGIN
----- ------
<S> <C>
ACD/CC Ratio less than 0.68; and Cash Coverage Ratio greater than
or equal to 1.66................................................. 0.000%
ACD/CC Ratio greater than or equal to 0.68 and less than 0.72; and
Cash Coverage Ratio greater than or equal to 1.56 and less than
1.66............................................................. 0.000%
ACD/CC Ratio greater than or equal to 0.68 and less than 0.72; and
Cash Coverage Ratio greater than or equal to 1.45 and less than
1.56............................................................. 0.000%
ACD/CC Ratio greater than or equal to 0.72 and less than 0.74; and
Cash Coverage Ratio greater than or equal to 1.40 and less than
1.45............................................................. 0.500%
ACD/CC Ratio greater than or equal to 0.74 or Cash Coverage Ratio
less than 1.40................................................... 1.000%
</TABLE>
5
<PAGE> 6
Any change in the Prime Margin shall be effective on the day on which
Borrower has delivered a Compliance Certificate pursuant to subsection 5.1D
which Compliance Certificate sets forth in reasonable detail the
calculations required to establish a change in the ACD/CC Ratio that
requires a change in the Prime Margin in accordance with this definition.
The Prime Margin in effect as of the Effective Date shall be established by
the delivery of a certificate of Borrower on the Effective Date showing the
ACD/CC Ratio and Cash Coverage Ratio as of September 30, 1994.
"RECEIVABLES FINANCING BACKSTOP FACILITY" means a credit facility
entered into by a Special Purpose Receivables Financing Subsidiary for the
purposes of providing liquidity with respect to securities issued by such
Special Purpose Receivables Financing Subsidiary and of financing
transactions of the type intended to be financed with the proceeds of such
securities.
"RECEIVABLES FINANCING PROGRAM" means a program pursuant to which a
Special Purpose Receivables Financing Subsidiary issues debt securities or
preferred stock secured by (i) Medicaid, Medicare or other patient accounts
receivable or Permitted Receivables Financing Securities purchased from BEI
or its Subsidiaries or (ii) security interests in Medicaid, Medicare or
other patient accounts receivable or Permitted Receivables Financing
Securities granted by BEI and its Subsidiaries.
"RENTAL EXPENSE" means, for any period, the rental expense (net of
sublease income) of BEI and its Consolidated Subsidiaries.
"SPECIAL PURPOSE RECEIVABLES FINANCING SUBSIDIARY" means a
Wholly-Owned Subsidiary of BEI the sole purpose of which is to issue debt
securities and/or preferred stock and to purchase Medicare, Medicaid or
other patient accounts receivable of BEI and its Subsidiaries and/or
Permitted Receivables Financing Securities and make advances to BEI and its
Subsidiaries secured by security interests in such Medicare, Medicaid or
other patient accounts receivable and/or Permitted Receivables Financing
Securities, which accounts receivable, Permitted Receivables Financing
Securities and/or security interests therein may be pledged to secure such
debt securities and/or preferred stock and/or borrowings by such Special
Purpose Receivables Financing Subsidiary under a Receivables Financing
Backstop Facility."
(b) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of
6
<PAGE> 7
"BEI 1992 Disposition Plan" and replacing such definition with the following:
" 'BEI 1992 DISPOSITION PLAN' means the disposition plan announced by
BEI on November 9, 1992 relating to the proposed disposition of certain
facilities and the establishment of reserves therefor, in each case, as
summarized in Schedule VII to the Morgan Credit Agreement."
(c) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Consolidated Capital Expenditures and
replacing such definition with the following:
" 'CONSOLIDATED CAPITAL EXPENDITURES' means, for any period, the sum,
without duplication, of (i) the total amount of additions to property and
equipment of BEI and its Consolidated Subsidiaries during such period of
the types classified as "Capital expenditures" or "Payments for
acquisitions, net of cash acquired" on the consolidated statement of cash
flows included in the Coverage Base Financials and (ii) all Investments
made by BEI or any of its Subsidiaries during such period in Beverly Japan
Corporation; provided that "Consolidated Capital Expenditures" shall
exclude (A) the application of insurance or condemnation proceeds to
rebuilding facilities, (B) any acquisition by BEI or any of its
Subsidiaries of any assets in connection with and as part of a Workout
Transaction, (C) any acquisition by BEI or any of its Subsidiaries of any
assets as part of a Lease Conversion and (D) the amount of any Debt
incurred or assumed for the purpose of financing all or any part of the
cost of constructing any asset to the extent that such amount does not
exceed 75% of the cost of acquiring or constructing such asset."
(d) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Consolidated EBITDA" and replacing such
definition with the following:
" 'CONSOLIDATED EBITDA' means, for any period, the sum of (i)
Consolidated Net Income for such period plus (ii) Consolidated Net Interest
Expense for such period, Consolidated income taxes for such period and
Consolidated depreciation and amortization expenses for such period, in
each case to the extent such amounts were deducted in determining
Consolidated Net Income for such period minus (iii) Consolidated
extraordinary items of gain or loss or other Consolidated nonrecurring
times and Consolidated gains or losses related to sales of assets or
terminations of leases for such period."
7
<PAGE> 8
(e) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Consolidated Interest Charges" and
replacing such definition with the following:
" 'CONSOLIDATED INTEREST CHARGES' means, for any period, all items for
such period of the types classified as "interest" on the consolidated
statement of operations included in the Coverage Base Financials."
(f) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Consolidated Rental Expense" and replacing
such definition with the following:
" 'CONSOLIDATED RENTAL EXPENSE' means Rental Expense with respect to
leases of real property and improvements of real property less, with
respect to any facility identified in the BEI 1992 Disposition Plan, the
amount of such rental expense with respect to such facility for such period
to the extent, but only to the extent, that such expense is charged against
the reserves established in respect of such facility as part of the BEI
1992 Disposition Plan prior to the Morgan Effective Date, determined on a
consolidated basis for such period."
(g) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Coverage Base Financials" and replacing
such definition with the following:
" 'COVERAGE BASE FINANCIALS' means the consolidated balance sheet of
BEI and its Consolidated Subsidiaries as of December 31, 1993 and the
related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended, together with the notes thereto,
included in BEI's 1993 Form 10-K and reported on without qualification by
Ernst & Young."
(h) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Debt" and replacing such definition with
the following:
" 'DEBT' of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes and other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as leasee which are
capitalized in accordance with generally accepted accounting principles,
(v) all
8
<PAGE> 9
obligations of such Person with respect to letters of credit and similar
instruments, including, without limitation, obligations under reimbursement
agreements, (vi) all mandatorily redeemable preferred stock of such Person,
(vii) all Debt of others secured by Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, and (viii) all Debt of
others guaranteed by such Person."
(i) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Senior Note Collateral" and replacing such
definition with the following:
" 'SENIOR NOTE COLLATERAL' means the real property and related
personal property securing obligations under the Senior Note Documents as
of the Morgan Effective Date."
SECTION 2. AMENDMENT TO SUBSECTION 2.7A OF THE CREDIT AGREEMENT
Subsection 2.7A of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"A. EURODOLLAR RATE LOANS. During such periods as such Loan is a
Eurodollar Rate Loan, at a rate per annum equal at all times during each
Interest Period for such Loan to the Adjusted Eurodollar Rate for such
Interest Period plus the Eurodollar Margin; provided, that after the
occurrence and during the continuation of any Event of Default, the
Eurodollar Rate Loans shall bear interest from the date on which such Event
of Default shall have occurred until such amount is paid in full at a rate
per annum equal at all times to 2.0% per annum above the rate of interest
otherwise payable under this subsection 2.7A, in each case payable in
arrears on each Interest Payment Date and on the date of any prepayment
thereof, unless such amounts are past due, in which case they shall be
payable on demand."
SECTION 3. AMENDMENT TO SUBSECTION 2.7B OF THE CREDIT AGREEMENT
Subsection 2.7B of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"B. PRIME RATE LOANS. During such periods as such Loan is a Prime Rate
Loan, at a rate per annum equal at all times to the Prime Rate in effect
from time to time plus the Prime Margin, provided, however, that after the
9
<PAGE> 10
occurrence and during the continuation of any Event of Default, the Prime
Rate Loans shall bear interest, from the date on which such Event of
Default shall have occurred until such amount is paid in full at a rate per
annum equal at all times to 2.0% per annum above the rate of interest
otherwise payable under this subsection 2.7B, in each case, payable
quarterly in arrears for the preceding quarter (or portion thereof) on each
Interest Payment Date occurring during such periods, on the date such Loan
is Converted to a Eurodollar Rate Loan and on the date of any payment or
prepayment thereof, unless such amounts are past due, in which case they
shall be payable on demand."
SECTION 4. AMENDMENT TO SUBSECTION 5.5 OF THE CREDIT AGREEMENT
Subsection 5.5 of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"5.5 FIXED CHARGE COVERAGE RATIO
The Fixed Charge Coverage Ratio at any date shall not be less than the
ratio set forth below opposite the period in which such date falls:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----------
<S> <C>
Effective Date through December 30, 1995...................................... 1.10 to 1.0
December 31, 1995 through December 30, 1997................................... 1.15 to 1.0
December 31, 1997 and thereafter.............................................. 1.20 to 1.0"
</TABLE>
SECTION 5. AMENDMENT TO SUBSECTION 5.6 OF THE CREDIT AGREEMENT
Subsection 5.6 of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"5.6 CONSOLIDATED DEBT RATIO
On the last day of each fiscal quarter, the ratio of (a) the sum of
Consolidated Debt as of the last day of each of the four fiscal quarters
ending on such date less the sum of Consolidated Subordinated Debt as of
the last day of each of such four fiscal quarters to (b) the sum of
Consolidated Net Worth as of the last day of each of such four fiscal
quarters plus the sum of Consolidated Subordinated Debt as of the last day
of each of such four fiscal quarters shall not be more than 1.20 to 1.00
10
<PAGE> 11
through to December 31, 1996, and 1.10 to 1.00 thereafter."
SECTION 6. DELETION OF SUBSECTION 5.7 OF THE CREDIT AGREEMENT
Subsection 5.7 of the Credit Agreement is hereby amended by deleting such
subsection in its entirety.
SECTION 7. AMENDMENT TO SUBSECTION 5.8 OF THE CREDIT AGREEMENT
Subsection 5.8 of the Credit Agreement is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"5.8 CONSOLIDATED DEBT FOR BORROWED MONEY TO CONSOLIDATED EBITDA
RATIO
On the last day of each fiscal quarter, the ratio of (a) the quotient
derived by dividing the sum of the Consolidated Debt For Borrowed Money as
of the last day of each of the four fiscal quarters ending on such date, by
four, to (b) the sum of (i) Consolidated EBITDA and (ii) EBITDA for Sold
Facility for each facility the Debt of which is guaranteed by BEI or a
Subsidiary and which is included in Consolidated Debt For Borrowed Money
for such four fiscal quarters shall not be more than 5.00 to 1.00 through
December 31, 1996, and 4.50 to 1.00 thereafter."
SECTION 8. AMENDMENTS TO SUBSECTIONS 5.13A AND 5.15 OF THE CREDIT AGREEMENT
Subsection 5.13A(xii) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(xii) Liens on Medicare, Medicaid or other patient accounts
receivable of BEI or any of its Subsidiaries, or on Permitted Receivables
Financing Securities, granted to secure Permitted Receivables Financing
Securities, provided that the net amount of all uncollected accounts
receivable owing to BEI or any of its Subsidiaries over which such a Lien
is granted, together, without duplication, with the net amount of all
uncollected accounts receivable owing to BEI or any of its Subsidiaries
that are assigned to secure such Permitted Receivables Financing
Securities, shall not exceed, at any time, 175% of the aggregate principal
or redemption
11
<PAGE> 12
amount of all Permitted Receivables Financing Securities then outstanding;"
Subsection 5.15(e) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(e) Permitted Receivables Financing Securities, provided that the
aggregate principal and redemption amount of all Permitted Receivables
Financing Securities outstanding at any time shall not exceed
$100,000,000;"
SECTION 9. AMENDMENTS TO EXHIBIT VIII OF THE CREDIT AGREEMENT
Exhibit VIII of the Credit Agreement is hereby amended by deleting such
Attachment No. 1 to such Exhibit VIII in its entirety and replacing it with
Attachment No. 1 to Exhibit VIII set forth in Exhibit A attached hereto.
SECTION 10. REPRESENTATIONS AND WARRANTIES
In order to induce Agent, Co-Agent and Lenders to enter into this
Amendment, each of BEI and Borrower represents and warrants to Agent, Co-Agent
and Lenders that:
(a) The representations and warranties of each Loan Party contained in the
Credit Agreement are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of the date
hereof except to the extent that such representations and warranties
specifically relate to an earlier date, in which case they are true, correct and
complete in all material respects as of such earlier date;
(b) No event has occurred and is continuing or would result from the
execution of this Amendment that constitutes an Event of Default or Potential
Event of Default;
(c) Each Loan Party has performed in all material respects all agreements
and satisfied all conditions that the Credit Agreement and this Amendment
provide shall be performed by it on or before the date hereof;
(d) The execution, delivery and performance of this Amendment and the
Credit Agreement as amended by this Amendment, by each Loan Party are within the
corporate power and authority of each such Loan Party and, as of the Ninth
Amendment Effective Date (as hereinafter defined), will be duly authorized by
all necessary corporate action on the part of each Loan Party, and this
Amendment, as of the Ninth Amendment Effective Date, is duly executed and
delivered by
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<PAGE> 13
each of such Loan Parties and will constitute a valid and binding agreement of
each of such Loan Parties, enforceable against such Loan Parties in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. The Credit Agreement constitutes and, as of the Ninth Amendment
Effective Date, the Credit Agreement, as amended by this Amendment, will
constitute, a valid and binding agreement of BEI and Borrower, enforceable
against BEI and Borrower in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles, relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(e) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to any Loan Party, the Certificate or
Articles of Incorporation or Bylaws of any Loan Party or any order, judgment or
decree of any court or other agency of government binding on any Loan Party,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any instrument that is material,
individually or in the aggregate, and that is binding on such Loan Party, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of any Loan Party (other than any Liens created under any
of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require
any approval or consent of any Person under any instrument that is material,
individually or in the aggregate, and that is binding on such Loan Party.
(f) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body.
SECTION 11. CONDITIONS TO EFFECTIVENESS
Sections 1 through 9 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Ninth Amendment
Effective Date");
13
<PAGE> 14
A. On or before the Ninth Amendment Effective Date, BEI, Borrower and each
Subsidiary Guarantor shall deliver to Lenders (or to Agent for Lenders with
sufficient originally executed copies, as appropriate, for each Lender and its
counsel) the following, each, unless otherwise noted, dated the Ninth Amendment
Effective Date;
(i) Resolutions of its Board of Directors approving and authorizing
the execution, delivery, and performance of this Amendment, certified as of
the Ninth Amendment Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(ii) A certificate of the Chief Financial Officer of Borrower
specifying the ACD/CC Ratio and the Cash Coverage Ratio in effect as of
September 30, 1994;
(iii) Signature and incumbency certificates of its officers executing
this Amendment certified by its secretary or an assistant secretary; and
(iv) Executed counterparts of this Amendment.
B. Lenders and their respective counsel shall have received originally
executed copies of one or more favorable written opinions of Robert W.
Pommerville, general counsel for BEI, and Weil, Gotshal & Manges, counsel for
BEI, Borrower and each Subsidiary Guarantor, in form and substance reasonably
satisfactory to Agent and its counsel, dated as of the Ninth Amendment Effective
Date and setting forth substantially the matters in the opinions designated in
Exhibit B to this Amendment and as to such other matters as Agent acting on
behalf of Lenders may reasonably request.
C. On or before the Ninth Amendment Effective Date, each Lender shall have
delivered to Agent a counterpart of this Amendment originally executed by a duly
authorized officer of such Lender or by telex or telephonic confirmation.
D. On or before the Ninth Amendment Effective Date:
(i) Borrower shall have caused payment to each Lender of an amendment
fee equal to 0.05% of the aggregate principal amount of Loans of such
Lender outstanding on the Ninth Amendment Effective Date;
(ii) Borrower shall have caused payment to Agent of all amounts
regarding the costs and expenses reasonably incurred by Agent in connection
with this Amendment that Borrower has agreed to pay;
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<PAGE> 15
(iii) The Morgan Credit Agreement shall have become effective in all
respects; and
(iv) An amendment to the Nippon Credit Agreement, which amendment
shall be satisfactory to Agent in all material respects, shall have become
effective in all respects.
E. On or before the Ninth Amendment Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and Agent and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Agent may reasonably request.
F. On the Ninth Amendment Effective Date American Transitional Care Centers
of Texas, Inc., American Transitional Care Dallas-Ft. Worth, Inc., American
Transitional Health Care, Inc., American Transitional Hospitals, Inc., American
Transitional Hospitals of Indiana, Inc., American Transitional Hospitals of
Oklahoma, Inc., American Transitional Hospitals of Tennessee, Inc., ATH Del Oro,
Inc., ATH Heights, Inc., ATH Tucson, Inc. and Beverly Enterprises Japan Limited
each shall have executed a Subsidiary Guaranty Agreement under which each such
Subsidiary Guarantor guarantees the Obligations under the Credit Agreement as
amended by this Amendment.
SECTION 12. THE GUARANTIES
Each Guarantor acknowledges that it has reviewed the terms and provisions
of the Credit Agreement and this Amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Guarantor hereby
confirms that the Guaranty Agreement and the Collateral Documents to which it is
a party or otherwise bound and all Collateral encumbered thereby will continue
to guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all Obligations, Guarantied Obligations (as defined
in the applicable Guaranty Agreements) and Secured Obligations (as defined in
the Collateral Documents), as the case may be, including, without limitation,
the payment and performance of all Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement as amended by this
Amendment and the Notes defined therein.
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<PAGE> 16
Each Guarantor acknowledges and agrees that any of the Guaranty Agreements
and the Collateral Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Guarantor represents and
warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and Guaranty Agreements and the
Collateral Documents to which it is a party or otherwise bound are true, correct
and complete in all material respects on and as of the Ninth Amendment Effective
Date to the same extent as though made on and as of that date except to the
extent that such representations and warranties specifically relate to an
earlier date, in which case they are true, correct and complete in all material
respects as of such earlier date.
Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document amd (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed to
require the consent of any Guarantor to any future amendments to the Credit
Agreement.
SECTION 13. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment (other
than the provisions of Sections 1 through 9 hereof) shall become effective upon
the execution of a counterpart hereof by all Lenders and each of the Loan
Parties and receipt of written or telephonic notification of such execution and
authorization of delivery thereof.
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<PAGE> 17
SECTION 14. FEES AND EXPENSES
Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.4 of the Credit Agreement incurred by Agent and its counsel with
respect to this Amendment and the documents and transactions contemplated hereby
shall be for the account of Borrower.
SECTION 15. EFFECT OF AMENDMENT
It is hereby agreed that, except as specifically provided herein, this
Amendment does not in any way affect or impair the terms and conditions of the
Credit Agreement, and all terms and conditions of the Credit Agreement are to
remain in full force and effect unless otherwise specifically amended or changed
pursuant to the terms and conditions of this Amendment.
SECTION 16. APPLICABLE LAW
This Amendment and the rights and obligations of the parties hereto and all
other aspects hereof shall be deemed to be made under, shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York without regard to principles of conflicts of laws.
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<PAGE> 18
WITNESS the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
By: /s/ SCHUYLER HOLLINGSWORTH, JR.
---------------------------------
Title: SVP and Treasurer
------------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By: /s/ SCHUYLER HOLLINGSWORTH, JR.
---------------------------------
Title: SVP and Treasurer
------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By: /s/ Y. KAMISAWA
---------------------------------
Title: Deputy General Manager
------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By: /s/ DANIEL A. BROWN
---------------------------------
Title: Director
------------------------------
S-1
<PAGE> 19
Lenders:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ TERESA ELLENSON
-----------------------------------
Title: Vice President
--------------------------------
U.S. NATIONAL BANK OF OREGON
By: /s/ JANET JORDAN
-----------------------------------
Title: Vice President
--------------------------------
The Subsidiary Guarantors:
-------------------------
Beverly Enterprises --
Alabama, Inc.
Beverly Enterprises --
Arkansas, Inc.
Beverly Enterprises --
Florida, Inc.
Beverly Enterprises --
Georgia, Inc.
Beverly Enterprises --
Maryland, Inc.
Beverly Enterprises --
Massachusetts, Inc.
Beverly Enterprises --
Minnesota, Inc.
Beverly Enterprises --
Mississippi, Inc.
S-2
<PAGE> 20
Beverly Enterprises --
Missouri, Inc.
Beverly Enterprises --
Nebraska, Inc.
Beverly Enterprises --
North Carolina, Inc.
Beverly Enterprises --
Oregon
Beverly Enterprises --
Wisconsin, Inc.
Commercial Management,
Inc.
Hallmark Convalescent,
Homes, Inc.
Hospital Facilities
Corporation
Moderncare of Lumberton,
Inc.
Nebraska City S-C-H, Inc.
South Dakota -- Beverly
Enterprises, Inc.
Vantage Healthcare
Corporation
AGI-Camelot, Inc.
AGI-McDonald County --
Health Care, Inc.
Beverly Enterprises --
Arizona, Inc.
Beverly Enterprises --
California, Inc.
Beverly Enterprises --
Colorado, Inc.
Beverly Enterprises --
Connecticut, Inc.
Beverly Enterprises --
S-3
<PAGE> 21
Garden Terrace, Inc.
Beverly Enterprises --
Hawaii, Inc.
Beverly Enterprises --
Idaho, Inc.
Beverly Enterprises --
Illinois, Inc.
Beverly Enterprises --
Indiana, Inc.
Beverly Enterprises --
Kansas, Inc.
Beverly Enterprises --
Kentucky, Inc.
Beverly Enterprises --
Louisiana, Inc.
Beverly Enterprises --
Michigan, Inc.
Beverly Enterprises --
New Jersey, Inc.
Beverly Enterprises --
Ohio, Inc.
Beverly Enterprises --
Pennsylvania, Inc.
Beverly Enterprises --
South Carolina, Inc.
Beverly Enterprises --
Tennessee, Inc.
Beverly Enterprises --
Texas, Inc.
Beverly Enterprises --
Utah, Inc.
Beverly Enterprises --
Virginia, Inc.
Beverly Enterprises --
Washington, Inc.
S-4
<PAGE> 22
Beverly Enterprises --
West Virginia, Inc.
Beverly Indemnity, Ltd.
Beverly Manor Inc. of Hawaii
Beverly Savana Cay Manor, Inc.
Columbia-Valley Nursing
Home, Inc.
Computran Systems, Inc.
Continental Care Centers
of Council Bluffs, Inc.
Forest City Building, Ltd.
Home Medical Systems, Inc.
Kenwood View Nursing
Home, Inc.
Liberty Nursing Homes,
Incorporated
Medical Arts Health
Facility of
Lawrenceville, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of
America
Salem No. 1, Inc.
South Alabama Nursing
Home, Inc.
By: /s/ SCHUYLER HOLLINGSWORTH, JR.
-------------------------------
Title: SVP and Treasurer
----------------------------
S-5
<PAGE> 1
EXHIBIT 10.43
TENTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY CALIFORNIA CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
BANK OF MONTREAL, AS CO-AGENT,
AND
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
LOS ANGELES AGENCY, AS AGENT
DATED AS OF DECEMBER 6, 1994
THIS TENTH AMENDMENT dated as of December 6, 1994 (this
"AMENDMENT"), is entered into by and among BEVERLY ENTERPRISES, INC.,
a Delaware corporation ("BEI"), BEVERLY CALIFORNIA CORPORATION,
a California corporation ("BORROWER"), the SUBSIDIARY GUARANTORS listed on the
signature pages hereof (together with BEI, the "GUARANTORS"), the LENDERS
listed on the signature pages hereof (such lenders, together with each Person
that may or has become a party to the Credit Agreement (as defined below)
pursuant to subsection 10.8 thereof, are referred to herein individually as a
"LENDER" and collectively as the "LENDERS"), BANK OF MONTREAL as co-agent
for the Lenders (in such capacity, the "CO-AGENT"), and THE LONG-TERM CREDIT
BANK OF JAPAN, LTD., Los Angeles Agency ("LTCB"), as agent for the Lenders
(in such capacity, the "AGENT"). This Amendment amends the Credit Agreement
dated March 24, 1992 by and among BEI, Borrower, Co-Agent, Agent and
Lenders, as amended by that First Amendment to Credit Agreement dated
April 7, 1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Second Amendment to Credit Agreement dated as of May
11, 1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Third Amendment to Credit Agreement dated as
of March 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Fourth Amendment to Credit Agreement dated as of
November 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Fifth Amendment to Credit Agreement dated
as of March 21, 1994 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Sixth Amendment to Credit Agreement dated
as of April 22, 1994 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Seventh Amendment to Credit Agreement
dated as of May 2, 1994 by and among BEI, Borrower, Co-Agent, Agent and
the Lenders, as further amended by that Eighth Amendment to Credit Agreement
dated as of November 1, 1994 by and among BEI, Borrower, Co-Agent, Agent
and the Lenders, as further
<PAGE> 2
amended by that Ninth Amendment to Credit Agreement dated as of November 9,
1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders (said
Credit Agreement, as so amended, the "CREDIT AGREEMENT"), as set forth
herein. Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in
certain respects;
WHEREAS, Lenders, Co-Agent and Agent have agreed to approve such
amendments;
WHEREAS, Guarantors desire to reaffirm the effectiveness
respectively of the Subsidiary Guaranty Agreement and the BEI Guaranty
Agreement;
NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Co-Agent, Agent and Lenders agree as
follows:
AGREEMENT
SECTION 1. AMENDMENT TO SUBSECTION 5.11(C) OF THE CREDIT AGREEMENT
Subsection 5.11(c) of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and replacing it with the
following:
"(c) Investments made by BEI or any of its Subsidiaries in
one or more Special Purpose Receivables Financing Subsidiaries by means of the
sale of, or the granting of security interests in, Medicare, Medicaid or other
patient accounts receivable owing to BEI or such Subsidiary, in either case
to such Special Purpose Receivables Financing Subsidiaries pursuant to
a Receivables Financing Program, provided that the net amount of all
uncollected accounts receivable owing to BEI or any of its Subsidiaries that
have been so sold or in which a security interest has been so granted shall not
exceed 175% of the aggregate principal or redemption amount of all Permitted
Receivables Financing Securities then outstanding;"
2
<PAGE> 3
SECTION 2. REPRESENTATIONS AND WARRANTIES
In order to induce Agent, Co-Agent and Lenders to enter into this
Amendment, each of BEI and Borrower represents and warrants to Agent, Co-Agent
and Lenders that:
(a) The representations and warranties of each Loan Party contained
in the Credit Agreement are true, correct and complete in all material respects
on and as of the date hereof to the same extent as though made on and as of the
date hereof except to the extent that such representations and warranties
specifically relate to an earlier date, in which case they are true, correct
and complete in all material respects as of such earlier date;
(b) No event has occurred and is continuing or would result
from the execution of this Amendment that constitutes an Event of Default
or Potential Event of Default;
(c) Each Loan Party has performed in all material respects all
agreements and satisfied all conditions that the Credit Agreement and
this Amendment provide shall be performed by it on or before the date hereof;
(d) The execution, delivery and performance of this Amendment and the
Credit Agreement as amended by this Amendment, by each Loan Party are
within the corporate power and authority of each such Loan Party and, as of
the Tenth Amendment Effective Date (as hereinafter defined), will be duly
authorized by all necessary corporate action on the part of each Loan Party,
and this Amendment, as of the Tenth Amendment Effective Date, is duly
executed and delivered by each of such Loan Parties and will constitute a
valid and binding agreement of each of such Loan Parties, enforceable against
such Loan Parties in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability. The Credit Agreement
constitutes and, as of the Tenth Amendment Effective Date, the Credit
Agreement, as amended by this Amendment, will constitute, a valid and
binding agreement of BEI and Borrower, enforceable against BEI and Borrower in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles, relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
(e) The execution and delivery by each Loan Party of this Amendment
and the performance by each Loan Party of the Credit Agreement as amended by
this Amendment, do not and will not (i) violate any provision of any
law or any
3
<PAGE> 4
governmental rule or regulation applicable to any Loan Party, the Certificate
or Articles of Incorporation or Bylaws of any Loan Party or any order,
judgment or decree of any court or other agency of government binding on any
Loan Party, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any instrument that
is material, individually or in the aggregate, and that is binding on such Loan
Party, (iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets of any Loan Party (other than any Liens created
under any of the Loan Documents in favor of Agent on behalf of Lenders), or
(iv) require any approval or consent of any Person under any instrument that is
material, individually or in the aggregate, and that is binding on such Loan
Party.
(f) The execution and delivery by each Loan Party of this Amendment
and the performance by each Loan Party of the Credit Agreement as amended by
this Amendment, do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or regulatory body.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "TENTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Tenth Amendment Effective Date, BEI,
Borrower and each Subsidiary Guarantor shall deliver to Lenders (or to
Agent for Lenders with sufficient originally executed copies, as appropriate,
for each Lender and its counsel) the following, each, unless otherwise noted,
dated the Tenth Amendment Effective Date:
(i) Signature and incumbency certificates of its officers
executing this Amendment certified by its secretary or an assistant
secretary; and
(ii) Executed counterparts of this Amendment.
B. On or before the Tenth Amendment Effective Date,
Requisite Lenders shall have delivered to Agent a counterpart of this
Amendment originally executed by a duly authorized officer of such Lender or by
telex or telephonic confirmation.
4
<PAGE> 5
SECTION 4. THE GUARANTIES
Each Guarantor acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment.
Each Guarantor hereby confirms that the Guaranty Agreement and the Collateral
Documents to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all Obligations,
Guarantied Obligations (as defined in the applicable Guaranty Agreements) and
Secured Obligations (as defined in the Collateral Documents), as the
case may be, including, without limitation, the payment and performance of all
Obligations of Borrower now or hereafter existing under or in respect of
the Credit Agreement as amended by this Amendment and the Notes defined
therein.
Each Guarantor acknowledges and agrees that any of the Guaranty
Agreements and the Collateral Documents to which it is a party or otherwise
bound shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of this Amendment. Each Guarantor represents
and warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and the Guaranty Agreements and the
Collateral Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Tenth Amendment
Effective Date to the same extent as though made on and as of that date except
to the extent that such representations and warranties specifically relate to
an earlier date, in which case they are true, correct and complete in all
material respects as of such earlier date.
Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document and (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed
to require the consent of any Guarantor to any future amendments to the Credit
Agreement.
SECTION 5. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which
when so executed and delivered
5
<PAGE> 6
shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Amendment (other than the
provisions of Section 1 hereof) shall become effective upon the execution of a
counterpart hereof by Requisite Lenders and each of the Loan Parties and
receipt of written or telephonic notification of such execution and
authorization of delivery thereof.
SECTION 6. FEES AND EXPENSES
Borrower acknowledges that all costs, fees and expenses as
described in subsection 10.4 of the Credit Agreement incurred by Agent
and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Borrower.
SECTION 7. EFFECT OF AMENDMENT
It is hereby agreed that, except as specifically provided herein,
this Amendment does not in any way affect or impair the terms and conditions of
the Credit Agreement, and all terms and conditions of the Credit Agreement are
to remain in full force and effect unless otherwise specifically amended or
changed pursuant to the terms and conditions of this Amendment.
SECTION 8. APPLICABLE LAW
This Amendment and the rights and obligations of the parties hereto
and all other aspects hereof shall be deemed to be made under, shall be
governed by, and shall be construed and enforced in accordance with, the laws
of the State of New York without regard to principles of conflicts of laws.
6
<PAGE> 7
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
By: /s/ Schuyler Hollingsworth, Jr.
-------------------------------
Title:
Borrower:
BEVERLY CALIFORNIA CORPORATION
By: /s/ Schuyler Hollingsworth, Jr.
-------------------------------
Title:
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By: /s/ Yutaka Kamisawa
-------------------
Title: Deputy General Manager
BANK OF MONTREAL,
as Co-Agent and as a Lender
By: /s/ Daniel A. Brown
-------------------
Title: Director
<PAGE> 8
Lenders:
INTERNATIONALE NEDERLANDEN (U.F.)
CAPITAL CORPORATION
By:
------------------------------
Title: Manager, Director
------------------------------
U.S. NATIONAL BANK OF OREGON
By:
------------------------------
Title:
------------------------------
The Subsidiary Guarantors:
--------------------------
Beverly Enterprises - Alabama, Inc.
Beverly Enterprises - Arkansas, Inc.
Beverly Enterprises - Florida, Inc.
Beverly Enterprises - Georgia, Inc.
Beverly Enterprises - Maryland, Inc.
Beverly Enterprises - Massachusetts, Inc.
Beverly Enterprises - Minnesota, Inc.
Beverly Enterprises - Mississippi, Inc.
Beverly Enterprises - Missouri, Inc.
Beverly Enterprises - Nebraska, Inc.
Beverly Enterprises - North Carolina, Inc.
Beverly Enterprises - Oregon
Beverly Enterprises - Wisconsin, Inc.
<PAGE> 9
Commerical Management, Inc.
Hallmark Convalescent Homes, Inc.
Hospital Facilities Corporation
Moderncare of Lumberton, Inc.
Nebraska City S-C-H, Inc.
South Dakota - Beverly Enterprises, Inc.
Vantage Healthchare Corporation
AGI-Camelot, Inc.
AGI-McDonald County Health Care, Inc.
Beverly Enterprises - Arizona, Inc.
Beverly Enterprises - California, Inc.
Beverly Enterprises - Colorado, Inc.
Beverly Enterprises - Connecticut, Inc.
Beverly Enterprises - Garden Terrace, Inc.
Beverly Enterprises - Hawaii, Inc.
Beverly Enterprlses - Idaho, Inc.
Beverly Enterprises - Illinois, Inc.
Beverly Enterprises - Indiana, Inc.
Beverly Enterprises - Kansas, Inc.
Beverly Enterprises - Kentucky, Inc.
Beverly Enterprises - Louisiana, Inc.
Beverly Enterprises - Michigan, Inc.
Beverly Enterprises - New Jersey, Inc.
Beverly Enterprises - Ohio, Inc.
Beverly Enterprises - Pennsylvania, Inc.
Beverly Enterprlses - South Carolina, Inc.
Beverly Enterprises - Tennessee, Inc.
S-3
<PAGE> 10
Beverly Enterprises - Texas, Inc.
Beverly Enterprises - Utah, Inc.
Beverly Enterprises - Virginia, Inc.
Beverly Enterprises - Washington, Inc.
Beverly Enterprises - West Virginia, Inc.
Beverly Indemnity, Ltd.
Beverly Manor Inc. of Hawaii
Beverly Savana Cay Manor, Inc.
Columbia-Valley Nursing Home, Inc.
Computran Systems, Inc.
Continental Care Centers of Council Bluffs, Inc.
Forest City Building Ltd.
Home Medical Systems, Inc.
Kenwood View Nursing Home, Inc.
Liberty Nursing Homes, Incorporated
Medical Arts Health Facility of Lawrenceville, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of America
Salem No. 1, Inc.
South Alabama Nursing Home, Inc.
American Transitional Care Centers of Texas, Inc.
American Transitional Care Dallas-Ft. Worth, Inc.
American Transitional Health Care, Inc.
American Transitional Hospitals, Inc.
S-4
<PAGE> 11
American Transitional Hospitals of Indiana, Inc.
American Transitional Hospitals of Oklahoma, Inc.
American Transitional Hospitals of Tennessee, Inc.
ATH Del Oro, Inc.
ATH Heights, Inc.
ATH Tuscon, Inc.
Beverly Enterprises Japan Limited
AdviNet, Inc.
Beverly Crest Corporation
Beverly Enterprises - Distribution Services, Inc.
Hospice Preferred Choice, Inc.
Beverly Rehabilitation Services, Inc.
Synergos, Inc.
Synergos-Scottsdale, Inc.
Synergos-Pleasanthill, Inc.
Synergos-North Hollywood, Inc.
By: Schuyler Hollingsworth, Jr.
-----------------------------
Title:
-----------------------------
S-5
<PAGE> 1
EXHIBIT 10.44
EXECUTION COPY
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.
EXECUTING THIS AGREEMENT,
BEVERLY ENTERPRISES, INC.
and
CERTAIN WHOLLY-OWNED
SUBSIDIARIES OF BEVERLY ENTERPRISES, INC.
WHICH MAY BECOME PARTIES
HERETO AS PROVIDED HEREIN
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
SALES OF RECEIVABLES
Section 2.1. Sales of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.2. Repurchase of Certain Purchased Receivables . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2. Representations and Warranties of the Seller Relating to the Agreement and the
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.3. Representations and Warranties of Beverly . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.4. Representations and Warranties of Each Selling Subsidiary . . . . . . . . . . . . . . . . 24
ARTICLE IV
COVENANTS
Section 4.1. Covenants of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2. Covenants of Beverly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3. Covenants of Each Selling Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 5.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.2. Servicer Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.4. Repurchase by Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.5. Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.6. Semi-Annual Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.7. Semi-Annual Independent Public Accountants' Servicing Report . . . . . . . . . . . . . . . 36
Section 5.8. Notices to the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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ARTICLE VI
ALLOCATION AND APPLICATION
OF COLLECTIONS
Section 6.1. Establishment of Issuer Accounts; Investment . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.2. Collections and Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.3. Application of Amounts in Collection Account . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.4. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.5. Adjustment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.6. Adjustments for Miscellaneous Credits and Erroneous Charges . . . . . . . . . . . . . . . 41
ARTICLE VII
CERTAIN MATTERS RELATING TO THE SELLER AND
THE SELLING SUBSIDIARIES
Section 7.1. Merger or Consolidation of, or Assumption of the Obligations of, the Seller or
any Selling Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII
OTHER MATTERS RELATING TO SERVICING
Section 8.1. Liability of the Servicers and Master Servicer; Indemnification . . . . . . . . . . . . . 42
Section 8.2. Merger or Consolidation of, or Assumption of the Obligations of, the Servicers
or Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.3. Servicers and Master Servicer Not To Resign . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.5. Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.6. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX
SERVICING DEFAULTS
Section 9.1. Servicing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.2. Appointment of Successor Servicer or Successor Master Servicer . . . . . . . . . . . . . . 46
Section 9.3. Collection of Medicaid, Medicare and Department of Veterans' Affairs Payments by
Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE X
MATTERS RELATING TO THE ISSUER
Section 10.1. Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.2. Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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ARTICLE XI
INDEMNITY
Section 11.1. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Transfer Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 12.2. Termination of Agreement; Sale of Receivables . . . . . . . . . . . . . . . . . . . . . . 50
Section 12.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 12.4. Intention of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.5. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 51
Section 12.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.7. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.9. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.10. No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.12. Binding Effect; Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.13. Nonpetition Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.15. General Provision as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.16. Additional Parties Hereto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.17. Assignment of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.18. Limitation of Liability of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.19. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
_______________________________
<TABLE>
<S> <C> <C>
Schedule I - Conditions to Effectiveness
Schedule II - List of Facilities Which Originated Designated Receivables
Schedule IIIA - Designated Receivable Facilities
Schedule IIIB - Effective Date Receivable Facilities
Schedule IIIC - Additional Receivables
Schedule IV - Litigation Schedule
Exhibit A - Form of Selling Subsidiary Agreement
Exhibit B - Form of Confirming Agreement
Exhibit C - Form of Selling Subsidiary Confirming Agreement
Exhibit D - Form of Daily Report
Exhibit E - Form of Daily Trustee Report
Exhibit F - Form of Monthly Trustee Report
</TABLE>
(iii)
<PAGE> 5
FIRST AMENDMENT AND RESTATEMENT, dated as of December 1,
1994, to MASTER SALE AND SERVICING AGREEMENT (the "Original Agreement") dated
as of December 1, 1990 among BEVERLY FUNDING CORPORATION, a Delaware
corporation and a wholly-owned subsidiary of Beverly Enterprises, Inc. (the
"Issuer"), BEVERLY ENTERPRISES, INC., a Delaware corporation ("Beverly"),
BEVERLY CALIFORNIA CORPORATION, a California corporation and a wholly-owned
subsidiary of Beverly (the "Seller", or in its capacity as a servicer hereunder
with respect to its Receivables, a "Servicer" or in its capacity as such, the
"Master Servicer"), the direct or indirect wholly-owned subsidiaries of Beverly
executing this Agreement (each, a "Selling Subsidiary" or, in its capacity as a
servicer hereunder with respect to its respective Receivables, a "Servicer";
and, together with the Seller in its capacity as a Servicer with respect to
Purchased Receivables originated by the Seller and the other Selling
Subsidiaries in their respective capacities as a Servicer with respect to the
Selling Subsidiaries Receivables, collectively, the "Servicers"). In addition,
as provided herein, certain other direct or indirect wholly-owned subsidiaries
of Beverly may become parties hereto.
The parties hereto agree that, effective the Effective Date,
the Original Agreement is amended and restated to read as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) Except as otherwise
specified herein or as the context may otherwise require, capitalized terms
used herein shall have the respective meanings set forth below:
"Additional Receivables" shall mean any Receivable listed on
Schedule IIIC hereto which is transferred to the Issuer on the Effective Date.
"Affiliate" shall mean, with respect to a Person, any other
Person which directly or indirectly controls, is controlled by or is under
common control with such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Amortization Event" shall mean any of the following events:
(a) the Seller or the Master Servicer shall fail (i) to
make (or cause to be made) any payment or deposit on or before the date
occurring three (3) Business Days after the date when it is required to do so
under the terms of this Agreement (except for deposits required to be made into
the Collection Account pursuant to Section 6.2(a), in which case an
Amortization Event shall mean the failure to make such a deposit on or before
the required date of deposit specified therein, other than a failure caused by
factors outside the control of the Seller, the Master Servicer or the
Servicers, in which case an Amortization Event shall mean a failure to make
such a deposit
<PAGE> 6
on or before the date one (1) Business Day after the required date of deposit
specified therein); or (ii) to observe or perform in any material respect any
of its other covenants or agreements, set forth herein for a period of three
(3) Business Days (in the case of covenants contained in Section 2.2, 5.4 or
6.6) or 30 days (in the case of other covenants and agreements herein) after
there shall have been given, by registered or certified mail to the Seller or
the Master Servicer, as the case may be, by the Issuer, the Trustee or the
Holders of at least 50% in Aggregate Outstanding Amount of Health Care Notes of
any Series (with a copy to the Trustee), a written notice specifying such
failure and requiring it to be remedied;
(b) any representation or warranty made by the Seller or
any Selling Subsidiary with respect to the Purchased Receivables proves to have
been incorrect in any respect when made (or deemed made), which continues to be
incorrect in any respect and unremedied for a period of 30 days, and all such
incorrect representations and warranties taken together have a material adverse
effect on the Purchased Receivables as a whole or the Issuer's ownership
interest therein;
(c) involuntary proceedings or an involuntary petition
shall be commenced or filed against Beverly, any Selling Subsidiary or the
Seller under any bankruptcy, insolvency or similar law or seeking dissolution
or reorganization of Beverly, any Selling Subsidiary or the Seller or the
appointment of a receiver, trustee, custodian or liquidator for Beverly, any
Selling Subsidiary or the Seller or a substantial part of the property, assets
or business of Beverly, any Selling Subsidiary or the Seller, or any writ,
order, judgment, warrant of attachment, execution or similar process shall be
issued or levied against a substantial part of the property, assets or business
of Beverly, any Selling Subsidiary or the Seller;
(d) Beverly, any Selling Subsidiary or the Seller shall
commence a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such law, or
consent to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of Beverly, any
Selling Subsidiary or the Seller or for any substantial part of any of their
respective property, or make any general assignment for the benefit of
creditors, or the failure by Beverly, any Selling Subsidiary or the Seller
generally to pay its debts as such debts become due, or the taking of any
corporate action by Beverly, any Selling Subsidiary or the Seller to authorize
any of the foregoing;
(e) Beverly, any Selling Subsidiary, the Seller or the
Issuer is or becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or the Issuer or any of its
Securities becomes subject to a registration requirement under any Applicable
Securities Law;
(f) a Servicing Default shall have occurred and be
continuing;
(g) an Event of Default under the Indenture shall have
occurred and be continuing;
2
<PAGE> 7
(h) the Net Purchased Receivables shall be determined to
be less than the Minimum Required Receivables Balance for five (5) consecutive
Business Days and the Trustee shall have not received written notice from
Holders of at least 50% in Aggregate Outstanding Amount of Health Care Notes of
each Series waiving such Amortization Event;
(i) the Loss Ratio shall be determined to be greater than
1.8% for five (5) consecutive Business Days and the Trustee shall have not
received written notice from Holders of at least 50% in Aggregate Outstanding
Amount of Health Care Notes of each Series waiving such Amortization Event;
(j) the Delinquency Ratio shall be determined to be
greater than 10% for five (5) consecutive Business Days and the Trustee shall
not have received written notice from Holders of at least 50% in Aggregate
Outstanding Amount of Health Care Notes of each Series waiving such
Amortization Event;
(k) any Person, together with its Affiliates, shall
beneficially own collectively such amount of the issued and outstanding capital
stock of Beverly that will enable such Person and its Affiliates to elect a
majority of the Board of Directors of Beverly (irrespective of whether such
power can be exercised at one time; or over a period of time; or
(l) the Issuer shall fail to pay (or amounts shall not
have been deposited into the related Expense Subaccount with respect to) any
Series Special Obligation within five (5) Business Days of any such amount
becoming due.
"Amortization Period" shall mean the period beginning on the
Transfer Termination Date and continuing until the Health Care Notes of all
Series have been paid in full.
"Applicable Securities Law" shall mean any of: (i) the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the Investment Company Act of 1940, as amended; or (ii) any other
Requirement of Law imposed by the United States or any Governmental Authority
thereof pertaining to the distribution, investment, holding or disposition of
Securities.
"Authorized Officer" shall mean (i) the President, any Vice
President, the Secretary, the Treasurer or the Assistant Secretary of the
Master Servicer or any Servicer, as the case may be, or (ii) any other person
duly authorized by the Master Servicer or any Servicer, as the case may be, to
perform any act or discharge any duty in connection with the execution,
issuance, and delivery of this Agreement and the transactions contemplated
hereby.
"Balance" shall mean, at the time of reference with respect
to any Receivable, the product of (i) the then outstanding unpaid balance of
such Receivable times (ii) 98.5% (expressed as a decimal).
"Base Reserve" shall mean, on any day, the lesser of (i) the
product of (a) the Base Reserve Percent times (b) the Net Purchased Receivables
and (ii) the Base Reserve Cap, all determined as of such day.
3
<PAGE> 8
"Base Reserve Cap" shall mean, on any day, the product of (i)
the quotient of (a) the Base Reserve Percent divided by (b) one minus the Base
Reserve Percent times (ii) (A) the aggregate Net Note Balance of all Series
minus (B) the principal amounts of Eligible Investments and cash in the
Collection Account (after applications pursuant to Section 6.3) all determined
as of such day.
"Base Reserve Percent" shall mean, on any day, the weighted
average Series Base Reserve Percent for all Series of Health Care Notes (based
on the relative outstanding Net Note Balance of each such Series on such day).
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies in New York,
New York or Fort Smith, Arkansas are authorized or obligated by law, regulation
or executive order to remain closed.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any regulations (including, without limitation, temporary and
proposed regulations) thereunder.
"Collection Account" shall have the meaning specified in
Section 6.1.
"Collection Period" shall mean each calendar month during the
term of this Agreement; provided, that, (x) the initial Collection Period shall
commence on December 1, 1994 and (y) for purposes of calculating certain
components of the definition of Required Enhancement Amount, this definition of
Collection Period shall include any applicable "Collection Period" as such term
is defined in the Original Agreement.
"Collections" shall mean, in each case regardless of the form
of payment: (i) all payments in respect of Purchased Receivables (including any
sales of Purchased Receivables pursuant to Article IX of the Indenture; (ii)
all payments received in respect of Eligible Investments; (iii) all payments of
the Repurchase Price pursuant to Section 2.2 or 5.4; and (iv) all payments on
account of adjustments pursuant to Section 6.6.
"Confirming Assignment" shall have the meaning specified in
Section 2.1(d)(ii).
"Contractual Obligation" shall mean, as to any Person, any
provision of any Security issued by such Person or of any agreement, instrument
or undertaking of any kind to which such Person is a party or by which it or
any of its property is bound.
"Current Servicing Fee Reserve" shall mean, on any day, the
product of (a) the Servicing Fee Rate and (b) the quotient equal to (i) the
aggregate number of days remaining in the current Collection Period divided by
(ii) 360 and (c) the Balance of Purchased Receivables for such day, all
determined as of such day.
"Current Yield Reserve" shall mean, on any day, the product
of (a) the weighted average Series Note Interest Rate (or Series Alternate Note
Interest Rate (if applicable)) on the Health Care Notes of all Series in effect
for such day (based on relative outstanding principal
4
<PAGE> 9
balances), (b) the quotient equal to (i) the number of days remaining until the
next Distribution Date, divided by (ii) 360 and (c) the then aggregate
outstanding principal amount of Health Care Notes of all Series on the prior
Distribution Date (after giving effect to any distributions made on such date),
all determined as of such day.
"Daily Cost Available Amount" shall mean, on any day, the
Trustee Cost Cap less the cumulative amounts previously requested by the
Trustee to be applied (and actually deposited into the Expense Account)
pursuant to Sections 6.3(a)(ii)(B) and 6.3(b)(ii)(B) through such day, all
determined as of such day.
"Daily Costs" shall mean, for each day, the sum of all
amounts payable by the Issuer on (or accruing for) such day with respect to the
transactions contemplated hereby and by the Indenture and the Related Documents
in respect of the following: (1) legal, auditing, printing, reproduction and
closing fees and expenses (including but not limited to the costs of filing UCC
continuation statements and preparing any certificates required hereunder or
under any Related Document), (2) auditors', accountants' (including Independent
public accountants), attorneys', investment bankers' and board of directors'
fees and expenses, (3) rating agencies' fees, (4) franchise, income and other
taxes of the Issuer, (5) without duplication, all other amounts other than
Series Special Obligations (including, without limitation, fees, indemnities,
expenses, prepayment premiums and compensation in respect of increased costs or
capital adequacy) of any kind or description payable under the Indenture or any
Related Document, (6) amounts due and payable to the Trustee not otherwise paid
pursuant to Sections 6.3(a)(ii) and 6.3(b)(ii) and (7) any other administrative
fees and expenses incurred by the Issuer not exceeding $50,000 for any one item
of such administrative fees and expenses referred to in this subclause (7) and
not exceeding $100,000 in the aggregate for each successive twelve-month period
for all such items of administrative fees and expenses referred to in this
subclause (7).
"Daily Report" shall mean the report in the form attached as
Exhibit E to be delivered by the Servicer pursuant to Section 6.4.
"Daily Trustee Report" shall mean the report in the form
attached as Exhibit F delivered by the Servicer pursuant to Section 6.4.
"Date of Processing" shall mean, with respect to any
Receivable, the Business Day on which such Receivable is first recorded by
input in the respective Servicer's computerized customer record file (without
regard to the effective date of such recordation).
"Day's Sales Outstanding" shall mean, on any day, the
quantity designated as such on the Monthly Trustee Report for the most recent
Distribution Date equal to (x) the Net Purchased Receivables at the end of the
corresponding Collection Period divided by (y) a quotient equal to (i) the
Originations giving rise to the then Purchased Receivables which occurred (or
would have occurred) during such Collection Period divided by (ii) the number
of days in such Collection Period, all determined as of such day; provided,
however, in the event of a Transfer Termination Date, on each subsequent day
the Day's Sales Outstanding shall be the then most recently determined
quantity.
5
<PAGE> 10
"Deemed Default Amount" shall mean, with respect to any
Collection Period, the aggregate Balance of all Purchased Receivables which (i)
became unpaid for 361-390 days from their respective Dates of Processing during
such Collection Period or (ii) (without duplication) otherwise became Defaulted
Receivables and were unpaid for less than 361 days from their respective Dates
of Processing during such Collection Period.
"Default Ratio" shall mean, on any day, the ratio designated
as such on the most recent Monthly Trustee Report for the most recent
Distribution Date (expressed as a percentage) computed by dividing (i) the
Deemed Default Amount for the corresponding Collection Period by (ii) the
Originations giving rise to the then Purchased Receivables which occurred (or
would have occurred) during the Collection Period 12 Collection Periods prior
to such Collection Period.
"Defaulted Receivable" shall mean a Receivable: (i) as to
which the Obligor is the subject of bankruptcy, insolvency, reorganizing or
analogous proceedings or (ii) which, consistent with the Seller's (or Selling
Subsidiary's, as applicable) ordinary credit and collection standards, would be
written off as uncollectible.
"Delinquency Ratio" shall mean, on any day, the ratio
designated on the Monthly Trustee Report for the most recent Distribution Date
(expressed as a percentage) computed by dividing (i) the aggregate Balance of
all Purchased Receivables which became unpaid for a period of 121-240 days from
their respective Dates of Processing during the immediately preceding
Collection Period by (ii) the corresponding Originations giving rise to the
then Purchased Receivables which occurred (or would have occurred) during the
Collection Periods five, six, seven and eight Collection Periods prior to such
Collection Period.
"Designated Receivable" shall mean any Receivable purchased
under the Original Agreement prior to the Effective Date and which was
originated at any of the Facilities listed in Schedule IIIA.
"Distribution Account" shall have the meaning specified in
Section 6.1.
"Distribution Date" shall mean the 15th calendar day of each
month during the term of this Agreement (commencing with the calendar month
immediately following the end of the initial Collection Period) or, if any such
day is not a Business Day, the next succeeding Business Day.
"Dollar", "Dollars" and "$" mean the lawful currency of the
United States.
"Dynamic Reserve" shall mean on any day, the greater of (i)
the sum of (a) the Loss Reserve for such date plus (b) the Base Reserve for
such date or (ii) the Dynamic Reserve Floor, all determined as of such day.
"Dynamic Reserve Floor" shall mean, on any day, the lesser of
(i) the product of (a) the Dynamic Reserve Floor Percent times (b) the Net
Purchased Receivables and (ii) the Dynamic Reserve Floor Limit, all determined
as of such day.
6
<PAGE> 11
"Dynamic Reserve Floor Limit" shall mean, on any day, the
product of (i) the quotient of (a) the Dynamic Reserve Floor Percent divided by
(b) one minus the Dynamic Reserve Floor Percent times (ii) (A) the then
aggregate Net Note Balance of all Series minus (B) the principal amounts of
Eligible Investments and cash in the Collection Account (after applications
pursuant to Section 6.3), all determined as of such day.
"Dynamic Reserve Floor Percent" shall mean, on any day, the
weighted average Series Dynamic Reserve Floor Percent for all Series of Health
Care Notes (based on the relative Net Note Balances of all Series on such day).
"Effective Date" shall mean the date on which the conditions
specified in Schedule I are satisfied.
"Effective Date Receivables" shall mean any Receivable
purchased under the Original Agreement prior to the Effective Date and which
was originated at any of the Facilities listed in Schedule IIIB.
"Eligible Institution" shall mean (x) a commercial bank
organized under the laws of the United States or any state thereof or (y) a
duly licensed branch or agency, located in the United States and subject to
supervision and regulation by federal and state banking authorities, of a
commercial bank organized under the laws of a nation other than the United
States but which is a member of the Organization for Economic Cooperation and
Development (or any successor thereto); provided, in either case, that such
bank, branch or agency, as the case may be, has either (a) a current short-term
unsecured debt rating of at least P-1 from Moody's or (b) a current long-term
unsecured debt rating of at least Aa from Moody's; provided, further, that any
such rating requirement may be altered upon satisfaction of the Rating Agency
Condition.
"Eligible Investments" shall mean one or more of the
following:
(i) direct obligations of, and obligations fully
and unconditionally guaranteed by, the United States of America or any
agency or instrumentality thereof the obligations of which are backed
by the full faith and credit of the United States of America (whether
certificated or uncertificated);
(ii) demand deposits, time deposits, certificates
of deposit or banker's acceptances issued by any Eligible Institution;
(iii) commercial paper having, at the time of the
investment, a rating of at least P-1 from Moody's;
(iv) any other investment satisfying the Rating
Agency Condition; or
(v) money market accounts that invest in any item
or items listed above in clauses (i) through (iv);
7
<PAGE> 12
in each case which (x) mature prior to the next following Distribution Date
with respect to any Series of Health Care Notes following purchase thereof, (y)
are denominated and payable in Dollars and (z) which are not issued by Beverly
or any Affiliate thereof.
"Facility" shall mean each facility of the Seller or a
Selling Subsidiary listed in Schedule II hereto.
"Fee Reserve" means, on any day, an amount equal to the then
sum of (i) previously accrued and unpaid Daily Costs and Servicing Fees (for
which deposits have not been made into the Expense Account or the Expense
Subaccount) plus (ii) the Daily Cost Available Amount plus (iii) the Current
Servicing Fee Reserve plus (iv) the then Liquidation Servicing Fee Reserve, all
determined as of such day.
"Governmental Authority" shall mean any nation or state or
any political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Health Care-related Receivable" means any receivables
originated by the Seller or a Selling Subsidiary (other than a Medicaid,
Medicare or VA Receivable), which may include a receivable the obligor of which
is an individual, insurance company or any governmental agency.
"Included Facility" shall mean each Facility during such time
as a designation or deemed designation with respect to such Facility is in
effect pursuant to Section 2.1(d)(i).
"Included Receivable" shall mean, (x) (A) initially, any
Medicaid Receivable, Medicare Receivable or VA Receivable existing on the
Effective Date and previously sold to the Issuer pursuant to the Original
Agreement which are Effective Date Receivables and (B) the Additional
Receivables; and (y) thereafter, any (a) Medicaid Receivable, Medicare
Receivable or VA Receivable or (b) any Health Care-related Receivable for which
inclusion as an Included Receivable satisfies the Rating Agency Condition, and
which in the case of any such Receivable (i) was originated at a Facility of
the Seller or a Selling Subsidiary during the period such Facility is an
Included Facility and (ii) has not been repurchased by the Seller, the
respective Selling Subsidiary or the respective Servicer, as applicable,
pursuant to Section 2.2, 5.4 or 6.6.
"Indenture" shall mean the Trust Indenture dated as of
December 1, 1994 from the Issuer to the Trustee, as from time to time amended,
supplemented or modified.
"Ineligible Receivable" shall mean any Receivable:
(a) which is not denominated and payable solely (i) in
Dollars, (ii) in the continental United States and (iii) by an Obligor
which is a United States Person;
(b) which was not originated by the Seller (or, in the
case of a Selling Subsidiary Receivable, by the applicable Selling
Subsidiary) in compliance with all
8
<PAGE> 13
Requirements of Law and Contractual Obligations applicable to the
Seller (or such Selling Subsidiary, as the case may be) or to the
respective Receivable; or was not properly entered into consistent
with the Seller's (or such Selling Subsidiary's, as the case may be)
usual and customary credit policies, practices and procedures;
(c) with respect to which any consent, license, approval
or authorization of, or filing, registration or declaration with, any
Governmental Authority or other Person required to be obtained,
effected or given in connection with the creation of such Receivable
or its transfer to the Issuer pursuant hereto (or in the case of a
Selling Subsidiary Receivable, its transfer to the Seller pursuant to
the applicable Selling Subsidiary Agreement), has not been duly
obtained, effected or given or is not in full force and effect;
provided, however, that a Medicaid Receivable as to which such consent
or approval has not been obtained shall not be deemed to be an
Ineligible Receivable if such consent or approval is being sought in
the ordinary course of business by the Seller or the applicable
Selling Subsidiary and is reasonably expected to be obtained in the
ordinary course of business within 180 days from the date upon which
such consent or approval was first sought; provided further that on
the date upon which any such approval or consent is denied or
rejected, such Medicaid Receivable shall be deemed to be an Ineligible
Receivable;
(d) as to which, at the time of the transfer of such
Receivable to the Issuer, the Seller (or in the case of a Selling
Subsidiary Receivable, any of the Seller or the applicable Selling
Subsidiary) was not the sole owner thereof or did not have good and
marketable title thereto free and clear of all Liens;
(e) which, at the time of its transfer to the Issuer, is
not the legal, valid and binding payment obligation of the Obligor
thereon, enforceable against such Obligor in accordance with its
terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
or of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(f) which does not constitute an "account" under and as
defined in Article 9 of the UCC;
(g) which, at the time of its transfer to the Issuer, has
been waived, modified, extended or reserved against by the Seller
except in accordance with this Agreement or the Original Agreement or
has been classified by the Seller as counterfeit, fraudulent or
charged-off;
(h) which is subject to any right of rescission, setoff,
counterclaim or defense other than any arising out of the transaction
out of which such Receivable arose;
(i) as to which the Seller (or, in the case of a Selling
Subsidiary Receivable, any of the Seller or the applicable Selling
Subsidiary) has done anything, at the time of
9
<PAGE> 14
transfer, to impair the rights of the Issuer (or of the applicable
Selling Subsidiary or the Seller) except as permitted under this
Agreement;
(j) that, at the time of its transfer to the Issuer, is
the subject of any material dispute as to whether the services which
were the subject of the Purchased Receivables were properly rendered
to or on behalf of the related Obligor by the Seller (or, in the case
of a Selling Subsidiary Receivable, by the Seller or the applicable
Selling Subsidiary) (other than audit adjustments in the ordinary
course of business);
(k) that becomes a Purchased Receivable following the
Seller (or the respective Servicer or the Master Servicer) having
determined that the related Obligor (i) is bankrupt or insolvent or
(ii) is the Obligor on another Receivable which has been written off
in part or in whole as uncollectible for credit reasons by the
respective Servicer;
(l) which is not a Medicaid Receivable, Medicare
Receivable or VA Receivable (unless such Receivable is a Health
Care-related Receivable otherwise included in the definition of
Included Receivable);
(m) as to which, at the time of its transfer to the
Issuer, any of the applicable representations and warranties set forth
in Section 3.2 hereof is not true and correct;
(n) which, at the time of its transfer to the Issuer, has
not been recorded by input in the respective Servicer's computerized
customer file (without regard to the effective date of such
recordation) or has not been evidenced by written notice transmitted
to the Obligor thereon;
(o) which, at the time of its transfer to the Issuer, is
(i) more than 360 days unpaid from its Date of Processing or (ii) a
Defaulted Receivable; or
(p) which is a Designated Receivable.
"Issuer" shall have the meaning specified in the introduction
hereof.
"Issuer Accounts" shall have the meaning specified in
Section 6.1.
"JCAHO" shall mean the Joint Commission on the Accreditation
of Healthcare Organizations and any successor thereto.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the UCC or comparable law of any
jurisdiction to evidence any of the foregoing.
10
<PAGE> 15
"Liquidation Average Rate" shall mean, on any day, the
weighted average of the Average Rates (as defined herein) on all Series of
Health Care Notes (based on relative Net Note Balances of all Series on such
day). "Average Rate" shall mean, on any day (x) with respect to any Series
which accrues interest on a floating rate basis, the average of the Projected
Rates (as defined herein) for each calendar month (or portion thereof) during
the Liquidation Horizon and (y) with respect to any Series which accrues
interest on a fixed rate basis, the applicable Series Note Interest Rate or
Series Alternate Note Interest Rate on such day. "Projected Rates" shall mean
with respect to any Series, if applicable, for each calendar month (or portion
thereof) during the Liquidation Horizon, the lesser of (x) the Maximum Rate, if
any, specified for such Series in the related Series Supplement; and (y) the
Last Rate (as defined herein) for such Series plus the Series Rate Increment
for such Series for the first such calendar month of the Liquidation Horizon
(and if applicable, each subsequent calendar month until the next interest rate
adjustment determined based on the Series Liquidation Payment Frequency); the
Last Rate plus two times the Series Rate Increment for the first such calendar
month following such next interest rate adjustment (and if applicable, each
subsequent calendar month until the next interest rate adjustment determined
based on the Series Liquidation Payment Frequency); and so on adding to the
Last Rate the product of (x) the Series Rate Increment and (y) the sum of (i)
the number of prior interest rate adjustments for such Series in the
Liquidation Horizon plus (ii) one (assuming partial months are full months).
"Last Rate" shall mean, on any day with respect to any Series, the then most
recent Series Note Interest Rate in effect for such Series (or the Series
Alternate Note Interest Rate in effect for such Series if such rate is being
applied).
"Liquidation Horizon" shall mean, on any day, the Day's Sales
Outstanding multiplied by 1.5.
"Liquidation Period" shall mean, for any Series, the period
following the Scheduled Amortization Date for such Series until the principal
amount of such Series of Health Care Notes is reduced to zero.
"Liquidation Servicing Fee Reserve" shall mean on any day the
product of (a) the Servicing Fee Rate and (b) the quotient equal to (i) the
Liquidation Horizon divided by (ii) 360 and (c) the Balance of Purchased
Receivables, all determined as of such day.
"Liquidation Yield Reserve" shall mean, on any day, (x) the
product of (i) (A) the aggregate Net Note Balance of all Series minus (B) the
principal amount of Eligible Investments and cash in the Collection Account
(after allocations pursuant to Section 6.3) times (ii) Liquidation Average Rate
times (iii) the Liquidation Horizon; divided by (y) 360, all determined as of
such day.
"Litigation Schedule" shall mean the Schedule IV attached
hereto.
"Loss Horizon Ratio" shall mean, on any day, the ratio equal
to (i) the cumulative Originations giving rise to the then Purchased
Receivables which occurred (or would have occurred) during the twelve
Collection Periods then most recently ended as designated on the
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Monthly Trustee Report for the most recent Distribution Date divided by (ii)
the Balance of Purchased Receivables as of such day.
"Loss Ratio" shall mean, on any day, the ratio designated on
the Monthly Trustee Report for the most recent Distribution Date (expressed as
a percentage) equal to the average of the Default Ratio for the three
Collection Periods then most recently determined.
"Loss Reserve" shall mean, on any day, the lesser of (i) the
product of (a) the Loss Reserve Percent times (b) the Net Purchased Receivables
or (ii) the Loss Reserve Cap, all determined as of such day.
"Loss Reserve Cap" shall mean, on any day, the product of (i)
the quotient of (a) the Loss Reserve Percent divided by (b) one minus the Loss
Reserve Percent times (ii) (A) the aggregate Net Note Balance of all Series,
minus (B) the principal amount of Eligible Investments and cash in the
Collection Account (after allocations pursuant to Section 6.3), all determined
as of such day.
"Loss Reserve Percent" shall mean, on any day, the product of
(i) Rating Multiple, times (ii) the Loss Ratio, times (iii) the Loss Horizon
Ratio, all determined as of such day.
"Master Servicer" shall mean the Seller or any Successor
Master Servicer pursuant hereto.
"Medicaid Receivable" shall mean any Receivable with respect
to which the Obligor is a state Governmental Authority (or agent thereof)
obligated to pay, pursuant to applicable Medicaid program statutes and
regulations, for services rendered to eligible beneficiaries thereunder and not
in contravention of any statute or regulation applicable thereto.
"Medicare Receivable" shall mean any Receivable with respect
to which the Obligor is the United States government (or agent thereof)
obligated to pay, pursuant to applicable Medicare Part B program statutes and
regulations, for services rendered to eligible beneficiaries thereunder and not
in contravention of any statute or regulation applicable thereto.
"Minimum Required Receivables Balance" shall mean, on any
day, the sum of (x) the aggregate Net Note Balance of all Series plus (y) the
Required Enhancement Amount minus (z) the principal amount of Eligible
Investments and cash in the Collection Account (after allocations pursuant to
Section 6.3), all determined as of such day.
"Monthly Trustee Report" shall mean the Trustee Report to be
delivered on each Distribution Date in the form of Exhibit F.
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors.
"Net Note Balance" shall mean, on any day with respect to any
Series, the excess of (i) the then outstanding principal amount of Health Care
Notes of such Series over (ii) the
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excess (if a positive number) of (A) the amounts on deposit in the Payment
Subaccount for such Series over (B) the sum of (1) accrued and unpaid interest
on the Health Care Notes of such Series and (2) amounts on deposit in the
Payment Subaccount for such Series representing any redemption premium.
"Net Purchased Receivables" shall mean, on any day, the
Balance of: (i) the Purchased Receivables minus (ii) the Purchased Receivables
which are unpaid for 361 or more days from their respective Dates of
Processing, minus (iii) (without duplication) the Ineligible Receivables which
have not been repurchased by the Seller, minus (iv) (without duplication) the
Defaulted Receivables, all determined as of such day.
"Obligor" shall mean, with respect to any Receivable, the
Person or Persons obligated to make payments with respect to such Receivable,
including any guarantor thereof.
"Officer's Certificate" shall mean, with respect to any
Person, a certificate signed by an Authorized Officer of such Person.
"Opinion of Counsel" shall mean a favorable written opinion
of counsel, who, unless otherwise specified, may be counsel for, or an employee
of, the Person providing the opinion and who shall be reasonably acceptable to
the Trustee.
"Originations" shall mean, with respect to any Collection
Period, the Balance of Included Receivables originated by the Seller and the
Selling Subsidiaries during such Collection Period.
"Person" shall mean any individual, estate, corporation,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization, or government or any
agency or political subdivision thereof.
"Proceeds" shall mean, with respect to any Receivable, any
and all "proceeds" (as defined in Section 9-306 of the UCC) from time to time
payable under or in connection with such Receivable, in each case wherever
located or deposited, including, without limitation, any applicable insurance,
indemnity, warranty or guaranty, any and all payments (in any form whatsoever)
made or due and payable from time to time in connection with the requisition,
confiscation, condemnation, seizure or foreclosure by any governmental body,
authority, bureau or agency (or any person acting under color of Governmental
Authority).
"Purchase Price" shall mean, on any day, with respect to any
Receivable, its Balance.
"Purchased Receivable" shall mean any Included Receivable
purchased by the Issuer hereunder pursuant to Section 2.1(c) then outstanding.
"Rating Agency" shall mean, Moody's, if it has issued and not
withdrawn a rating on any Series of the Health Care Notes.
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"Rating Agency Condition" shall be satisfied with respect to
any action (i) (A) if the Rating Agency shall have notified the Trustee, the
Servicer and the Master Servicer in writing that such action will not result in
a reduction or withdrawal of the rating of any outstanding Series of Health
Care Notes with respect to which it is the Rating Agency or (B) if there is no
Rating Agency, if the Trustee, at the direction of the Holders of 50% of the
Aggregate Outstanding Amount of each Series, shall have consented to such
action and (ii) if any other condition is required in any Series Supplement,
such condition is satisfied.
"Rating Multiple" shall mean, on any day, the weighted
average of the Series Rating Multiples for all Series of Health Care Notes
(based on the relative Net Note Balance of each Series).
"Receivables" shall mean each of (i) the Seller's or any
Selling Subsidiary's patient accounts, (ii) any and all rights to receive
payments due or to become due on any patient accounts and (iii) any direct or
indirect Proceeds of any patient accounts.
"Receivables Information" shall mean all information
concerning the Purchased Receivables at any time or from time to time provided,
in writing (including by microfilm or microfiche), by or on behalf of the
Seller or any Selling Subsidiary or any of their respective Affiliates to the
Issuer, the Trustee or any Rating Agency.
"Records" shall mean all ledger sheets, files, records,
documents, computer tapes and correspondence, whether presently existing or
hereafter created pertaining to any Purchased Receivables.
"Regional Center" shall mean the center at which Records
pertaining to the Purchased Receivables are maintained. As of the Closing
Date, the Regional Center shall mean the center located at Fort Smith, Arkansas
or any other center as shall subsequently be designated by the Seller in a
written notice to the Trustee, and the Issuer.
"Regulatory Change" shall mean any change after the date
hereof in any Requirement of Law or any interpretation, directive or request of
or by any Governmental Authority (whether or not having the force of law) or in
the interpretation or administration of any or all thereof.
"Repurchase Price" shall mean, on any day, with respect to
any Purchased Receivable, an amount equal to the product of (i) the Balance of
such Purchased Receivable determined as of such day times (ii) the quotient of
(A) one divided by (B) 0.985; provided, that, the Repurchase Price for
Designated Receivables shall be an amount equal to the purchase price paid
therefor by the Issuer under the Original Agreement.
"Required Enhancement Amount" shall mean, at any date, the
sum of (i) the Dynamic Reserve, plus (ii) the Yield Reserve, plus (iii) the Fee
Reserve, all determined as of such day.
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"Requirement of Law" for any Person shall mean the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, judgment,
injunction, order, decree or other determination of an arbitrator or
Governmental Authority, in each case applicable to or binding upon such Person
or to which such Person is subject.
"Security" shall have the meaning ascribed in Section 2(1) of
the Securities Act of 1933, as amended.
"Selling Subsidiary" shall mean (i) initially, the direct or
indirect wholly-owned subsidiaries of Beverly executing this Agreement as
Selling Subsidiaries: and (ii) each other direct or indirect wholly-owned
subsidiary of Beverly which becomes a party hereto pursuant to Section 12.16
hereof.
"Selling Subsidiary Agreement" shall mean each agreement,
between the Seller and a Selling Subsidiary, pursuant to which such Selling
Subsidiary is selling its respective Receivables to the Seller, each of which
agreements shall be in the form of Exhibit A hereto, as amended, supplemented
or modified from time to time. "Selling Subsidiary Agreements" shall mean all
such agreements.
"Selling Subsidiary Confirming Assignment" shall have the
meaning specified in Section 2.1(d).
"Selling Subsidiary Receivables" shall mean, with respect to
any Selling Subsidiary, such Selling Subsidiary's Included Receivables.
"Servicer" shall have the meaning specified in the
introduction hereof.
"Servicing Default" shall have the meaning specified in
Section 9.1.
"Servicing Fee Rate" shall mean on any day an annualized rate
equal to 2.00%; provided, however, such percentage may be increased or
decreased (subject to the satisfaction of the Rating Agency Condition) by
written notice from the Master Servicer to the Trustee.
"Servicing Fees" shall have the meaning specified in Section
5.2.
"Successor Master Servicer" shall have the meaning specified
in Section 9.2(a).
"Successor Servicer" shall have the meaning specified in
Section 9.2(a).
"Termination Notice" shall have the meaning specified in
Section 9.1.
"Transfer Termination Date" shall mean the earlier to occur
of (i) the Business Day following the day on which an Amortization Event first
occurs and (ii) the date of any termination pursuant to Section 2.3.
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"Trustee" means Chemical Bank, a New York banking
corporation, and its successors as trustee under the Indenture.
"Trustee Cost Cap" shall mean $51,667.
"Trustee Fee" shall mean the annual fee agreed upon by the
Issuer and the Trustee, apportioned on a daily basis pursuant to Section 6.3
and paid to the Trustee on each Distribution Date pursuant to Section 7.2(h) of
the Indenture.
"UCC" unless the context otherwise requires, shall mean the
Uniform Commercial Code, as in effect in the jurisdiction relevant to the
related Purchase Receivable jurisdiction, as amended from time to time.
"United States Person" means (i) in the case of a natural
Person, a Person who is a citizen or permanent resident of, and whose permanent
residence is in, the United States; and (ii) otherwise, a Person organized
under the laws of, and whose principal place of business and whose principal
assets are located in, the United States.
"VA Receivable" shall mean any Receivable with respect to
which the Obligor is the United States (or an agency thereof) obligated to pay,
pursuant to applicable Veterans' program statutes and regulations, for services
rendered to eligible beneficiaries thereunder and not in contravention of any
statutes or regulations applicable thereto.
"Yield Reserve" shall mean, on any day, an amount equal to
the sum of (i) previously accrued and unpaid interest on the Health Care Notes
of all Series (which has not been deposited into the applicable Payment
Subaccount) plus (ii) the Current Yield Reserve plus (iii) the Liquidation
Yield Reserve, all determined as of such day.
(b) Capitalized terms used herein undefined have the
meanings ascribed in the Indenture.
Section 1.2. Accounting Terms. As used herein and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in Section 1.1, and accounting terms
partly defined in Section l.l to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles.
ARTICLE II
SALES OF RECEIVABLES
Section 2.1. Sales of Receivables.
(a) No Sale Hereunder Prior to Effective Date. No sale
shall occur hereunder prior to the Effective Date.
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(b) Sales Pursuant to Original Agreement; Effective Date.
Prior to the Effective Date, the Seller has, pursuant to the Original
Agreement, sold, transferred, assigned, set over and conveyed to the Issuer all
its right, title and interest in and to the Effective Date Receivables. On the
Effective Date, all such Effective Date Receivables, without any action by
Seller or any other Person, are deemed to have been sold hereunder, and the
Seller hereby sells, transfers, assigns, sets over and conveys to the Issuer
all of its right, title and interest in and to the Additional Receivables, and
the Effective Date Receivables and Additional Receivables shall thereafter be
held (or disposed of) pursuant to the terms of this Agreement and the Related
Documents.
(c) After the Effective Date. On each Business Day after
the Effective Date and prior to the Transfer Termination Date, the Seller
shall, without any further action by itself or any other Person, sell,
transfer, assign, set over and otherwise convey to the Issuer, and the Issuer,
without further action by itself or any other Person, shall purchase from the
Seller, without recourse (except as specifically provided herein), all right,
title and interest of the Seller in, to and under its Included Receivables
created (or acquired) subsequent to the last sale hereunder transferred to the
Issuer by the Seller pursuant to subsection (d), together with all monies due
or to become due and all amounts received with respect thereto and all Proceeds
thereof; provided, however, that the Issuer shall only be required to purchase
Included Receivables on any such day to the extent of the remaining amounts on
deposit in the Collection Account after allocation of the amounts set forth in
Section 6.3(a)(i), (ii), (iii), (iv) and (v); provided, further, that during
the Liquidation Period of any Series the Issuer shall not purchase Included
Receivables until the Net Note Balance of such Series has been reduced to zero.
To the extent the Issuer has not purchased Included Receivables pursuant to the
preceding two provisos, the Issuer may simultaneously or subsequently do so
with the proceeds of additional Series of Health Care Notes or from its own
funds.
(d) General Provisions as to Transfers. (i) On the
Effective Date (with respect to the first two Collection Periods) and, on each
Distribution Date (with respect to the next succeeding Collection Period)
commencing with the January 1995 Distribution Date, the Seller shall designate
those Facilities with respect to which the Seller (or the respective Selling
Subsidiary as the case may be) shall sell to the Issuer (or make available for
sale) all its Included Receivables originated at such Facilities during the
next succeeding Collection Period (or first two Collection Periods, as the case
may be). In the event the Seller shall fail to designate Included Facilities
on any Distribution Date pursuant to the previous sentence, the Seller shall be
deemed to have made the same designation as was previously in effect. Each
designation or deemed designation of Included Facilities so designated
hereunder shall be deemed to be a representation and warranty by the Seller
that no selection procedures materially adverse to the interests of the Health
Care Note Holders were utilized in selecting the Included Facilities so
designated or deemed designated from the available Facilities.
(ii) The Seller shall deliver to the Issuer on the
Effective Date and on each Distribution Date commencing with the January 1995
Distribution Date a duly executed and appropriately completed Confirming
Assignment (each, a "Confirming Assignment") in substantially the form of
Exhibit B hereto; on the Effective Date and on each Distribution Date
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the Seller will deliver to the Issuer the duly executed and appropriately
completed corresponding Selling Subsidiary Confirming Assignments (each, a
"Selling Subsidiary Confirming Assignment"), in substantially the form of
Exhibit C hereto, with respect to the Selling Subsidiary Receivables included
in the Confirming Assignment then being delivered. Failure to deliver any such
Confirming Assignment or Selling Subsidiary Confirming Assignment shall not
limit or otherwise affect the absolute conveyance of the Included Receivables
pursuant to Subsections (b) or (c) above, as the case may be.
(iii) The Seller and each Selling Subsidiary each agrees to
record and file, at its own expense, financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to all of its Included Receivables (now in existence or hereafter
created, acquired or arising) meeting all requirements of applicable law in
such manner and in such jurisdictions as are necessary to provide notice of the
sale and assignment of its respective Included Receivables to the Issuer (or,
in the case of each Selling Subsidiary, to the Seller) and to perfect the
interests of the Issuer therein, and to deliver a file-stamped copy of such
financing statements or other evidence of such filing to the Issuer (x) in the
case of the Seller and each Selling Subsidiary on the date hereof on or as soon
as practicable after the Effective Date, or (y) in the case of Selling
Subsidiaries becoming parties hereto pursuant to Section 12.16 hereof, on or
prior to the initial sale hereunder including any of such Selling Subsidiary's
Receivables.
(iv) In connection with each sale hereunder, the Seller
further agrees, at its own expense: (x) on or prior to the date of such sale to
indicate in its computer files (and, in the case of Selling Subsidiary
Receivables to cause the Selling Subsidiary to indicate in its computer files)
that the Included Receivables being sold on such date have been transferred to
the Issuer pursuant to this Agreement (and, in the case of Selling Subsidiary
Receivables, to the Seller pursuant to the respective Selling Subsidiary
Agreement) and (y) on a monthly basis, to generate a computer list identifying
(in such detail as is reasonably requested from time to time by the Issuer)
each of the Purchased Receivables. The computer list(s) referred to in the
preceding clause (y) shall be held in trust for the Issuer in separate
containers (prominently marked to reflect the foregoing) and in safe places at
the Regional Center; and copies of such computer lists shall, at the request of
the Trustee, be delivered to, or upon direction of, the Trustee. The same
shall be at all times open to inspection and audit by the Issuer and the
Trustee and their respective representatives. During the continuance of an
Amortization Event, all such list(s) shall, at the request of the Trustee or
the Holders of 50% in Aggregate Outstanding Amount of Health Care Notes of any
Series, be delivered to, or upon the direction of, the Trustee or such Holders.
(e) Payment of Purchase Price. The Purchase Price
payable by the Issuer for the Purchased Receivables shall be payable in federal
(or other immediately available) funds.
(f) No Transfer of Liability. No sale pursuant hereto
shall constitute or is intended to result in a creation or an assumption by the
Issuer of any liability or obligation (other than its obligation to pay the
Purchase Price pursuant to subsection (e) above) including, without limitation,
any obligation to any Obligor of the Seller, any Servicer or any other Person
in connection with the Receivables, pursuant to any Requirement of Law or
Contractual Obligation relating thereto or in any other manner whatsoever.
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Section 2.2. Repurchase of Certain Purchased Receivables.
In the event that (i) any Purchased Receivable at the time of transfer to the
Issuer (or, in the case of Effective Date Receivables, on the Effective Date)
is an Ineligible Receivable or (ii) there is any other breach of any
representation, warranty or covenant under Sections 3.1, 3.2, 3.4, 4.1 or 4.3
with respect to any Purchased Receivable which breach would have a material
adverse effect on the interests of the Issuer and the Health Care Noteholders
in such Purchased Receivable, then, (x) in the case of Designated Receivables,
on the Effective Date, and (y) in the case of other Purchased Receivables, if
the foregoing is continuing on the first Distribution Date occurring at least
30 days after the earlier to occur of (A) the discovery of any such event by
the Seller or (B) the receipt by the Seller of written notice of any such event
given by any Servicer, the Issuer, the Master Servicer, the Trustee or the
Holders of at least 50% in Aggregate Outstanding Amount of any Series of Health
Care Notes, on such Distribution Date the Seller shall repurchase all such
Purchased Receivables by depositing in the Collection Account in immediately
available funds an amount equal to the Repurchase Price for such Receivables
before 11:00 a.m. New York City time. Any such repurchased Receivable shall be
treated as if paid in full in the Collection Period in which such obligation to
repurchase arises. Such Repurchase Price shall be treated as a Collection of
the related Purchased Receivables in the Collection Period in which the
obligation to repurchase such Receivables arose and shall be applied in
accordance with Article VI. Upon each repurchase by the Seller of such a
Purchased Receivable, the Issuer hereby appoints the respective Servicer to
effect, automatically and without further action on the Issuer's part, the
sale, transfer, assignment, set over and other conveyance to the Seller on
behalf of the Issuer, without recourse, representation or warranty, of all the
right, title and interest of the Issuer in and to such Purchased Receivable,
all monies due or to become due with respect thereto, and all Proceeds thereof
other than any portion of the Repurchase Price. The Issuer shall execute such
documents and instruments of transfer or assignment and take such other actions
as shall reasonably be requested by the Seller to effect the conveyance of such
Purchased Receivable pursuant to this subsection. The obligation of the Seller
to repurchase any such Purchased Receivable pursuant to this Section 2.2 shall
survive the termination of this Agreement and, if fulfilled, shall constitute
the sole remedy for the events referred to in clause (i) of the first sentence
of this Section 2.2. The parties intend that this Section 2.2 not be applied
to provide direct or indirect assurance to the Issuer against loss by reason of
the bankruptcy or insolvency (or other credit condition) of, or default by, the
Obligor on, or the uncollectability of, any Purchased Receivable, except only
to the extent such Purchased Receivable was an Ineligible Receivable by reason
of clause (k) of the definition thereof.
Section 2.3. Termination. Provided the Health Care Notes
of each Series then outstanding are then subject to optional redemption in full
pursuant to Section 9.1 of the Indenture at their respective Redemption Prices,
and the requisite amounts have been deposited into the appropriate subaccounts
of the Distribution Account, the Seller may, upon 30 days prior written notice
to the Issuer, terminate its right to sell Included Receivables to the Issuer
hereunder. Upon the effectiveness of such termination the provisions of this
Agreement pertaining to purchases under Section 2.1(c) or (d) shall terminate
(other than with respect to actions taken or to be taken in respect of
Purchased Receivables already transferred). All other provisions hereof,
including, without limitation, all other obligations of the Seller hereunder,
shall remain in effect.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Seller.
The Seller hereby represents and warrants to the Issuer, the Trustee and the
Health Care Noteholders as of the date hereof and as of each date on which any
of Receivables are sold hereunder that:
(a) Organization, Good Standing and Due Qualification.
The Seller is duly organized and validly existing in good standing
under the laws of its state of incorporation, and has full corporate
power, authority and legal right to own its property and conduct its
business as contemplated by the Related Documents and as such property
is presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under the Related
Documents to which it is, or is to be, a party. The Seller is duly
qualified to do business and is in good standing as a foreign
corporation (or is exempt from such requirements) and has obtained all
necessary licenses and approvals in each jurisdiction in which failure
to so qualify or to obtain such licenses and approvals would have a
material adverse effect on the Seller's ability to perform its
obligations under the Related Documents to which it is, or is to be, a
party. The Seller is a direct wholly-owned subsidiary of Beverly.
(b) Due Authorization. The execution and delivery of the
Related Documents to which it is, or is to be, a party by the Seller
and the consummation of the transactions provided for therein have
been duly authorized by the Seller by all necessary corporate action
on the part of the Seller.
(c) Enforceable Obligation. The Seller has the power,
authority and legal right to execute, deliver and perform all of its
obligations under the Related Documents to which it is a party, and
the Related Documents to which it is a party have been duly executed
by the Seller and constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or of general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) No Conflict. Except as would not affect the
validity or enforceability of any Related Document or Included
Receivable, would not have a material adverse effect on the business,
operations, assets or financial or other condition of the Seller or
its ability to perform its obligations under the Related Documents and
would not have a material adverse effect on the ownership or servicing
of Included Receivable, the execution and delivery of the Related
Documents to which it is, or is to be, a party, the performance of the
transactions contemplated thereby and the fulfillment of the terms
thereof, will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with
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or without notice or lapse of time or both) a default under, any
Contractual Obligation applicable to the Seller or any of its
properties.
(e) No Violation. The execution and delivery of the
Related Documents to which it is, or is to be, a party, the
performance thereof, the transactions contemplated hereby and thereby
and the fulfillment of the terms thereof, will not, conflict with or
violate any Requirement of Law applicable to the Seller or any of its
properties.
(f) No Proceedings. Except as listed in the Litigation
Schedule attached hereto, there are no proceedings or investigations
pending or, to the best knowledge of the Seller, threatened against
the Seller, before any court, regulatory body, administrative agency,
or other tribunal or Governmental Authority (i) asserting the
invalidity or unenforceability of any Related Document or Included
Receivable, (ii) seeking to prevent, enjoin or delay the consummation
of any of the transactions contemplated by the Related Documents,
(iii) seeking any determination or ruling that would materially and
adversely affect the performance by the Seller of its obligations
under the Related Documents, (iv) seeking any determination or ruling
that would materially and adversely affect the validity or
enforceability of any Related Document or Included Receivable or (v)
seeking to affect adversely the income tax attributes of the Heath
Care Notes or beneficial ownership interests in the Issuer under the
United States federal, or any applicable state, income tax systems.
(g) No Default. Except as would not affect the validity
or enforceability of any Related Document or Included Receivable,
would not have a material adverse effect on the business, operations,
assets or financial and other condition of the Seller or its ability
to perform its obligations under the Related Documents and would not
have a material adverse effect on the ownership or servicing of the
Included Receivables, the Seller is not in breach or default of any
Contractual Obligation, and is not in violation of any Requirement of
Law, applicable to it or its properties.
(h) Good Title. None of the Seller's Included
Receivables has been sold, assigned or pledged to any Person other
than the Issuer. Immediately prior to their conveyance to the Issuer
hereunder the Seller has good title thereto, free and clear of any
Lien, and, as of each date Included Receivables are sold hereunder,
the Seller will have conveyed good title to such Included Receivables
to the Issuer free and clear of any Lien.
(i) Sole Owner. Immediately prior to their conveyance to
the Issuer hereunder the Seller is the sole owner of all right, title
and interest in and to the Purchased Receivables.
(j) Receivables Information. The Receivables Information
does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements in the
Receivables Information, in light of the circumstances in which they
were made, not misleading.
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(k) Place of Business. The principal place of business
and chief executive office of the Seller and the location of the
Records pertaining to its Receivables is 5111 Rogers Avenue, Suite
40-A, Fort Smith, Arkansas 72919.
The representations and warranties set forth in this Section 3.1 shall survive
each sale and assignment of Included Receivables to the Issuer hereunder, and
termination of the rights and obligations of the Seller as a Servicer and as
Master Servicer pursuant to Section 9.1.
Section 3.2. Representations and Warranties of the Seller
Relating to the Agreement and the Receivables. The Seller hereby represents
and warrants to the Issuer, the Trustee and the Health Care Noteholders that as
of each date on which any Included Receivables are sold hereunder:
(a) Validity. Each of this Agreement and the Confirming
Assignment constitutes a legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms,
except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally or of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) Eligibility. No Purchased Receivable is an
Ineligible Receivable.
(c) No Liens. Each Purchased Receivable has been
conveyed to the Issuer free and clear of any Lien.
(d) Consents. With respect to each Purchased Receivable,
all consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by the Seller in connection with the
conveyance of such Receivable to the Issuer have been duly obtained,
effected or given and are in full force and effect.
(e) Valid Transfer. This Agreement, together with the
Selling Subsidiary Agreements and Confirming Assignments, constitutes
a valid sale, transfer and assignment to the Issuer of all right,
title and interest in and to the Purchased Receivables and the
Proceeds thereof; or, if this Agreement and the Selling Subsidiary
Agreements are determined not to constitute a sale of such property,
they constitute a grant of a "security interest" in such property to
the Issuer, which is enforceable against all Persons with respect to
all Purchased Receivables and the Proceeds thereof. The Issuer has,
or will have upon the filing of the financing statements described in
Section 2.1, an ownership or a first priority perfected security
interest in all Purchased Receivables.
(f) Compliance with Law. All applicable Requirements of
Law with respect to Included Receivables, including without limitation
any pertaining to the transfer thereof hereunder (or, in the case of
any Selling Subsidiary Receivables, hereunder or under the
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applicable Selling Subsidiary Agreement), have been complied with in
all material respects.
(g) No Transfer of Obligations. No transfer of any
Purchased Receivable to the Issuer results in a creation or assumption
by the Issuer of, or otherwise directly or indirectly imposes on the
Issuer, any liability or obligation to any Obligor on any such
Purchased Receivable of the Seller, any Servicer or any other Person
in connection with such Included Receivables pursuant to any
Requirement of Law or Contractual Obligation relating thereto or in
any other manner whatsoever.
The representations and warranties set forth in this Section 3.2 shall survive
each sale and assignment of Included Receivables to the Issuer, and termination
of the rights and obligations of the Seller as a Servicer and as Master
Servicer pursuant to Section 9.1.
Section 3.3. Representations and Warranties of Beverly.
Beverly hereby represents and warrants to the Issuer, the Trustee and the
Health Care Noteholders that, as of the date hereof and as of each date on
which Included Receivables are sold hereunder:
(a) Organization, Good Standing and Due Qualification.
Beverly is duly organized and validly existing in good standing under
the laws of its state of incorporation, and has full corporate power,
authority and legal right to own its property and conduct its business
as contemplated by this Agreement and as such property is presently
owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement. Beverly is
duly qualified to do business and is in good standing as a foreign
corporation (or is exempt from such requirements) and has obtained all
necessary licenses and approvals in each jurisdiction in which failure
to so qualify or to obtain such licenses and approvals would have a
material adverse effect on Beverly's ability to perform its
obligations under this Agreement.
(b) Due Authorization. The execution and delivery of
this Agreement by Beverly and the consummation of the transactions
provided for in this Agreement have been duly authorized by Beverly by
all necessary corporate action on the part of Beverly.
(c) Enforceable Obligation. Beverly has the power,
authority and legal right to execute, deliver and perform all of its
obligations under the Related Documents to which it is a party, and
the Related Documents to which it is a party have been duly executed
by Beverly and constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or of general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) No Conflict. Except as would not affect the validity
or enforceability of any Related Document or Included Receivable,
would not have a material adverse effect on the business, operations,
assets or financial or other condition of Beverly or on its
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ability to perform its obligations under this Agreement and the other
Related Documents to which it is a party and would not have a material
adverse effect on the ownership or servicing of the Included
Receivables, the execution and delivery of this Agreement and the
other Related Documents to which it is a party, the performance of the
transactions contemplated hereby and thereby and the fulfillment of
the terms hereof or thereof, will not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under any
Contractual Obligation applicable to Beverly or any of its properties.
(e) No Violation. The execution and delivery of this
Agreement, the performance of the transactions contemplated hereby,
and the fulfillment of the terms hereof, will not conflict with or
violate any Requirement of Law applicable to Beverly or any of its
properties.
(f) No Proceedings. Except as listed in the Litigation
Schedule attached hereto, there are no proceedings or investigations
pending or, to the best knowledge of Beverly, threatened against
Beverly, before any court, regulatory body, administrative agency, or
other tribunal or Governmental Authority (i) asserting the invalidity
or unenforceability of this Agreement, (ii) seeking to prevent, enjoin
or delay the consummation of any of the transactions contemplated by
this Agreement, (iii) seeking any determination or ruling that would
materially and adversely affect the performance by Beverly of its
obligations under this Agreement or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement.
(g) No Default. Except as would not have a material
adverse effect on the business, operations, assets or financial or
other condition of Beverly or its ability to perform its obligations
under the Related Documents and would not have a material adverse
effect on the ownership or servicing of the Included Receivables or
the validity or enforceability of the Related Documents or the
Included Receivables, Beverly is not in breach or default of any
Contractual Obligation, and is not in violation of any Requirement of
Law, applicable to it or its properties.
The representations and warranties set forth in this Section 3.3 shall survive
each sale and assignment of Included Receivables to the Issuer hereunder.
Section 3.4. Representations and Warranties of Each
Selling Subsidiary. Each Selling Subsidiary hereby represents and warrants to
the Issuer, the Trustee and the Health Care Noteholders as of each date on
which any of such Selling Subsidiary's Receivables are sold hereunder that:
(a) Organization, Good Standing and Due Qualification.
It is duly organized and validly existing in good standing under the
laws of its state of incorporation, and has full corporate power,
authority and legal right to own its property and conduct its business
as contemplated by the Related Documents to which it is, or is to be,
a party and as such property is presently owned and such business is
presently conducted, and to execute,
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deliver and perform its obligations under the Related Documents to
which it is, or is to be, a party. It is duly qualified to do
business and is in good standing as a foreign corporation (or is
exempt from such requirements) and has obtained all necessary licenses
and approvals in each jurisdiction in which failure to so qualify or
to obtain such licenses and approvals would have a material adverse
effect on its ability to perform its obligations under the Related
Documents to which it is, or is to be, a party. It is a direct or
indirect wholly-owned subsidiary of Beverly.
(b) Due Authorization. The execution and delivery of the
Related Documents to which it is, or is to be, a party and the
consummation of the transactions provided for in this Agreement have
been duly authorized by it by all necessary corporate action.
(c) Enforceable Obligation. It has the power, authority
and legal right to execute, deliver and perform all of its obligations
under the Related Documents to which it is a party, and the Related
Documents to which it is a party have been duly executed by it and
constitutes its legal, valid and binding obligations, enforceable in
accordance with their respective terms, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) No Conflict. The execution and delivery of the
Related Documents to which it is, or is to be, a party, the
performance of the transactions contemplated thereby and the
fulfillment of the terms thereof, will not, except as would not affect
the validity or enforceability of any Related Document or any of its
respective Selling Subsidiary Receivables, would not have a material
adverse effect on its business, operations, assets or financial or
other condition or its ability to perform its obligations under the
Related Documents and would not have a material adverse effect on the
ownership or servicing of its respective Selling Subsidiary
Receivables, conflict with, result in any breach or any of the terms
and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, any Contractual Obligation applicable
to it or any of its properties.
(e) No Violation. The execution and delivery of the
Related Documents to which it is, or is to be, a party, the
performance of the transactions contemplated by the Related Documents
to which it is, or is to be, a party, and the fulfillment of the terms
thereof, will not conflict with or violate any Requirement of Law
applicable to it or any of its properties.
(f) No Proceedings. Except as listed in the Litigation
Schedule attached hereto, there are no proceedings or investigations
pending or, to its best knowledge, threatened against it before any
court, regulatory body, administrative agency, or other tribunal or
Governmental Authority (i) asserting the invalidity or
unenforceability of any Related Document or any of its respective
Selling Subsidiary Receivables, (ii) seeking to prevent, enjoin or
delay the consummation of any of the transactions contemplated by the
Related Documents to which it is, or is to be, a party, (iii) seeking
any determination or ruling that
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would materially and adversely affect the performance by it of its
obligations under the Related Documents to which it is, or is to be, a
party or (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of any
Related Document or of any of its respective Selling Subsidiary
Receivables.
(g) No Default. Except as would not have a material
adverse effect on its business, operations, assets or financial or
other condition or on its ability to perform its obligations under the
Related Documents and would not have a material adverse effect on the
ownership or servicing of its respective Selling Subsidiary
Receivables or the validity or enforceability of the Related Documents
or its respective Receivables, it is not in breach or default of any
Contractual Obligations, and is not in violation of any Requirement of
Law, applicable to it or its properties.
(h) Good Title. None of its respective Selling
Subsidiary Receivables has been sold, assigned or pledged to any
Person other than the Seller and, pursuant hereto, the Issuer.
Immediately prior to their conveyance to the Seller pursuant to its
respective Selling Subsidiary Agreement, it has good title to all its
respective Purchased Receivables, free and clear of any Lien, and, as
of each date its respective Purchased Receivables are conveyed
pursuant to its respective Selling Subsidiary Agreement, it will have
conveyed good title to such Purchased Receivables to the Seller free
and clear of any Lien.
(i) Sole Owner. Immediately prior to their conveyance to
the Seller pursuant to its respective Selling Subsidiary Agreement, it
is the sole owner of all right, title and interest in and to its
respective Selling Subsidiary Receivables.
(j) Receivables Information. The Receivables Information
does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements consisting of
Receivables Information, in light of the circumstances in which they
were made, not misleading.
(k) Place of Business. Its principal place of business
and chief executive office and the location of the Records pertaining
to its respective Receivables is 5111 Rogers Avenue, Suite 40-A, Forth
Smith, Arkansas 72919.
(l) No Transfer of Obligations. No transfer of any of
its respective Purchased Receivables by such Selling Subsidiary to the
Seller results in a creation or assumption by the Seller or the Issuer
of, or otherwise directly or indirectly imposes on the Seller or the
Issuer, any liability or obligation (contingent or otherwise),
including without limitation, any liability or obligation to any
Obligor on any of its respective Purchased Receivables of such Selling
Subsidiary, any Servicer or any other Person in connection with such
Purchased Receivable, pursuant to any Requirement of Law or
Contractual Obligation relating thereto or in any other manner
whatsoever.
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The representations and warranties set forth in this Section 3.4 shall survive
each sale and assignment of Selling Subsidiary Receivables to the Issuer, and
termination of its rights and obligations as a Servicer pursuant to Section
9.1.
ARTICLE IV
COVENANTS
Section 4.1. Covenants of the Seller. The Seller hereby
covenants that:
(a) Receivables Not To Be Evidenced by Instruments. The
Seller will take no action to cause any Included Receivables to be evidenced by
any instrument (as defined in the UCC).
(b) Security Interest. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on any
Included Receivables, whether now existing or hereafter created, or any
interest therein, and the Seller shall defend the right, title and interest of
the Issuer in, to and under the Purchased Receivables sold and assigned to the
Issuer hereunder whether now existing or hereafter created, against all claims
of third parties except any third party claiming through or under the Issuer.
(c) Status of Receivables. The Seller will comply, in
all material respects, with all Contractual Obligations applicable to the
Purchased Receivables or any part thereof.
(d) Licenses. The Seller will preserve and maintain its
licenses, permits and other authorizations necessary for the conduct of its
business.
(e) Indemnity. In any suit, proceeding or action brought
by the Trustee or the Issuer for any sum owing with respect to a Purchased
Receivable, the Seller will save, indemnify and keep the Trustee, the Health
Care Noteholders and the Issuer, as the case may be, harmless from and against
all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever under such
Purchased Receivable, arising out of a breach by the Seller of any obligation
under such Purchased Receivable or arising out of any other agreement,
indebtedness or liability other than a Purchased Receivable at any time owing
to or in favor of a patient or provider or its successor from the Seller, and
all such obligations of the Seller shall be and remain enforceable against and
only against the Seller, and shall not be enforceable against the Trustee or
the Issuer, as the case may be. The parties intend that this Subsection (e)
not be applied to provide direct or indirect assurance to the Trustee, the
Health Care Noteholders or the Issuer, as the case may be, against loss by
reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, the Obligor on, or the uncollectability of, any Purchased
Receivable.
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(f) Compliance with Law. The Seller will comply, in all
material respects, with all Requirements of Law applicable to the Purchased
Receivables or any part thereof.
(g) No Liens. The Seller will not create, permit or
suffer to exist, and will defend the Issuer's rights to Purchased Receivables
against, and take such other actions as are necessary to remove, any Lien,
claim or right in, to or on any Included Receivables, other than the Liens
created hereby and by the Indenture.
(h) Access and Information. Unless prohibited by
applicable governmental regulations or any regulations of JCAHO, the Issuer,
the Master Servicer, the Trustee, any Noteholder representing at least 66-2/3%
of the Aggregate Outstanding Amount of Health Care Notes of any Series and
their respective representatives shall at all times have full and free access
during normal business hours to all the books, correspondence and records of
the Seller insofar as they relate to the Purchased Receivables, and the Issuer,
the Master Servicer, the Trustee and their respective representatives may
examine the same, take extracts therefrom and make photocopies thereof, and the
Seller agrees to render to the Issuer, the Master Servicer, the Trustee and
their respective representatives, at the Seller's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto; provided, however, that the Issuer, the Master Servicer and the
Trustee each acknowledges that in exercising its rights and privileges
conferred in this Section 4.1(h) it or its representatives may, from time to
time, obtain knowledge of information, practices, books, correspondence and
records of a confidential nature and in which the Seller has a proprietary
interest. The Issuer, the Master Servicer and the Trustee each agrees that all
such information, practices, books, correspondence and records so obtained by
it are to be regarded as confidential information and that such information may
be subject to laws, rules and regulations regarding patient confidentiality,
and agrees that (other than for the purposes contemplated by the Related
Documents) (i) it shall retain in confidence and shall ensure that its
representatives retain in confidence and will not disclose without the prior
written consent of the Seller any or all of such information, practices, books,
correspondence and records furnished to them and (ii) it will not, and will
ensure that its representatives will not, make any use whatsoever of any of
such information, practices, books, correspondence and records without the
prior written consent of the Seller, unless such information is generally
available to the public (other than as a result of a breach of this subsection
(h) or Section 4.3(h) hereof) or is required by law to be disclosed.
(i) Change of Location. The Seller will not, without
providing 20 days notice to the Issuer and the Trustee and without filing such
new financing statements or amendments to any previously filed financing
statements as the Issuer or the Trustee may require, (i) change the location of
its chief executive office, principal place of business or of any Regional
Center or the location of the offices where the Records relating to the
Receivables are kept or (ii) change its name, identity or corporate structure
in any manner which would, could or might make any financing statement or
continuation statement filed by the Seller in accordance herewith seriously
misleading within the meaning of Section 9-402(7) of any applicable enactment
of the UCC.
(j) Obligor Contracts. Subject to Section 6.6, the
Seller may change the terms of the Obligor contracts and agreements relating to
the Purchased Receivables (or any part thereof)
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or its policies and procedures with respect to the servicing thereof (including
without limitation the amount and timing of finance charges, fees and
write-offs) only if such change (i) is not as a result of the related Obligor's
inability to pay any Purchased Receivable, (ii) would not, in the reasonable
belief of the Seller and the Master Servicer, cause an Amortization Event to
occur and (iii) is determined by the Seller to be desirable and appropriate, is
consistent with its past practices and is based on the same standards the
Seller would apply had it not sold such Receivable hereunder but continued to
hold such Receivable for its own account.
(k) Corporate Existence. The Seller will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the state of its incorporation (unless it becomes organized under the laws of
any other State or of the United States of America, in which case the Seller
will keep in full effect its existence, rights and franchises under the laws of
such other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Related Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(l) Non-Impairment of Purchased Receivables. Except as
permitted by Section 6.6, the Seller will not take or omit to take any action,
or permit any Servicer or the Master Servicer to take or omit to take any
action, which action or omission would reduce or impair the rights of the
Issuer, the Trustee or the Health Care Noteholders with respect to any
Purchased Receivable. Without limiting the generality of the foregoing, the
Seller shall not take any of the following actions, or permit any Servicer or
the Master Servicer to take any of the following actions:
(i) rescind, cancel or modify any provision of any
Purchased Receivable;
(ii) waive any right with respect to any Purchased
Receivable; or
(iii) take or omit to take any action which might subject
any Purchased Receivable to offset, counterclaim, deduction or
defense.
Notwithstanding the foregoing, the Seller may take or omit to take any action
(whether or not reducing or impairing the rights of the Issuer, the Trustee or
the Health Care Noteholders) or adjust, correct, modify, cancel or write-off
the amount of any Purchased Receivable if such change (i) is not as a result of
the related Obligor's inability to pay any Purchased Receivable; and (ii) is
determined by the Seller to be desirable and appropriate, is consistent with
its past practices and is based on the same standards the Seller would apply
had it not sold such Receivable hereunder but continued to hold such Receivable
for its own account.
(m) Obligations. The Seller will duly fulfill all
obligations on its part to be fulfilled under or in connection with each
Purchased Receivable and will do nothing to impair the rights of the Issuer
therein except as otherwise expressly permitted in this Agreement.
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(n) Business, Credit and Collection Policies. It will
not change its business, credit, or collection policies in a manner which would
materially impair its ability to collect the Purchased Receivables.
Section 4.2. Covenants of Beverly. Beverly hereby
covenants that:
(a) Financial Statements. Beverly will assure that (A)
its consolidated financial statements will reflect, by footnote or otherwise,
the separate existence of the Issuer, the extent of its separate assets and the
unavailability of those assets to satisfy claims of the creditors of Beverly or
any Affiliate other than the Issuer (as well as the fact that the Purchased
Receivables generated by the Selling Subsidiaries and the Seller are owned by
the Issuer and are unavailable to the creditors of the Selling Subsidiaries and
the Seller); and (B) any separate financial statements of the Seller or any
Selling Subsidiary, to the extent any Purchased Receivables are reflected
therein, will reflect, by footnote or otherwise, the ownership of such
Purchased Receivables by the Issuer.
(b) Information. Beverly will deliver to the Issuer and
the Trustee:
(A) as soon as available and in any event within 90 days
after the end of each fiscal year of Beverly, a statement of Beverly's
independent public accountants to the effect that nothing has come to
their attention to cause them to believe that (1) there existed on the
date of such statements any Amortization Event or event or condition
which, with the giving of notice or lapse of time or both, would
become an Amortization Event or (2) that Beverly was not in compliance
during such fiscal year with the requirements of Section 4.2(a) and
Section 4.2(d) hereof;
(B) as soon as available and in any event within 60 days
after the end of each fiscal quarter of each fiscal year of Beverly, a
certificate from the chief financial officer of Beverly to the effect
that: (x) such officer is familiar with the Related Documents; (y) has
conducted a diligent inquiry with respect to whether Beverly and its
Affiliates are in compliance with their obligations thereunder and (z)
that, on the basis of the foregoing: (i) no Amortization Event or
event or condition which, with the giving of notice or lapse of time
or both, would become an Amortization Event has occurred; (ii) Beverly
was in compliance during the fiscal year (or fiscal period, as the
case may be) with the requirements of Section 4.2(a) and Section
4.2(d) hereof and (iii) the Seller and each Selling Subsidiary was in
compliance during the fiscal year (or fiscal period as the case may
be) with the requirements of the Related Documents to which they are
party.
(C) forthwith upon the occurrence of any Amortization
Event or event or condition which, with the giving of notice or lapse
of time or both, would become an Amortization Event or upon becoming
aware that any of the representations and warranties contained in
Article III have ceased to be true and correct, a certificate of the
president, any vice president or the chief financial officer or the
chief accounting officer of Beverly setting forth the details thereof
and the action which Beverly is taking or proposes to take with
respect thereto.
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(D)(1) as soon as available and in any event within 60 days
after the end of each fiscal quarter of each fiscal year of Beverly,
consolidated balance sheets of Beverly and its consolidated
subsidiaries as of the end of such quarter, and consolidated
statements of income and retained earnings of Beverly and its
consolidated subsidiaries each for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter
certified by the chief financial officer, each certified as being
prepared in accordance with generally accepted accounting principles
for interim financial statements and the rules and regulations of the
Commission;
(2) as soon as available and in any event within 90 days
after the end of each fiscal year of Beverly, a copy of the
consolidated balance sheets of Beverly and its consolidated
subsidiaries as of the end of such year and the related consolidated
statements of income and retained earnings of Beverly and its
consolidated subsidiaries for such year each reported on by Beverly's
Independent public accountants, each certified as being prepared in
accordance with generally accepted accounting principles;
(3) notice promptly after the sending or filing of all
reports which Beverly sends to any of its security holders and all
reports and registration statements which Beverly files with the
Securities and Exchange Commission or any national securities exchange
other than registration statements relating to employee benefit plans
and to registrations of securities for selling security holders and
copies thereof; and
(4) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any "Reportable Event" defined
in Article IV of ERISA which Beverly or any subsidiary files under
ERISA with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or which Beverly
or any subsidiary receives from such Corporation.
(c) Access and Information. Unless prohibited by
applicable governmental regulations or any regulations of JCAHO, the Issuer,
the Trustee, any Noteholder representing at least 66-2/3% of the Aggregate
Outstanding Amount of Health Care Notes of any Series and their respective
representatives shall at all times have full and free access during normal
business hours to all the books, correspondence and records of Beverly insofar
as they relate to Purchased Receivables, and the Issuer, the Trustee and their
respective representatives may examine the same, take extracts therefrom and
make photocopies thereof, and Beverly agrees to render to the Issuer, the
Trustee and their respective representatives, at Beverly's cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto; provided, however, that the Issuer, and the Trustee each acknowledges
that in exercising its respective rights and privileges conferred in this
Section 4.2(c) it or its representatives may, from time to time, obtain
knowledge of information, practices, books, correspondence and records of a
confidential nature and in which Beverly has a proprietary interest. The
Issuer and the Trustee each agrees that all such information, practices, books,
correspondence and records so obtained by it are to be regarded as confidential
information and that such information may be subject to laws, rules and
regulations regarding patient confidentiality, and agrees that (other than for
the purposes contemplated by the Related Documents) (i) it shall retain in
confidence and shall ensure that its
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representatives retain in confidence and will not disclose without the prior
written consent of Beverly any or all of such information, practices, books,
correspondence and records furnished to them and (ii) it will not, and will
ensure that its representatives will not, make any use whatsoever of any of
such information, practices, books, correspondence and records without the
prior written consent of Beverly, unless such information is generally
available to the public (other than as a result of a breach of this Section
4.2(c), Section 4.1(h) or Section 4.3(h) hereof) or is required by law to be
disclosed.
(d) Corporate Formalities. Beverly will, and will cause
its Affiliates to: (x) observe the applicable legal requirements for the
recognition of the Seller, the Issuer and each Selling Subsidiary (and any
subsidiary into which the Seller, the Issuer or any such Selling Subsidiary is
merging or consolidating) as a legal entity separate and apart from Beverly and
its other Affiliates and (y) comply with the provisions of Section 3.17 of the
Indenture.
Section 4.3. Covenants of Each Selling Subsidiary. Each
Selling Subsidiary hereby covenants that:
(a) Receivables Not To Be Evidenced by Instruments. It
will take no action to cause any of its respective Included Receivables to be
evidenced by any instrument (as defined in the UCC).
(b) Security Interests. Except for the conveyances
hereunder and under the Selling Subsidiary Agreements, it will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur, assume
or suffer to exist any Lien on any of its respective Included Receivables
whether now existing or hereafter created, or any interest therein, and it
shall defend the right, title and interest of the Issuer in, to and under its
respective Receivables whether now existing or hereafter created, against all
claims of third parties except any third party claiming through or under the
Issuer.
(c) Status of Receivables. It shall comply in all
material respects with all Contractual Obligations applicable to its respective
Receivables or any part thereof.
(d) Licenses. It will preserve and maintain its
licenses, permits and other authorizations necessary for the conduct of its
business.
(e) Indemnity. In any suit, proceeding or action brought
by the Trustee or the Issuer for any sum owing with respect to any of its
respective Receivables, it will save, indemnify and keep the Trustee, the
Health Care Noteholders and the Issuer, as the case may be, harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever under such
Receivable, arising out of a breach by such Selling Subsidiary of any
obligation under such Receivable or arising out of any other agreement,
indebtedness or liability other than a Purchased Receivable at any time owing
to or in favor of a patient or provider or its successor from such Selling
Subsidiary, and all such obligations of such Selling Subsidiary shall be and
remain enforceable against and only against such Selling Subsidiary, and shall
not be enforceable against the Trustee or the Issuer, as
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the case may be. The parties intend that this Subsection (e) not be applied to
provide direct or indirect assurance to the Trustee, the Health Care
Noteholders or the Issuer, as the case may be, against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, the
Obligor on, or the uncollectability of, any Purchased Receivable.
(f) Compliance with Law. It will comply, in all material
respects, with all Requirements of Law applicable to its respective Receivables
or any part thereof.
(g) No Liens. It will not create, permit or suffer to
exist, and will defend the Issuer's rights to its respective Purchased
Receivables against, and take such other actions as are necessary to remove,
any Lien, claim or right in, to or on any Purchased Receivables, other than the
Liens created hereby and by the Indenture.
(h) Access and Information. Unless prohibited by
applicable governmental regulations or any regulations of JCAHO, the Issuer,
the Master Servicer, the Trustee, any Noteholder representing at least 66-2/3%
of the Aggregate Outstanding Amount of Health Care Notes of any Series and
their respective representatives shall at all times have full and free access
during normal business hours to all the books, correspondence and records of
such Selling Subsidiary insofar as they relate to its respective Receivables,
and the Issuer, the Master Servicer, the Trustee and their respective
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and such Selling Subsidiary agrees to render to the
Issuer, the Master Servicer, the Trustee and its representatives, at such
Selling Subsidiary's cost and expense, such clerical and other assistance as
may be reasonably requested with regard thereto; provided, however, that the
Issuer, the Master Servicer and the Trustee each acknowledges that in
exercising its respective rights and privileges conferred in this Section
4.3(h) it or its representatives may, from time to time, obtain knowledge of
information, practices, books, correspondence and records of a confidential
nature and in which such Selling Subsidiary has a proprietary interest. The
Issuer, the Master Servicer and the Trustee each agrees that all such
information, practices, books, correspondence and records so obtained by it are
to be regarded as confidential information and that such information may be
subject to laws, rules and regulations regarding patient confidentiality, and
agrees that (other than for the purposes contemplated by the Related Documents)
(i) it shall retain in confidence and shall ensure that its representatives
retain in confidence and will not disclose without the prior written consent of
such Selling Subsidiary any or all of such information, practices, books,
correspondence and records furnished to them and (ii) it will not, and will
ensure that its representatives will not, make any use whatsoever of any of
such information, practices, books, correspondence and records without the
prior written consent of such Selling Subsidiary, unless such information is
generally available to the public (other than as a result of a breach of this
subsection (h) or Section 4.1(h) hereof) or is required by law to be disclosed.
(i) Change of Location. It will not, without providing
20 days notice to the Issuer and the Trustee and without filing such financing
statements and amendments to any previously filed financing statements as the
Issuer and the Trustee may require, (i) change the location of its chief
executive office, principal place of business or of any Regional Center the
location of the offices where the Records relating to its respective
Receivables are kept or (ii)
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change its name, identity or corporate structure in any manner which would,
could or might make any financing statement or continuation statement filed by
it in accordance herewith seriously misleading within the meaning of Section
9-402(7) of any applicable enactment of the UCC.
(j) Obligor Contracts. Subject to Section 6.6, it may
change the terms of the Obligor contracts and agreements relating to its
respective Purchased Receivables (or any part thereof) or its policies and
procedures with respect to the servicing thereof (including without limitation
the amount and timing of finance charges, fees and write-offs) only if such
change: (i) is not as a result of the related obligor's inability to pay any
Purchased Receivable; and (ii) would not, in the reasonable belief of such
Selling Subsidiary or the Master Servicer, cause an Amortization Event to
occur.
(k) Corporate Existence. Except as provided in Article
VIII hereof, it will keep in full effect its existence, rights and franchises
as a corporation under the laws of the state of its incorporation (unless it
becomes organized under the laws of any other state or of the United States of
America, in which case it will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Related Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
(l) Non-Impairment of Purchased Receivables. Except as
permitted by Section 6.6, it will not take or omit to take any action, or
permit any Servicer or the Master Servicer to take or omit to take any action,
which action or omission would reduce or impair the rights of the Issuer, the
Trustee or the Health Care Noteholders with respect to any Purchased
Receivable. Without limiting the generality of the foregoing, it shall not
take any of the following actions, or permit any Servicer or the Master
Servicer to take any of the following actions:
(i) rescind, cancel or modify any provision of any of its
respective Purchased Receivables:
(ii) waive any right with respect to any of its respective
Purchased Receivables; or
(iii) take or omit to take any action which might subject
any of its respective Purchased Receivables to offset, counterclaim,
deduction or defense.
Notwithstanding the foregoing, it may take or omit to take any action (whether
or not reducing or impairing the rights of the Issuer, the Trustee or the
Health Care Noteholders) or adjust, correct, modify, cancel or write-off the
amount of any Purchased Receivable if such change (i) is not as a result of the
related Obligor's inability to pay any Purchased Receivable; and (ii) is
determined by it to be desirable and appropriate, is consistent with its past
practices and is based on the same standards it would apply had it not sold
such Receivable hereunder but continued to hold such Receivable for its own
account.
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(m) Obligations. It will duly fulfill all obligations on
its part to be fulfilled under or in connection with each of its respective
Purchased Receivables and will do nothing to impair the rights of the Issuer
therein except as otherwise expressly permitted in this Agreement.
(n) Business, Credit and Collection Policies. It will
not change its business, credit, or collection policies in a manner which would
materially impair its ability to collect its related Purchased Receivables.
ARTICLE V
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 5.1. General. The Seller agrees to act as a
Servicer under this Agreement with respect to the Purchased Receivables (other
than the Selling Subsidiary Receivables) and as Master Servicer hereunder; and
the Issuer consents thereto. Each Selling Subsidiary agrees to act as a
Servicer hereunder with respect to its respective Purchased Receivables and the
Issuer consents thereto. Each Servicer shall service and administer its
respective Purchased Receivables and shall collect payments due under its
respective Purchased Receivables in accordance with its usual and customary
servicing policies and procedures for servicing accounts comparable to such
Purchased Receivables, and shall have full power and authority, acting alone or
through any Person properly designated by it hereunder, to do any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Each Servicer recognizes that the Master Servicer will
be acting hereunder on the basis of information provided it by the Servicers;
and each Servicer agrees to cooperate with the Master Servicer and, to the
extent necessary, the other Servicers such that the Master Servicer's
obligations may be fulfilled in a timely fashion.
Section 5.2. Servicer Compensation. As compensation for
its acting as Servicer or Master Servicer, as the case may be, hereunder, each
Servicer shall be entitled to receive a daily servicing fee equal to one-half
of the Servicing Fee Rate on the Balance of the Purchased Receivables being
serviced by such Servicer (determined as of such day), and the Master Servicer
shall be entitled to receive a daily servicing fee (collectively, with the
other servicing fees referred to in this Section 5.2, the "Servicing Fees"),
equal to one-half of the Servicing Fee Rate on the Balance of all Purchased
Receivables (determined as of such day). Such amounts shall be payable from
amounts distributed to the Master Servicer pursuant to Section 7.2(h)(i) of the
Indenture.
Section 5.3. Expenses. Each Servicer and the Master
Servicer, respectively, shall pay out of its own funds all expenses incurred in
connection with the servicing activities hereunder including, without
limitation, UCC filing fees and expenses related to the collection and
enforcement of the Purchased Receivables.
Section 5.4. Repurchase by Servicers. In the event there
is any breach of any of the representations, warranties or covenants of any
Servicer contained in this Agreement, then if
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such breach or failure has a material adverse effect on the interests of the
Issuer, the Trustee, the Trust Estate or the Health Care Noteholders in such
Servicer's respective Purchased Receivables and if such event is continuing on
the first Distribution Date occurring at least 30 days after the earlier to
occur of (a) the discovery of such event by such Servicer or (b) receipt by
such Servicer of written notice of such event given by the Trustee, the Holders
of at least 50% in Aggregate Outstanding Amount of Health Care Notes of any
Series or the Issuer, such Servicer shall purchase all of its respective
Purchased Receivables as to which such event relates on such Distribution Date.
The Servicer shall purchase a Purchased Receivable on such Distribution Date by
making a deposit into the Collection Account before 11:00 a.m. New York City
time on such Distribution Date in immediately available funds in an amount
equal to the Repurchase Price for such Receivable. Such Repurchase Price shall
be treated as a Collection of the related Purchased Receivables and shall be
applied in accordance with Article VI. Upon each such purchase by the
Servicer, the Issuer shall automatically and without further action be deemed
to sell, transfer, assign and set over, and otherwise convey to the Servicer,
without recourse, representation or warranty, all right, title and interest of
the Issuer in and to such Purchased Receivable, all monies due or to become due
with respect thereto and all Proceeds thereof other than any portion of the
Repurchase Price. The Issuer shall execute such documents and instruments of
transfer or assignment and take such other actions as shall be reasonably
requested by the Servicer to effect the conveyance of any Purchased Receivable
pursuant to this Section. The parties intend that this Section 5.4 not be
applied to provide direct or indirect assurance to the Issuer against loss by
reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, the related Obligor on, or the uncollectability of, any Purchased
Receivable. The obligation to repurchase any such Purchased Receivable
pursuant to this Section 5.4 shall survive the termination of this Agreement.
Section 5.5. Master Servicer. (a) General. To the
extent not inconsistent with Requirements of Law, the Master Servicer shall
assist the Servicers in the performance of their respective duties under this
Article. In addition, the Master Servicer shall assist the Issuer and the
Trustee in monitoring compliance by the Seller and each Selling Subsidiary (and
of their respective Purchased Receivables) with the requirements of this
Agreement.
(b) Reports. The Master Servicer, on the basis of
information provided by the Servicers, will deliver appropriately completed
Daily Reports, Daily Trustee Reports and Monthly Trustee Reports as provided in
Section 6.5.
Section 5.6. Semi-Annual Servicer's Certificate. Each
Servicer will deliver to the Master Servicer, the Issuer and the Trustee, and
the Master Servicer will deliver to the Issuer and the Trustee, on or before
each of June 30 and December 31 of each year, commencing June 30, 1995, an
Officer's Certificate stating that (a) a review of the activities of the
Servicer or the Master Servicer, as the case may be, during the immediately
preceding six months ending on the last day of the month preceding such report
date, and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to the best of such
officer's knowledge, based on such review, the Servicer or the Master Servicer,
as the case may be, has fully performed all its obligations under this
Agreement throughout such six-month period (including its obligations to
prepare and deliver each Daily Report, each Daily Trustee Report and
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each Monthly Trustee Report in compliance with the terms of this Agreement),
or, if there has been a default in the performance of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
Section 5.7. Semi-Annual Independent Public Accountants'
Servicing Report. Semi-annually, on or before June 30 and December 31 of each
year, commencing June 30, 1995, the Master Servicer shall furnish to the
Issuer, the Trustee and the Rating Agency a statement from a firm of
Independent public accountants stating that: (1) they have reviewed this
Agreement and the Monthly Trustee Reports for the immediately preceding six
months ending on the last day of the month preceding such report date and
certain documents and records relating to the servicing of the Purchased
Receivables during such period, (2) based upon their review of such Monthly
Trustee Reports, the calculations contained therein have been performed in
accordance with the provisions of this Agreement and (3) based upon their
review, nothing came to their attention that caused them to believe that the
information in any such Monthly Trustee Reports was not correct or that such
servicing was conducted in violation of this Agreement, except for such
exceptions as shall be set forth in such report. The Servicers and the Master
Servicer shall make diligent efforts to comply with any recommendations
contained in such report and shall each deliver an Officer's Certificate to the
Issuer and the Trustee not later than 30 days thereafter describing the scope
and progress of such efforts.
Section 5.8. Notices to the Seller. In the event that the
Seller or any Selling Subsidiary is no longer acting as a Servicer hereunder or
the Seller is no longer acting as Master Servicer hereunder, any Successor
Master Servicer or Successor Servicer appointed pursuant to Section 9.2 shall
deliver or make available to the Seller and each Selling Subsidiary, as the
case may be, each certificate and report required to be prepared, forwarded or
delivered thereafter pursuant to Sections 5.5, 5.6 and 5.7.
ARTICLE VI
ALLOCATION AND APPLICATION
OF COLLECTIONS
Section 6.1. Establishment of Issuer Accounts; Investment.
(a) The Issuer has pursuant hereto and to the Indenture established and shall
maintain with the Trustee three segregated trust accounts (the "Collection
Account", the "Distribution Account" and the "Expense Account" and,
collectively, the "Issuer Accounts"). With respect to each Series, a Payment
Subaccount and an Expense Subaccount of the Distribution Account shall be
established and maintained. The Trustee will make any withdrawals or deposits
from or to the Issuer Accounts required or permitted pursuant to the terms
hereof.
(b) Funds in the Issuer Accounts which are permitted (or
required) to be invested in accordance with Section 6.3 may (or shall) be
invested by and in the name of the Trustee in Eligible Investments for the
account of the Master Servicer.
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Section 6.2. Collections and Allocations. All Collections
shall be deposited (or caused to be deposited) by the respective Servicer in
immediately available funds to the Collection Account within two Business Days
of receipt thereof by such Servicer. Any Collections received by the Master
Servicer shall be similarly so deposited. Pending such transfer, the
respective Servicer or the Master Servicer, as the case may be, may deposit the
same in a concentration account in which funds of Beverly and its subsidiaries
may also be deposited; provided that Collections deposited in such a
concentration account shall be transferred to the Collection Account within two
Business Days of receipt thereof by such Servicer; provided further that each
Servicer and the Master Servicer shall maintain records permitting a
determination and identification on a daily basis of the amount and location of
all Collections which have been so deposited. In the event of the commencement
of a bankruptcy, insolvency, reorganization or similar proceeding with respect
to Beverly, the Seller, any Selling Subsidiary or any Servicer, then,
immediately upon the occurrence of such event and thereafter so long as any
such proceeding is pending, the Seller, the Servicers and the Master Servicer
shall immediately remit (or cause to be remitted) all Collections on the
Purchased Receivables received by it directly to the Trustee for deposit into
the Collection Account, and shall not commingle any such Collections with other
funds or deposit any such Collections thereafter into any account established,
held or maintained by itself.
Section 6.3. Application of Amounts in Collection Account.
(a) Except during the Amortization Period (and subject to the other provisions
of this Article VI), amounts on deposit in the Collection Account shall be
applied by the Trustee on a daily basis, based on the Daily Trustee Report
delivered on such day, in the following order:
(i) First, for deposit into the Expense Account, an
amount equal to accrued and unpaid Servicing Fee up to but excluding
the next succeeding Business Day (to the extent not previously
deposited into the Expense Account);
(ii) Second, for deposit into the Expense Account, (A) an
amount equal to the accrued Trustee's Fee (in advance and on a daily
basis, and to the extent not previously deposited into the Expense
Account), up to but excluding the next succeeding Business Day,plus
(B) an amount as requested by the Trustee in writing, equal to the
then unreimbursed expenses of the Trustee (which expenses, in the
aggregate through such date, shall not exceed the Daily Cost Available
Amount);
(iii) Third, for deposit into the Payment Subaccount for
each Series, an amount equal to interest accrued and unpaid on the
Health Care Notes of such Series up to but excluding the next
succeeding Business Day (allocated pro rata on the basis of relative
accrued and unpaid interest) (to the extent not previously deposited
into such Payment Subaccount);
(iv) Fourth, for deposit into the Payment Subaccount for
each Series, an amount equal to the Net Note Balance of each Series of
Health Care Notes in its Liquidation Period (allocated pro rata on the
basis of relative Net Note Balances);
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(v) Fifth, for deposit into the Expense Subaccount for
each Series, an amount equal to the accrued and unpaid Series Special
Obligations of such Series (pro rata based on the relative amounts
then due) (to the extent not previously deposited into such Expense
Subaccount);
(vi) Sixth, to pay the Seller the Purchase Price of
Purchased Receivables pursuant to Section 2.1(c) hereof (if
Receivables are to be purchased pursuant to Section 2.1(c));
(vii) Seventh, first, for deposit into the Expense Account,
an amount equal to any due and unpaid Daily Costs owing to the Trustee
(to the extent not paid pursuant to clause (ii)), and then, for
deposit into the Expense Account or the applicable Expense Subaccount,
as applicable, pro rata based on the amounts then due, an amount equal
to the due and unpaid remaining Daily Costs (to the extent not
previously deposited into such accounts);
(viii) Eighth, at the option of the Issuer to be (x)
retained by the Trustee in the Collection Account to be invested by
and in the name of the Trustee in Eligible Investments maturing
overnight, (y) paid out by the Trustee to the Issuer as a Restricted
Payment pursuant to a certificate of an Authorized Officer of the
Issuer (setting forth any required calculations pursuant to the
definition of "Restricted Payment") delivered to the Trustee or (z)
transferred from the Collection Account to the appropriate subaccounts
of one or more Distribution Accounts pursuant to Article IX of the
Indenture;provided that, in each case, the Issuer complies with all
applicable Requirements of Law and Contractual Obligations;provided
further that no payment or transfer shall be paid pursuant to clause
(y) or (z) unless the Net Purchased Receivables exceeds the Minimum
Required Receivables Balance after giving effect to such Restricted
Payment or transfer and contemplated redemption.
(b) During the Amortization Period (and subject to the
other provisions of this Article VI), amounts on deposit in the Collection
Account shall be applied by the Trustee on a daily basis, based on the Daily
Trustee Report for such day, in the following order:
(i) First, for deposit into the Expense Account, an
amount equal to the accrued and unpaid Servicing Fee up to but
excluding the next Business Day, to the extent not previously
deposited into the Expense Account;
(ii) Second, for deposit into the Expense Account, (A) an
amount equal to the accrued Trustee's Fee (in advance and on a daily
basis, and to the extent not previously deposited into the Expense
Account) plus (B) an amount as requested by the Trustee in writing,
equal to the then unreimbursed expenses of the Trustee (which
expenses, in the aggregate through such date, shall not exceed the
Daily Cost Available Amount).
(iii) Third, for deposit into the Payment Subaccount of
each Series, an amount equal to interest accrued and unpaid on the
Health Care Notes of such Series up to but
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excluding the next Business Day (allocated on the basis of relative
accrued and unpaid interest) (to the extent not previously deposited
into such Payment Subaccount);
(iv) Fourth, for deposit into the Payment Subaccount of
each Series, an amount equal to the Net Note Balance of such Series of
Health Care Notes (allocated on the basis of relative Net Note
Balances);
(v) Fifth, for deposit into the Expense Subaccount for
each Series, an amount equal to the accrued and unpaid Series Special
Obligations of such Series (pro rata based on the relative amounts
then due) (to the extent not previously deposited into such Expense
Subaccount);
(vi) Sixth, first, for deposit into the Expense Account,
an amount equal to any due and unpaid Daily Costs owing to the
Trustee, and then, for deposit into the Expense Account or Expense
Subaccount, as applicable, pro rata based on the amounts then due, an
amount equal to the due and unpaid remaining Daily Costs (to the
extent not previously deposited into such accounts).
Section 6.4. Reports. (a) On each Date of Processing,
each Servicer will determine (based on estimates) and report to the Master
Servicer, for the current day, Collections with respect to such Servicer's
respective Purchased Receivables and such Servicer's respective new Included
Receivables. The Master Servicer shall determine for the current day the
aggregate Collections and aggregate new Purchased Receivables; shall determine
for such day the Minimum Required Receivables Balance; and shall prepare a
report (the "Daily Report") setting forth such information and such other
information specified in Exhibit D. The Master Servicer shall deliver Daily
Reports (not previously delivered) for each day to the Issuer.
(b) On each Business Day, the Master Servicer will determine
(based on estimates) and provide to the Trustee and the Issuer the information
necessary for the Trustee to make the distributions and allocation set forth in
Section 6.3, shall determine for the current day the Minimum Required
Receivables Balance and shall prepare a report (the "Daily Trustee Report")
setting forth such information and such other information specified in Exhibit
F. The Master Servicer shall deliver Daily Trustee Reports (not previously
delivered) to the Trustee and the Issuer by 11:00 a.m. New York City time on
each Business Day.
Section 6.5. Adjustment Procedures. On each Distribution
Date, the Master Servicer shall determine the actual amount of Collections and
the actual Balances of Purchased Receivables purchased during the preceding
Collection Period, together with the aggregate amount of any Purchased
Receivables erroneously reported during any prior Collection Period, and shall
set forth such actual amounts and the other calculations and information
specified in the form of the Monthly Trustee Report attached as Exhibit G for
the prior Collection Period. The Master Servicer shall complete such Monthly
Trustee Report and deliver it to the Issuer and the Trustee by 11:00 a.m. New
York City time on each Distribution Date. Each Monthly Trustee Report may be
transmitted by telecopy to the telecopy numbers specified in Section 12.6 and
shall thereafter be promptly mailed to the Trustee and the Issuer at the
address for notices for each such party
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specified in Section 12.6. To the extent the actual amounts specified in the
Monthly Trustee Report differ from the estimates calculated pursuant to Section
6.4 or as contemplated by Section 2.1(c), the following adjustments shall be
made:
(i) If and to the extent that the estimated Balance of new
Purchased Receivables exceeds the actual Balance of new and
under-reported Purchased Receivables (less amounts of over-reported
Purchased Receivables), the Issuer shall decrease the Balance of its
Purchased Receivables by, and the Seller shall deposit into the
Collection Account in immediately available funds, an amount equal to
such excess.
(ii) If and to the extent that the actual Balance of new
Purchased Receivables (less amounts of over- reported Purchased
Receivables) exceeds the estimated Balance of new and under-reported
Purchased Receivables, the Issuer shall increase the balance of its
Purchased Receivables by, and shall instruct the Trustee pursuant to
an Issuer Order to pay to the Seller in immediately available funds
from amounts in the Collection Account (prior to applications of the
amounts set forth in Section 6.3), an amount equal to the amount of
such excess.
(iii) If and to the extent that the estimated amount of
Collections exceeds the actual amount of Collections, the Issuer shall
(A) increase the Balance of its Purchased Receivables by the amount of
such excess, (B) decrease its gross revenues by an amount equal to
such excess and (C) instruct the Trustee pursuant to an Issuer Order
to pay to the Seller, in immediately available funds from amounts in
the Collection Account (prior to applications of the amounts set forth
in Section 6.3), an amount equal to the amount of such excess.
(iv) If and to the extent that the actual amount of
Collections exceeds the estimated amount of Collections, the Issuer
shall (A) decrease the Balance of its Purchased Receivables by the
amount of such excess and (B) increase its gross revenues by an amount
equal to such excess; and the Seller shall deposit into the Collection
Account, in immediately available funds an amount equal to such
excess.
On each Distribution Date, based on the reconciled Balances of
Purchased Receivables determined as set forth above, the Servicer shall
redetermine the Delinquency Ratio, Loss Ratio, Days Sales Outstanding and the
Originations for each of the past 12 Collection Periods, and such information
shall be set forth in the Monthly Trustee Report.
Section 6.6. Adjustments for Miscellaneous Credits and
Erroneous Charges. (a) If during any Collection Period the respective Servicer
or the Seller, as applicable, (i) adjusts the amount of any Purchased
Receivable because of a rebate, refund or billing error to an Obligor, or (ii)
discovers that a Purchased Receivable was created through an erroneous charge
or (iii) otherwise compromises, adjusts, reduces, modifies or cancels any
indebtedness evidenced by a Purchased Receivable (otherwise than to correct the
transaction giving rise to such Purchased Receivable) without receiving the
full amount of cash therefor, the Servicer or the Seller, as applicable, shall
deposit cash into the Collection Account during such Collection Period in an
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amount equal to such offset or other action within two Business Days following
such adjustment or discovery. The Seller shall not compromise, adjust, reduce,
modify or cancel any indebtedness evidenced by a Purchased Receivable pursuant
to clause (iii) of this Section 6.6(a) unless such change (A) is not as a
result of the related Obligor's inability to pay any Purchased Receivable, and
(B) is determined by the Seller to be desirable and appropriate, is consistent
with its past practices and is based on the same standards the Seller would
apply had it not sold such Purchased Receivable hereunder but continued to hold
such Purchased Receivable for its own account. All cash received on account of
such offset shall be treated as a Collection of the related Receivables in the
Collection Period in which the obligation to repurchase such Receivables arose
and shall be applied in accordance with this Article VI. The obligation of the
Servicer and the Seller to make such offsets shall survive the termination of
this Agreement. Notwithstanding the foregoing, but subject to Section 6.6(b),
any Purchased Receivable may be written off as uncollectible, if permitted as
described in the last sentences of Sections 4.1(l) or 4.3(l), without any
obligation by the respective Servicer or Seller to make any payment hereunder.
(b) If any Purchased Receivable included in the Balance
of Purchased Receivables on the date of transfer thereof to the Issuer pursuant
to Section 2.1 hereof includes any amounts which should have been written-off
by the Seller or applicable Selling Subsidiary prior to the date of transfer
thereof in accordance with the Seller's or Selling Subsidiary's customary
write-off procedures and practices, the Seller shall, within two Business Days
following discovery thereof by the Seller, notify the applicable Servicer and
deposit cash into the Collection Account in an amount equal to such amounts
which so should have been written-off. Such deposit shall be treated as a
Collection of the related Purchased Receivables in the Collection Period in
which the obligations to make such deposit arose and shall be applied in
accordance with this Article VI.
ARTICLE VII
CERTAIN MATTERS RELATING TO THE SELLER AND
THE SELLING SUBSIDIARIES
Section 7.1. Merger or Consolidation of, or Assumption of
the Obligations of, the Seller or any Selling Subsidiaries. (a) Any
corporation into which the Seller or any Selling Subsidiary may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Seller or any Selling Subsidiary, shall be a party,
or any Person succeeding to the business of the Seller or any Selling
Subsidiary shall be the successor of the Seller or such Selling Subsidiary
hereunder (without relieving the Seller or such Selling Subsidiary of its
responsibilities hereunder if it survives such merger, conversion or
consolidation) without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, however, that the successor
to the Seller or such Selling Subsidiary shall execute an assumption agreement
providing for the assumption by the successor to the Seller or such Selling
Subsidiary of the rights and obligations of the Seller or such Selling
Subsidiary hereunder in a form reasonably satisfactory to the Issuer and the
Trustee; and provided, further, that neither the Seller nor any Selling
Subsidiary may merge or consolidate with or into any Person unless:
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(v) such merger or consolidation is permitted by all applicable Requirements of
Law (including, without limitation, all federal and state Medicaid, Medicare
and Department of Veterans' Affairs laws, rules and regulations), (w)
immediately prior to, and immediately after and giving effect to, such merger
or consolidation, the Seller, Beverly and each Selling Subsidiary shall be in
compliance with their respective covenants and agreements contained herein and
in the Related Documents, (x) no Amortization Event shall have occurred or be
impending, (y) the surviving corporation shall be a direct or indirect
wholly-owned subsidiary of Beverly and (z) the Rating Agency Condition shall
have been satisfied.
(b) The obligations of the Seller or any Selling
Subsidiary hereunder shall not be assignable nor shall any Person succeed to
the obligations of the Seller or any Selling Subsidiary hereunder except in
each case in accordance with the provisions of Section 7.1(a).
ARTICLE VIII
OTHER MATTERS RELATING TO SERVICING
Section 8.1. Liability of the Servicers and Master
Servicer; Indemnification. Each Servicer and the Master Servicer, respectively,
will indemnify the Issuer, its beneficial owners, the Trustee and the Health
Care Noteholders from and against any loss, liability, expense, damage or
injury suffered or sustained arising from acts or omissions of such Servicer or
the Master Servicer, as the case may be. The foregoing indemnity shall not be
construed as to limit any rights (including without limitations rights to
indemnity) which any such indemnified person shall be entitled under applicable
law, rule, regulation or court decree, at equity or otherwise.
Section 8.2. Merger or Consolidation of, or Assumption of
the Obligations of, the Servicers or Master Servicer. Any corporation into
which any Servicer or the Master Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
such Servicer or the Master Servicer shall be a party, or any Person succeeding
to the business of such Servicer or the Master Servicer shall be the successor
of such Servicer or the Master Servicer, as the case may be, hereunder (without
relieving such Servicer or the Master Servicer of its responsibilities
hereunder if it survives such merger, conversion or consolidation), without the
execution or filing of any paper; provided, however, that the Issuer, the
successor to such Servicer or the Master Servicer, as the case may be, shall
execute an assumption agreement providing for the assumption by the successor
to such Servicer or the Master Servicer, as the case may be, of the rights and
obligations of such Servicer or the Master Servicer hereunder in a form
reasonably satisfactory to the Issuer and the Trustee; and provided, further,
that no Servicer or Master Servicer may merge or consolidate with or into any
Person unless: (v) such merger or consolidation is permitted by all applicable
Requirements of Law (including, without limitation, all federal and state
Medicaid, Medicare and Department of Veterans' Affairs laws, rules and
regulations), (w) immediately prior to, and immediately after and giving effect
to such merger or consolidation, the Seller, Beverly and each Selling
Subsidiary shall be in compliance with their covenants and agreements contained
herein and in the Related Documents, (x) no Amortization Event shall have
occurred or be impending, (y) the surviving
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corporation shall be a direct or indirect wholly owned subsidiary of Beverly
and (z) the Rating Agency Condition shall have been satisfied.
Section 8.3. Servicers and Master Servicer Not To Resign.
Neither any Servicer nor the Master Servicer shall resign from the obligations
and duties hereby imposed on it except upon a determination that (i) the
performance of its duties hereunder is no longer permissible under applicable
Requirements of Law and (ii) there is no reasonable action which the Servicer
or the Master Servicer could take to make the performance of its duties
hereunder permissible under applicable Requirements of Law. Any such
determination permitting the resignation of any Servicer or the Master Servicer
shall be evidenced as to clause (i) above by an Opinion of Counsel to such
effect delivered to the Issuer and the Trustee.
Section 8.4. Delegation of Duties. In the ordinary course
of business, a Servicer or the Master Servicer may at any time delegate any of
its duties hereunder to any Person who agrees to conduct such duties in
accordance with the terms of this Agreement; provided, however, that (a) such
delegation is otherwise in compliance with all applicable Requirements of Law;
(b) such delegation shall not relieve the Servicer or the Master Servicer of
its liability and responsibility with respect to such duties, and shall not
constitute a resignation within the meaning of Section 8.3 hereof; and (c) the
Rating Agency Condition shall have been satisfied.
Section 8.5. Monitoring. Until such time as the Issuer,
the Trustee or the Health Care Noteholders pursuant to Section 9.1 replace a
Servicer or the Master Servicer with a Successor Servicer or Successor Master
Servicer following delivery of a Termination Notice to such Servicer or Master
Servicer, as applicable, to the extent permitted by law, the Issuer, the
Trustee or the Holders of at least 50% in Aggregate Outstanding Amount of
Health Care Notes of any Series shall have the right to appoint a firm of
Independent public accountants to monitor the servicing of Purchased
Receivables and to furnish to the Issuer and the Trustee, such letters,
certificates and reports as either the Issuer, the Trustee or the Holders of at
least 50% in Aggregate Outstanding Amount of Health Care Notes of any Series
shall reasonably request. The respective Servicer and the Master Servicer
shall cooperate fully with such firm of Independent public accountants. The
fees and expenses of such firm of Independent public accountants shall be paid
for by the respective Servicer or the Master Servicer, as the case may be.
Section 8.6. Confidentiality. Notwithstanding any
provision of this Agreement to the contrary, including, without limitation,
Sections 4.1(h), 4.2(c), 4.3(h), 8.5, 9.1 and 10.2, in no event shall the
Issuer, the Master Servicer, the Trustee or any Health Care Noteholder or any
representatives of any of them have access to any patient records required by
any law, rule or regulation of any Governmental Authority, the JCAHO or any
similar agency, or any other regulatory or professional organization to which
the Master Servicer, the Seller or any Selling Subsidiary belongs or is
subject, to be kept confidential; provided, however, that the Master Servicer,
the Seller and each Selling Subsidiary shall each use its reasonable efforts to
furnish, or cause to be furnished, information reasonably requested by the
Issuer, Master Servicer, the Trustee or any Health Care Noteholder, as the case
may be, relating to the Purchased Receivables without violating any such law,
rule or regulation.
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ARTICLE IX
SERVICING DEFAULTS
Section 9.1. Servicing Defaults. If any one of the
following events (a "Servicing Default") shall occur and be continuing:
(a) any failure by any Servicer or the Master Servicer to
make any payment, transfer, deposit or any demand, or to prepare or deliver any
report, statement or other certification (in any such case, of any kind
whatsoever) or to give instructions or notice to the Issuer or the Trustee on
or before the date occurring five (5) Business Days after the date such
payment, transfer, deposit or report, statement or other certification (in any
such case, of any kind whatsoever) or such instruction or notice is required to
be made, delivered or given, as the case may be, under the terms of this
Agreement (except for deposits required to be made into the Collection Account
pursuant to Section 6.2(a), in which case a Servicing Default shall mean the
failure to make such a deposit on or before the required date of deposit
specified therein, other than a failure caused by factors outside the control
of the Seller, the Master Servicer or the Servicers, in which case an
Amortization Event shall mean the failure to make such a deposit on or before
the date one Business Day after the required date of deposit specified therein;
(b) any Servicer or the Master Servicer shall assign or
delegate its duties under this Agreement, except as permitted by Section 8.4;
(c) failure on the part of any Servicer or the Master
Servicer duly to observe or perform any of its other respective covenants or
agreements set forth in this Agreement, which continues unremedied for a period
of 30 days after the earlier of (i) knowledge of such failure by any Servicer
or the Master Servicer, as the case may be, or (ii) there shall have been
given, by registered or certified mail, to any Servicer or the Master Servicer
by the Issuer, the Trustee or the Holders of at least 50% in Aggregate
Outstanding Amount of Health Care Notes of any Series a written notice
specifying such failure and requiring that it be remedied;
(d) any certification by any Servicer or the Master
Servicer in any certificate delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when delivered and such
incorrectness is not remedied in all material respects within 30 days after the
earlier of (i) knowledge of such failure by such Servicer or the Master
Servicer, as the case may be, or (ii) there shall have been given, by
registered or certified mail to such Servicer or the Master Servicer by the
Issuer, the Trustee or the Holders of at least 50% in Aggregate Outstanding
Amount of Health Care Notes of any Series, a written notice specifying such
incorrectness and requiring that it be remedied;
(e) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of any Servicer or the Master
Servicer in an involuntary case under any applicable Federal or state
bankruptcy, insolvency, or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator,
or similar official for any Servicer or the Master Servicer or for any
substantial part of any of its respective
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property, or ordering the winding up or liquidation of any Servicer or the
Master Servicer and such order, decree or appointment remains unstayed for a
period of 60 days or more;
(f) any Servicer or the Master Servicer shall commence a
voluntary case under any applicable Federal or state bankruptcy, insolvency or
similar law now or hereafter in effect, or consent to the entry of an order for
relief in an involuntary case under any such law, or consent to the appointment
of or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of any Servicer or the Master
Servicer or for any substantial part of any of its respective property, or make
any general assignment for the benefit of creditors, or the failure by any
Servicer or the Master Servicer generally to pay its debts as such debts become
due, or the taking of any corporate action by any Servicer or the Master
Servicer to authorize any of the foregoing;
then, so long as the Servicing Default shall not have been waived or remedied,
(x) in the case of a Servicing Default set forth in clauses (a), (b), (c) or
(d), any of the Issuer, the Trustee or the Holders of at least 50% in Aggregate
Outstanding Amount of Health Care Notes of any Series by written notice to the
affected Servicer or the Master Servicer (a "Termination Notice") may terminate
the rights and obligations of the Servicer or of the Master Servicer under this
Agreement and (y) in the case of a Servicing Default set forth in clauses (e)
or (f), the rights and obligations of such Servicer or of the Master Servicer
under this Agreement shall be automatically terminated without requiring the
delivery of a Termination Notice.
Upon the occurrence of any such Servicing Default the affected
Servicer or the Master Servicer, as the case may be, shall not be relieved from
using its best efforts to perform its obligations in a timely manner in
accordance with the terms of this Agreement and such Servicer or the Master
Servicer, as the case may be, shall provide the Issuer and the Trustee prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. Each Servicer or the Master Servicer,
as the case may be, shall immediately notify the Issuer and the Trustee in
writing of any Servicing Default (or incipient Servicing Default).
After receipt by a Servicer or the Master Servicer, as the
case may be, of such Termination Notice, and on the date that a Successor
Servicer or Successor Master Servicer, as the case may be, shall have been
appointed pursuant to Section 9.2, all authority and power of such Servicer or
Master Servicer, as the case may be, under this Agreement shall pass to and be
vested in a Successor Servicer or Successor Master Servicer, as the case may
be; and, without limitation, the Issuer is hereby authorized and empowered
(upon the failure of the Servicer or Master Servicer, as the case may be, to
cooperate) to execute and deliver, on behalf of such Servicer or Master
Servicer, as the case may be, as attorney-in-fact or otherwise, all documents
and other instrument or instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The affected Servicer or Master Servicer, as the case may be,
agrees not to contest such termination and to fully cooperate at its expense
with the Issuer and such Successor Servicer or Successor Master Servicer, as
the case may be, in effecting the termination of the responsibilities and
rights of such Servicer or the Master Servicer, as the case may be, to conduct
servicing hereunder, including, without limitation, the transfer to such
Successor Servicer or successor Master Servicer, as the case may be, of all
authority of the affected Servicer or Master Servicer, as the case may be, to
service the Purchased Receivables provided for under this Agreement, including,
without limitation, all authority over all Collections which shall on the date
of transfer be held by the affected Servicer or Master Servicer, as the case
may be, for deposit, or which have been deposited by such Servicer or Master
Servicer, as the case may
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be, in the Issuer Accounts, or which shall thereafter be received with respect
to the Purchased Receivables, and to assist the Successor Servicer or Successor
Master Servicer. The affected Servicer or Master Servicer shall promptly
transfer its electronic records relating to the Purchased Receivables to the
Successor Servicer or Successor Master Servicer, as the case may be, in such
electronic form as the Successor Servicer or Successor Master Servicer may
reasonably request and shall promptly transfer to the Successor Servicer or
Successor Master Servicer all other records, correspondence and documents
necessary for the continued servicing of the Purchased Receivables in the
manner and at such times as the Successor Servicer or Successor Master Servicer
shall reasonably request. To the extent that compliance with this Section 9.1
shall require the affected Servicer or Master Servicer, as the case may be, to
disclose to the Successor Servicer or Successor Master Servicer information of
any kind which the affected Servicer or Master Servicer, as the case may be,
reasonably deems to be confidential, the Successor Servicer or Successor Master
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the affected Servicer or Master Servicer, as the
case may be, shall deem necessary to protect its interest.
Section 9.2. Appointment of Successor Servicer or
Successor Master Servicer. (a) On and after the receipt by a Servicer or Master
Servicer, as the case may be, of a Termination Notice, the affected Servicer or
Master Servicer, as the case may be, shall, subject to Section 8.5, continue to
perform all servicing functions under this Agreement until the date specified
in the Termination Notice or otherwise specified by the Issuer, the Trustee or
the Holders of at least 50% in Aggregate Outstanding Amount of Health Care
Notes of any Series, as the case may be, by notice to such Servicer or Master
Servicer, as the case may be, or, if no such date is specified in such
Termination Notice, or otherwise specified by the Issuer, the Trustee or the
Holders of at least 50% in Aggregate Outstanding Amount of Health Care Notes of
any Series, as the case may be, until a date mutually agreed upon by such
Servicer or the Master Servicer, as the case may be, and the Issuer, the
Trustee or the Holders of at least 50% in Aggregate Outstanding Amount of
Health Care Notes of any Series, as the case may be. The Issuer, the Trustee or
at least 50% in Aggregate Outstanding Amount of Health Care Notes of all Series
shall as promptly as possible after the giving of a Termination Notice appoint
a successor Servicer (a "Successor Servicer") or successor Master Servicer (a
"Successor Master Servicer"), as the case may be, and such Successor Servicer
or Successor Master Servicer shall accept its appointment by a written
assumption in a form acceptable to the Issuer and the Trustee.
(b) Upon its appointment, the Successor Servicer or
Successor Master Servicer shall be the successor in all respects to the
respective Servicer or Master Servicer, as the case may be, with respect to
servicing functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
respective Servicer or Master Servicer, as the case may be, by the terms and
provisions hereof, and all references in this Agreement to the respective
Servicer or Master Servicer, as the case may be, shall be deemed to refer to
the Successor Servicer or Successor Master Servicer. Without limiting the
foregoing, the
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Successor Servicer or Successor Master Servicer shall be deemed to make as to
itself each of the representations set forth herein in Sections 3.1(a) through
(g) or 3.4(a) through (g), as the case may be (excepting, in each case, the
representation set forth in the last sentence of Sections 3.1(a) and 3.4(a)).
(c) The Successor Servicer or Successor Master Servicer
shall be entitled to servicing compensation with respect to the Purchased
Receivables sufficient to pay the Successor Servicer or Successor Master
Servicer a reasonable fee (including the estimated costs of such servicing and
a reasonable profit). Such servicing compensation rate shall be a reasonable
fee determined by the Issuer. In the event that such fee shall exceed the
previous Servicing Fee, the outgoing Servicer shall be liable to, and shall
make payment to, the Successor Servicer or the Successor Master Servicer, as
the case may be, in the amount of such shortfall for each period during which
such Successor Servicer or the Successor Master Servicer, as the case may be,
is acting hereunder; provided, however, that such Successor Servicer shall
remain obligated to perform hereunder notwithstanding the outgoing Servicer's
non-payment of such shortfall.
Section 9.3. Collection of Medicaid, Medicare and
Department of Veterans' Affairs Payments by Servicers. Notwithstanding any
provision hereof or of any Related Document to the contrary, all Medicaid,
Medicare or Department of Veterans' Affairs payments which are made by an
Obligor with respect to any Purchased Receivable shall be collected from such
Obligor only by the Servicer which furnished the services for which such
payments are made, except to the extent that an Obligor may be required to
submit any such payments directly to a Person other than the Servicer pursuant
to a court-ordered assignment which is valid, binding and enforceable under
applicable federal and state Medicaid, Medicare and Department of Veterans'
Affairs laws, rules and regulations; and no Related Document shall be construed
to permit any other Person, in violation of applicable federal and state
Medicaid, Medicare or Department of Veterans' Affairs laws, rules and
regulations to collect or receive, or to be entitled to collect or receive, any
such payments prior to the Servicer's receipt thereof.
ARTICLE X
MATTERS RELATING TO THE ISSUER
Section 10.1. Recourse. Except as otherwise expressly
provided herein, the Issuer is purchasing and will purchase the Purchased
Receivables without recourse to the Seller (or any Selling Subsidiary) or the
respective Servicer or the Master Servicer, and the Issuer shall bear all
economic benefit and economic risk of loss inherent in owning the Purchased
Receivables. The Issuer, as opposed to the Seller (or any Selling Subsidiary)
or the Servicers, shall bear all losses arising out of any default of the
Obligor with respect to any Purchased Receivable while such Purchased
Receivable is owned by the Issuer.
Section 10.2. Inspection of Books and Records. The Issuer
and the Trustee shall have the right to review and inspect the Seller's, Master
Servicer's and Servicers' books and records as such books and records apply to
the respective Purchased Receivables and to make
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copies and extracts therefrom and cause such books and records, as they relate
to the respective Purchased Receivables, to be audited by a firm of Independent
public accountants selected by the Issuer.
ARTICLE XI
INDEMNITY
Section 11.1. Indemnity. (a) By the Seller. The Seller
agrees to indemnify the Issuer, the Holders of the Health Care Notes and the
Trustee (the "Indemnified Parties") and each of them against any and all
losses, liabilities, claims, damages, costs and expenses (including without
limitation reasonable fees and expenses of counsel) imposed on, asserted
against or suffered or incurred by, any of them and which in any way arise out
of or relate to:
(i) any taxes which may be asserted or imposed at any time in
respect of purchases, sales, repurchases and resales of any Purchased
Receivable;
(ii) the lack of enforceable ownership and/or first perfected
priority and general first Lien status against all Persons (including
without limitation any bankruptcy trustee or similar Person) in favor
of the Issuer in any Purchased Receivable or any direct or indirect
Proceeds thereof;
(iii) the inaccuracy in any material respect at any time made
or deemed made of the Receivables Information or of any representation
or warranty made by the Seller (or any of its Authorized Officers)
hereunder or under any Related Document or in any information or
report delivered by the Seller pursuant hereto;
(iv) the failure by the Seller to comply with any applicable
Requirement of Law or Contractual Obligation with respect to any of
its Purchased Receivables;
(v) any failure of the Seller to perform its duties or
obligations hereunder in accordance with the provisions of this
Agreement;
(vi) any non-compliance by the Seller with the "bulk transfer"
or analogous laws of any jurisdiction or jurisdictions; or
(vii) any Regulatory Change which (i) changes the method or
basis of taxation of any amounts payable to the Issuer under this
Agreement in respect of any Purchased Receivables or (ii) imposes any
other condition affecting any Related Document.
(b) By Each Selling Subsidiary. Each Selling Subsidiary
agrees to indemnify the Indemnified Parties, and each of them, against any and
all losses, liabilities, claims, damages, costs and expenses (including without
limitation reasonable fees and expenses of counsel) imposed on, asserted
against or suffered or incurred by any of them and which in any way arise out
of or relate to:
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(i) the inaccuracy in any material respect at any time made or
deemed made of the Receivables Information or of any representation or
warranty made by such Selling Subsidiary (or any of its Authorized
Officers) hereunder or under any Related Document or in any
information or report delivered by it pursuant hereto;
(ii) the failure by such Selling Subsidiary to comply with any
applicable Requirement of Law or Contractual Obligation with respect
to any of its respective Purchased Receivables;
(iii) any failure of such Selling Subsidiary to perform its
duties or obligations under this Agreement and under its respective
Selling Subsidiary Agreement in accordance with the provisions hereof
and thereof; or
(iv) any non-compliance by such Selling Subsidiary in
connection herewith or with its respective Selling Subsidiary
Agreement with the "bulk transfer" or analogous laws of any
jurisdiction or jurisdictions.
(c) Third Party Claims. Any Indemnified Party shall
notify the Seller or the respective Selling Subsidiary (each, an "Indemnifying
Party"), as the case may be, promptly after such Indemnified Party's receipt of
notice, or such Indemnified Party otherwise becoming aware, of any third party
claims with respect to which indemnification may be sought under this Section
11.1. Such notice shall be in writing and shall be delivered in accordance
with the provisions of Section 12.6 hereof. In case any such action is brought
against any Indemnified Party and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
Indemnifying Party, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified Party under this
Subsection (c) for any legal fees and expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof. Any one or more of
the Indemnified Parties shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Indemnified Parties unless (i) the employment of such has been specifically
authorized in writing by the Indemnifying Party or (ii) representation of both
the Indemnifying Party and such Indemnified Party or Indemnified Parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The Indemnifying Party shall not be liable for any
settlement of any such action effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff in
any such action with or without consent, the Indemnifying Party agrees to
indemnify and hold harmless the Indemnified Parties from and against any loss
or liability by reason of such settlement or final judgment. Notwithstanding
the foregoing, if an Indemnified Party refuses to consent to a bona fide offer
of settlement of a third party claim that the Indemnifying Party is willing to
accept, the Indemnified Party may continue to pursue the matter at its own
expense, but the Indemnifying Party's liability shall be limited to the amount
of such settlement. If the Indemnifying Party elects not to participate in a
matter in any way, all legal and other expenses reasonably incurred by the
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Indemnified Party with respect to such third party claim shall be for the
account of the Indemnifying Party. Any indemnification will be paid promptly
upon demand therefor.
(d) Indemnity Not to Provide Recourse. The parties
intend that this Section 11.1 not be applied to provide direct or indirect
assurance to any Indemnified Party against loss by reason of the bankruptcy or
insolvency (or other credit condition) of, or default by, the related Obligor
on, or the collectability of, any Purchased Receivable.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Transfer Termination Date. No purchase of
any Receivable by the Issuer may occur subsequent to the Transfer Termination
Date.
Section 12.2. Termination of Agreement; Sale of
Receivables. This Agreement shall terminate on the date on which all
principal, premium, if any, and interest on all Health Care Notes and all
amounts due hereunder and under the Related Documents shall have been
indefeasibly paid in full. Notwithstanding any such termination, all
obligations under Sections 2.2 and 5.4 and under Articles VI, IX and XI shall
survive.
Section 12.3. Amendment. Subject to Section 12.16, this
Agreement may be amended only in writing signed by Beverly, the Servicers, the
Seller, each Selling Subsidiary, the Master Servicer, and the Issuer consented
to in the manner set forth in Section 8.6 or Section 8.7 of the Indenture, as
applicable. Contemporaneously therewith, the Seller shall give written notice
of any such amendment to the Rating Agency.
Section 12.4. Intention of the Parties. It is the
intention of the parties hereto that the transactions arising under this
Agreement be treated as a present and absolute sale of the Purchased
Receivables. The terms of this Agreement shall be construed to further this
intention of the parties. In the event that such transactions are held by a
court of competent jurisdiction not to constitute a sale, the parties hereto
intend that such transactions constitute the grant of (and the parties hereto
hereby grant and agree that, in such event, the applicable parties shall have,
by the provisions of this Agreement, granted) a security interest in all of the
Seller's (and each Selling Subsidiary's) right, title and interest in and to
the Purchased Receivable and the Proceeds thereof and that this Agreement
constitute a security agreement under applicable law.
SECTION 12.5. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS. THE PARTIES HERETO EACH IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, EACH HEREBY
IRREVOCABLY WAIVING ANY OBJECTION TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING SO BROUGHT AS WELL AS ANY CLAIM OF INCONVENIENT FORUM. THE PARTIES
HERETO EACH HEREBY CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR
51
<PAGE> 56
PROCEEDING WITH RESPECT TO THIS AGREEMENT, OR ANY DOCUMENT DELIVERED PURSUANT
HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SPECIFIED
AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO ANY OTHER ADDRESS OF WHICH
IT SHALL HAVE GIVEN WRITTEN NOTICE TO THE OTHER PARTIES. THE PARTIES HERETO
EACH WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OF ERROR BY
REASON OF SUCH SERVICE, IF MADE PURSUANT TO THE TERMS HEREOF, AND AGREES THAT
SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID PERSONAL SERVICE UPON IT AND
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS. THE FOREGOING
SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING SUIT IN THE COURTS OF
ANY JURISDICTION. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT CAN EFFECTIVELY DO SO UNDER APPLICABLE LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS.
Section 12.6. Notices. All notices, demands, instructions and
other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered, certified or express (by U.S. Postal Service or other nationally
recognized overnight delivery service) mail, postage prepaid, return receipt
requested, or by confirmed telecopy or prepaid telegram (with messenger
delivery specified in the case of a telegram) and shall be deemed to be given
for purposes of this Agreement on the day that such writing is delivered or
sent to the intended recipient thereof in accordance with the provisions of
this Section 12.6. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this Section, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective telecopier numbers) indicated below, and, in the case of telephonic
instructions or notices, by calling the telephone number or numbers indicated
for such party below:
If to the Issuer:
Beverly Funding Corporation
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-5600
Attention: Financial Reporting
Telephone: (501) 484-8984
52
<PAGE> 57
Telecopy: (501) 484-8608
with a copy to:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-5600
Attention: Treasurer
Telephone: (501) 484-8902
Telecopy: (501) 484-8916
If to the Seller:
Beverly California Corporation
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-5600
Attention: Treasurer
Telephone: (501) 484-8902
Telecopy: (501) 484-8916
If to any Selling Subsidiary:
Beverly California Corporation
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-5600
Attention: Treasurer
Telephone: (501) 484-8902
Telecopy: (501) 484-8916
If to the Master Servicer:
Beverly California Corporation
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-5600
Attention: Treasurer
Telephone: (501) 484-8902
Telecopy: (501) 484-8916
53
<PAGE> 58
If to the Trustee:
Chemical Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Structured Finance Services - ABS
Telephone: (212) 946-8600
Telecopy: (212) 946-3916
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party. Copies of all notices delivered
pursuant to Section 2.3 and notices of all events required to be delivered to
the Rating Agency shall also be delivered to Moody's Investors Service, Inc.,
99 Church Street, New York, New York 10007, Attention: Asset Backed
Surveillance Department.
Section 12.7. Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this Agreement shall
for any reason whatsoever be held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement.
Section 12.8. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 8.2 and 9.2, this
Agreement may not be assigned by any party without the prior consent of the
Issuer and of the Trustee.
Section 12.9. Further Assurances. The Seller, each Selling
Subsidiary, Beverly, the Master Servicer and each Servicer agree to do and
perform, from time to time, any and all acts and to execute any and all further
instruments required or reasonably requested by the Issuer, the Trustee or the
Holders of at least 50% in Aggregate Outstanding Amount of any Series of Health
Care Notes to more fully effect the purposes of this Agreement, including,
without limitation, the execution of any financing statements or continuation
statements relating to the Purchased Receivables for filing under the
provisions of the UCC of any applicable jurisdiction.
Section 12.10. No Waiver; Cumulative Remedies. No failure
to exercise and no delay in exercising, on the part of the Issuer, the Trustee
or any other Person entitled to rights or benefits hereunder, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
54
<PAGE> 59
Section 12.11. Counterparts. This Agreement may be executed
in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
Section 12.12. Binding Effect; Benefit of Agreement.
Subject to Section 12.8, the provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement shall also inure to the benefit of the Trustee and
the Holders of the Health Care Notes, each of which is hereby expressly
declared to be a third party beneficiary hereof. Subject to the foregoing, no
Person not a party to this Agreement shall be deemed to be a third party
beneficiary of this Agreement, nor shall any Person be empowered to enforce the
provisions of this Agreement, except as set forth in the preceding sentence and
to the extent such Person becomes a permitted successor or assign hereunder.
Section 12.13. Nonpetition Covenant. Notwithstanding any
prior termination of this Agreement, each Selling Subsidiary, the Servicers,
Beverly, the Master Servicer, the Seller and any Health Care Noteholders by
entering into this Agreement or purchasing the Health Care Notes shall not,
prior to the date which is 370 days after the termination of this Agreement,
acquiesce, petition or otherwise, directly or indirectly, invoke or cause the
Issuer to invoke the process of any court of Governmental Authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Issuer.
Section 12.14. Headings. The headings herein are for
purpose of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
Section 12.15. General Provision as to Payments. Except as
otherwise expressly provided herein, all payments hereunder (including without
limitation all net settlements occurring on any Distribution Date) shall be
made prior to 11:00 a.m. New York City Time on the date specified therefor and
in funds immediately available in The City of New York.
Section 12.16. Additional Parties Hereto. (a) In the event
that (x) one or more direct or indirect wholly-owned subsidiaries of Beverly
(other than the Selling Subsidiaries), now owned or hereafter acquired, is
primarily engaged in the same business as is conducted on the Effective Date by
the Seller and any Selling Subsidiary, or (y) Beverly reorganizes its corporate
structure such that facilities generating Included Receivables on the Effective
Date (or acquired as contemplated by clause (x)) are owned by one or more
additional wholly-owned subsidiaries of Beverly, any or all of the wholly-owned
subsidiaries referred to in clause (x) and (y) may, following 30-days' advance
written notice to the Rating Agency and the Trustee, become parties to this
Agreement upon delivery to the Issuer and the Trustee of:
(i) a duly executed instrument in writing reasonably
satisfactory to them, agreeing to become a party to this Agreement
with the same effect as if named herein in
55
<PAGE> 60
a similar capacity (including, without limitation in their capacities
as Servicers) as a Selling Subsidiary;
(ii) a duly executed Selling Subsidiary Agreement with the
Seller;
(iii) documents relating to such subsidiary of the kind
delivered by the Selling Subsidiaries as of the Effective Date
pursuant to clauses (a) through (d), (i), (j), (k), (l) and, if
applicable, clause (p) of clause (2) of Schedule I hereto and a list
of Excluded Facilities, if any, of such subsidiary of the kind listed
in Schedule II hereto; and
(iv) written evidence of satisfaction of the Rating Agency
Condition.
(b) Upon the addition of any wholly-owned subsidiary of
Beverly as a party hereto as contemplated by Subsection (a) above and without
further act or documentation of any kind, the provisions of this Agreement and
the Related Documents shall be deemed amended such that such subsidiary assumes
obligations, and is entitled to rights of, and the other provisions of this
Agreement and the Related Documents (including, without limitation, Article IX
hereof) apply to the same extent as the same apply to, the Selling Subsidiaries
as of the Effective Date (including without limitation in their capacities as
Servicers) on the Effective Date.
Section 12.17. Assignment of this Agreement. The Seller and
the Selling Subsidiaries acknowledge that the Issuer has granted the Trustee a
security interest in and Lien on the Purchased Receivables and other Collateral
and its right, title and interest in this Agreement.
Section 12.18. Limitation of Liability of Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement has
been acknowledged and accepted by Chemical Bank not in its individual capacity
but solely as Trustee under the Indenture, and in no event shall Chemical Bank
have any liability for the representations, warranties, covenants, agreements
or other obligations of the Seller, Master Servicer, Beverly and each Servicer
hereunder or in any of the certificates, notices or agreements delivered by any
such Person pursuant hereto.
Section 12.19. Entire Agreement. This Agreement and the
Related Documents constitute the entire agreement among the parties hereto.
[The remainder of this page has been intentionally left blank]
56
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
ISSUER: BEVERLY FUNDING CORPORATION
- ------
By: /s/ Schuyler Hollingsworth, Jr.
----------------------------------
Title: Senior Vice President and Treasurer
SELLER: BEVERLY CALIFORNIA CORPORATION
- ------
By: /s/ Schuyler Hollingsworth, Jr.
--------------------------------
Title: Senior Vice President and Treasurer
SELLING SUBSIDIARIES: BEVERLY ENTERPRISES - ALABAMA, INC.
- -------------------- BEVERLY ENTERPRISES - ARKANSAS, INC.
BEVERLY ENTERPRISES - ARIZONA, INC.
BEVERLY ENTERPRISES - CALIFORNIA, INC.
BEVERLY ENTERPRISES - FLORIDA, INC.
BEVERLY ENTERPRISES - GEORGIA, INC.
BEVERLY ENTERPRISES - INDIANA, INC.
BEVERLY ENTERPRISES - MASSACHUSETTS, INC.
BEVERLY ENTERPRISES - MARYLAND, INC.
BEVERLY ENTERPRISES - MINNESOTA, INC.
BEVERLY ENTERPRISES - MISSOURI, INC.
BEVERLY ENTERPRISES - NEBRASKA, INC.
BEVERLY ENTERPRISES - NEW JERSEY, INC.
BEVERLY ENTERPRISES - NORTH CAROLINA, INC.
BEVERLY ENTERPRISES - OHIO, INC.
BEVERLY ENTERPRISES - OREGON, INC.
BEVERLY ENTERPRISES - PENNSYLVANIA, INC.
BEVERLY ENTERPRISES - SOUTH CAROLINA, INC.
BEVERLY ENTERPRISES - TENNESSEE, INC.
BEVERLY ENTERPRISES - TEXAS, INC.
BEVERLY ENTERPRISES - VIRGINIA, INC.
BEVERLY ENTERPRISES - WISCONSIN, INC.
BEVERLY SAVANNA CAY MANOR, INC.
COLUMBIA - VALLEY NURSING HOME, INC.
CONTINENTAL CARE CENTERS OF COUNCIL BLUFFS,
INC.
HOSPITAL FACILITIES CORPORATION
LIBERTY NURSING HOMES, INCORPORATED
<PAGE> 62
MODERN CARE OF LUMBERTON, INC.
NURSING HOME OPERATORS, INC.
PETERSEN HEALTH CARE, INC.
VANTAGE HEALTH CARE CORPORATION
By: /s/ Schuyler Hollingsworth, Jr.
--------------------------------
Name: Schuyler Hollingsworth, Jr.
Title: Senior Vice President and
Treasurer
BEVERLY: BEVERLY ENTERPRISES, INC
- -------
By: /s/ Schuyler Hollingsworth, Jr.
---------------------------------
Title: Senior Vice President and Treasurer
AGREED TO AND ACKNOWLEDGED BY:
CHEMICAL BANK, as Trustee
By: /s/ Regina Bishop
--------------------
Title: Assistant Vice President
<PAGE> 63
SCHEDULE I
The Effective Date shall be subject to (1) satisfaction on and
as of the Effective Date of the following conditions:
(a) the representations and warranties of the Seller, each Selling
Subsidiary and of Beverly contained herein shall be true and
correct;
(b) the Related Documents shall all have
been duly executed and delivered and
be in full force and effect;
(c) the Issuer shall have amended its
Certificate of Incorporation, and
each of the Issuer, the Seller,
Beverly and each Selling Subsidiary
shall have taken all appropriate
corporate action, to permit and
authorize the transactions
contemplated by the Related
Documents;
(d) the Series 1994-A Health Care Notes
shall have been rated Aa by Moody's;
(e) no Amortization Event shall have
occurred or be impending; and
(f) Beverly shall have paid or caused to
be paid all accrued fees and
expenses of the Issuer and of the
placement agent for the Series
1994-A Health Care Notes, including
the fees and expenses of counsel
(provided that Beverly's obligation
with respect to the fees, but not
disbursements, of counsel for the
placement agent shall be limited to
$100,000), in connection with the
preparation, execution and delivery
of the Related Documents and the
consummation of the transactions
contemplated thereby, which fees and
expenses shall have been notified to
Beverly at least one Business Day
prior to the Closing Date;
(g) the Purchase Money Note and the
Beverly Note under the Original
Agreement shall have been cancelled
and any outstandings thereunder,
either paid off or, in the case of
the Beverly Note, converted to
capital surplus;
(h) Beverly shall have provided the
Issuer with an initial capital
contribution such that the Net
Purchased Receivables shall
<PAGE> 64
exceed the Minimum Required
Receivables Balance on the Effective
Date.
and (2) to receipt by the Issuer and the Trustee of the following documents:
(a) a copy of the Issuer's, the
Seller's, each Selling Subsidiary's,
and Beverly's corporate charters and
all amendments thereto, certified as
of a recent date by the respective
Secretaries;
(b) copies of certificates of recent
date, issued by the Secretary of
State of their respective states of
incorporation, as to the legal
existence and good standing of the
Issuers, the Sellers, each Selling
Subsidiary and Beverly;
(c) duly certified copies of: the
Issuer's, the Seller's, each Selling
Subsidiary's, and Beverly's bylaws
and board of directors resolutions
approving the execution, delivery
and performance of the Related
Documents to which each is,
respectively, a party and the
transactions contemplated thereby;
and evidence of the authority and
incumbency of specified officers of
the Issuer, the Seller, each Selling
Subsidiary and Beverly to execute
the Related Documents to which each
is, respectively, a party;
(d) favorable opinions of: (I) Robert W.
Pommerville, Esq., as counsel to the
Issuer and as counsel to Beverly,
the Seller and the Selling
Subsidiaries, and (II) Girior &
Gregory;
(e) a "true sale" opinion of Orrick,
Herrington & Sutcliffe;
(f) a "non-consolidation" opinion of
Weil, Gotshal & Manges;
(g) a general corporate opinion of Weil,
Gotshal & Manges;
(h) a California perfection opinion of
Orrick, Herrington & Sutcliffe;
(i) an opinion of Reed Smith Shaw &
McClay as to compliance with
applicable federal and state
transfer restrictions;
(j) a certificate, addressed to Orrick,
Herrington & Sutcliffe, and to Weil
Gotshal & Manges, of the Treasurer
of Beverly;
I-2
<PAGE> 65
(k) copies of Requests for Information
or Copies (Form UCC-11), dated as of
a recent date, listing all
conflicting financing statements on
file in all states in which the
Seller, or any Selling Subsidiary
(or any predecessor) has facilities
originating Included Receivables or
maintains Records pertaining to
Included Receivables that name the
Seller or any Selling Subsidiary (or
any predecessor of either) as debtor
or assignor together with copies of
all such listed financing
statements, which shall show no
filings other than those described
in (l) below;
(l) copies of financing statements (Form
UCC-1) naming the Seller, or any
Selling Subsidiary as
debtor/assignors and the Issuer (or
in the case of any Selling
Subsidiary, the Seller) as
assignee/secured party and
containing an indication of
assignment thereof to the Trustee
(or, in the case of any Selling
Subsidiary, assignment thereof to
the Seller and the Trustee) of all
Included Receivables now existing or
hereafter acquired or created and
all Proceeds thereof, filed in the
office of the Secretary of State of
Arkansas and all states in which
they have facilities originating
Included Receivables or maintains
Records pertaining to Included
Receivables (and, in any case where
there is only one such office in a
State, with the appropriate local
filing office);
(m) Certificate as to termination of the
Issuer's Commercial Paper Program;
(n) Certificate as to termination of the
Liquidity Agreement;
(o) UCC-3's terminating UCC-1's
previously in favor of Collateral
Agent;
(p) such other documents, opinions or
certificates as the Issuer or the
Trustee may reasonably request; and
(q) cross receipts.
UPON ISSUANCE OF THE SERIES 1994-A HEALTH CARE NOTES, ALL
CONDITIONS TO THE EFFECTIVE DATE SHALL BE IRREVOCABLY DEEMED SATISFIED.
I-3
<PAGE> 66
EXHIBIT A
FIRST AMENDMENT AND RESTATEMENT, dated as of December 1, 1994
to AGREEMENT dated as of December 1, 1990 (this "Agreement") (the "Original
Agreement") between [________________________], a _____________ corporation
("Selling Subsidiary") and Beverly California Corporation, a California
corporation ("Seller").
WHEREAS, Selling Subsidiary and Seller are each direct or
indirect wholly-owned subsidiaries of Beverly Enterprises, Inc. ("Beverly");
and
WHEREAS, Selling Subsidiary and Seller have entered into a
Master Sale and Servicing Agreement (the "Original Sale and Servicing
Agreement"), dated as of December 1, 1990, with, inter alia, Beverly Funding
Corporation (the "Issuer") and others pursuant to which the Issuer has, prior
to the date hereof, purchased Seller's Included Receivables (as defined
therein); and Selling Subsidiary has availed itself indirectly of the benefits
of the Original Sale and Servicing Agreement by selling its Included
Receivables to Seller (for resale by Seller to the Issuer pursuant to the
Original Sale and Servicing Agreement) on the same terms (except as specified
herein) as are applicable to sales by Seller to the Issuer under the Original
Sale and Servicing Agreement; and
WHEREAS, the Original Sale and Servicing Agreement is being
amended and restated by the First Amendment and Restatement thereof (the "Sale
and Servicing Agreement"), dated as of December 1, 1994 and the Selling
Subsidiary desires to continue to be able to sell its Included Receivables to
Seller for resale to the Issuer under the Sale and Servicing Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions; Interpretation. (a) Capitalized terms
used herein undefined shall have the respective meanings ascribed in the Sale
and Servicing Agreement.
(b) It is the intention of the parties that the transactions
pursuant hereto constitute a present and absolute sale of the Included
Receivables to the same extent as specified for sales under the Sale and
Servicing Agreement in Section 12.4 thereof.
2. Sales of Receivables. (a) Prior to the Effective
Date, the Selling Subsidiary has, pursuant to the Original Agreement, sold,
transferred, assigned, set over and conveyed to the Seller all its right, title
and interest in certain Receivables previously conveyed hereunder. On the
Effective Date, all Effective Date Receivables shall, without any action by
Selling Subsidiary or any other Person, be deemed to have been sold hereunder,
and the Additional Receivables are hereby sold hereunder, and the Effective
Date Receivables and Additional Receivables shall
<PAGE> 67
thereafter be held (or disposed of) pursuant to the terms of this Agreement and
the Related Documents.
(b) On the terms and conditions hereinafter set forth, the
Selling Subsidiary shall sell, and Seller shall make purchases on each Business
Day after the Effective Date prior to the Transfer Termination Date, of all of
Selling Subsidiary's right, title and interest in its Included Receivables
created subsequent to the last sale hereunder. Pursuant to the Sale and
Servicing Agreement and the Related Documents (as defined therein), the Seller
will sell such Included Receivables to the Issuer. The Selling Subsidiary
hereby consents to, and approves of, the arrangements documented by the Sale
and Servicing Agreement and the Related Documents.
(c) Selling Subsidiary hereby sells, transfers, assigns,
sets-over and otherwise conveys (without recourse, except as expressly provided
in the Sale and Servicing Agreement), and Seller hereby purchases, on each
Business Day after the Effective Date prior to the Transfer Termination Date,
all of Selling Subsidiary's right, title and interest in its Included
Receivables created subsequent to the last sale hereunder. The purchase price
therefor shall be the Purchase Price under the Sale and Servicing Agreement for
the sale of such Included Receivables by the Seller to the Issuer. Payments of
(and adjustments to) the purchase price hereunder and all other terms and
conditions applicable to each sale hereunder shall be the same (except: (i) as
pertain to the right of the Seller to designate Included Facilities pursuant to
Section 2.1(d) thereof (which right shall continue to be exercised only by the
Seller notwithstanding its effect on sales hereunder), (ii) as pertain to the
Master Servicer or to any Servicer other than Selling Subsidiary, (iii) as
pertain to segregation of funds in separate accounts and (iv) the provisions of
Section 6.3 thereof (which shall continue to apply as therein specified but are
not incorporated herein by reference)) as would be applicable under the Sale
and Servicing Agreement if Selling Subsidiary were the Seller thereunder and
Seller the Issuer thereunder, which terms shall, mutatis mutandis, be deemed
incorporated herein in their entirety by this reference. Without limiting the
generality of the foregoing, (x) Selling Subsidiary, with respect to its
Included Receivables, makes to Seller each of the representations, warranties
and agreements (including without limitation those requiring repurchase of, or
payments in respect of adjustments to, Purchased Receivables) made by Seller to
the Issuer with respect to the Purchased Receivables under the Sale and
Servicing Agreement; and (y) the Seller and Selling Subsidiary shall be bound
by the other provisions of the Sale and Servicing Agreement as if (except as
provided above for Section 6.3 thereof) the Seller were the Issuer and the
Selling Subsidiary were the Seller thereunder.
The provisions of the Sale and Servicing Agreement dealing
with the Selling Subsidiary or its Selling Subsidiary Receivables shall
continue to apply as specified therein, unaffected by the provisions of this
Agreement.
3. Termination. Either Selling Subsidiary or Seller may
terminate future sales of Included Receivables hereunder upon 30 days written
notice to the other and to the Trustee.
A-2
<PAGE> 68
4. Miscellaneous.
(a) Notices hereunder shall be given, and be effective, in
the same manner as notices under the Sale and Servicing Agreement.
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO EACH IRREVOCABLY SUBMIT TO
THE NON- EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING
IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT. EACH HEREBY
IRREVOCABLY WAIVING ANY OBJECTION TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING SO BROUGHT, AS WELL AS ANY CLAIM OF INCONVENIENT FORUM. THE PARTIES
HERETO HEREBY EACH CONSENT TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, OR ANY DOCUMENT DELIVERED PURSUANT
HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE ADDRESS OF EACH OF THE PARTY
SPECIFIED AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO ANY OTHER ADDRESS
OF WHICH ANY PARTY SHALL HAVE GIVEN WRITTEN NOTICE TO THE OTHER PARTY. EACH
PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OF
ERROR BY REASON OF SUCH SERVICE, IF MADE PURSUANT TO THE TERMS HEREOF, AND
AGREES THAT SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID PERSONAL SERVICE UPON
EACH PARTY AND SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS.
EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT CAN EFFECTIVELY
DO SO UNDER APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE RELATED DOCUMENTS.
(c) This Agreement may not be assigned by either party
without the consent of the other party, the Issuer and the Trustee.
(d) This Agreement may not be amended or waived except by an
instrument in writing signed by the party to be charged.
(e) Subject to (c) above, this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns; provided, that, the Issuer, the Trustee and the Health
Care Noteholders are each expressly declared to be third party beneficiaries of
the agreements contained herein.
(f) This Agreement shall become effective upon the Effective
Date under the Sale and Servicing Agreement.
A-3
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
BEVERLY CALIFORNIA CORPORATION
By:______________________________
Title:
[SELLING SUBSIDIARY]
By:______________________________
Title:
A-4
<PAGE> 70
EXHIBIT B
CONFIRMING ASSIGNMENT
CONFIRMING ASSIGNMENT No. ___ OF RECEIVABLES, dated as of
______________________, between Beverly California Corporation, a California
corporation (the "Seller") and Beverly Funding Corporation, a Delaware
corporation (the "Issuer") pursuant to Sections 2.1(b) and (c) of the Sale and
Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, pursuant to the First Amendment and Restatement (the
"Sale and Servicing Agreement"), dated as of December 1, 1994, to the Master
Sale and Servicing Agreement (the "Original Agreement"), dated as of December
1, 1990, the Seller wishes to confirm the conveyance of the Purchased
Receivables to the Issuer.
The parties hereto agrees as follows:
1. Defined Terms. All capitalized terms used herein
shall have the meanings specified in the Sale and Servicing Agreement.
2. List of Transferred Purchased Receivables. The
Seller hereby confirms that on the [Effective Date (with respect to the
Effective Date Receivables and Additional Receivables [__________ [insert
applicable month and year] Distribution Date (with respect to the Purchased
Receivables transferred during the immediately preceding Collection Period)],
the Seller delivered to the Issuer a computer file list, dated as of [the last
day of the month prior to the Effective Date] [_______ days prior to such
Distribution Date containing a true and complete list of all [Included
Receivables so previously sold by the Seller as of the Effective Date]
[Purchased Receivables sold by it to the Issuer during the immediately
preceding Collection Period], in which such Included Receivables are identified
by name of the patient, the month during which service was provided and the
amount due.
3. Confirmation of Conveyance of Purchased Receivables.
The Seller hereby sells, transfers, assigns, sets over and conveys for fair
value (receipt and sufficiency of which is hereby acknowledged) and in
accordance with Section 2.1 of the Sale and Servicing Agreement to the Issuer
without recourse (except as expressly provided in the Sale and Servicing
Agreement) of all of its right, title and interest in, to and under all
[Effective Date Receivables and Additional Receivables] [the Purchased
Receivables transferred during the ______________ Collection Period], all
moneys due or to become due and all amounts received with respect thereto and
all "proceeds" (as defined in Section 9-306 of the UCC) and confirms that such
sale, transfer, assignment, set over and conveyance does not constitute and is
not intended to result in a creation
<PAGE> 71
or an assumption by the Issuer of any obligation of the Servicer or any other
Person in connection with [such Receivables] [the Purchased Receivables] or
under any agreement or instrument relating thereto, including, without
limitation, any obligation to any Person.
4. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
B-2
<PAGE> 72
IN WITNESS WHEREOF, the undersigned has caused this Confirming
Assignment to be duly executed and delivered by its duly authorized officer on
the day and the year first above written.
BEVERLY CALIFORNIA CORPORATION
By: _____________________________
Title:
BEVERLY FUNDING CORPORATION
By: _____________________________
Title:
B-3
<PAGE> 73
EXHIBIT C
FORM OF SELLING SUBSIDIARY CONFIRMING ASSIGNMENT
CONFIRMING ASSIGNMENT No. ____ OF RECEIVABLES, dated as of
______________, between the Selling Subsidiaries listed on the signature pages
hereto (the "Sellers") and Beverly California Corporation, a California
corporation ("Beverly California") pursuant to Sections 2.1(b) and (c) of the
Sale and Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, pursuant to the First Amendment and Restatement (the
"Sale and Servicing Agreement"), dated as of December __, 1994, to the Master
Sale and Servicing Agreement (the "Original Agreement"), dated as of December
1, 1990, the Sellers wish to confirm the conveyance of Purchased Receivables to
Beverly California (which Purchased Receivables have been, or are being,
conveyed to the Issuer by Beverly California).
The parties hereto agree as follows:
1. Defined Terms. All capitalized terms used herein
shall have the meanings specified in the Sale and Servicing Agreement.
2. List of Transferred Purchased Receivables. The
Sellers hereby confirm that on the */[Effective Date (with respect to its
Effective Date Receivables and Additional Receivables)] [__________ insert
applicable month and year] Distribution Date (with respect to the Purchased
Receivables transferred during the immediately preceding Collection Period)],
the Sellers delivered to Beverly California a computer file list, dated as of
*[the last day of the month prior to the Effective Date] [___ days prior to
such Distribution Date], containing a true and complete list of all *[such
Effective Date Receivables and Additional Receivables] [Purchased Receivables
sold by it to Beverly California and owned by Beverly California during the
preceding Collection Period, after giving effect to all additions or removals
to or prior on such Distribution Date], in which *[such Effective Date and
Additional Receivables] [Purchased Receivables transferred during the
immediately preceding Collection Period] are identified by name of the patient,
the month during which service was provided and the amount due.
__________________________________
*/: use only on Effective Date
<PAGE> 74
3. Confirmation of Conveyance of Purchased Receivables.
The Sellers hereby confirm the sale, transfer, assignment, set over and
conveyance for fair value (receipt and sufficiency of which is hereby
acknowledged) and in accordance with the First Amendment and Restatement (the
"Selling Subsidiary Agreement"), dated as of December __, 1994, to the
Agreement (the "Original Subsidiary Agreement"), dated as of December 1, 1990
between the Sellers and Beverly California, without recourse (except as
expressly provided in the Selling Subsidiary Agreement) of all of its right,
title and interest in, to and under *[all Effective Date Receivables and
Additional Receivables] [the Purchased Receivables], all moneys due or to
become due and all amounts received with respect thereto and all "proceeds"
thereof (as defined in Section 9-306 of the UCC) and confirms that such sale,
transfer, assignment, set over and conveyance does not constitute and is not
intended to result in a creation or an assumption by Beverly California of any
obligation of the Sellers or any other Person in connection with *[such
Receivables] [the Purchased Receivables] or under any agreement or instrument
relating thereto, including, without limitation, any obligation to any Person.
4. Acknowledgment of Conveyance to Issuer. The Sellers
hereby acknowledge and agree that except as provided in Section 3 hereof, all
right, title and interest in *[such Receivables] [the Purchased Receivables],
all money due or to become due and all amounts received with respect hereto and
all "proceeds" thereof (as defined in Section 9-306 of the UCC), the conveyance
of which to Beverly California is confirmed hereby, have been (or are being)
sold, transferred, assigned, set-over and conveyed by Beverly California to the
Issuer in accordance with Section 2.1 of the Sale and Servicing Agreement.
5. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
C-2
<PAGE> 75
IN WITNESS WHEREOF, the undersigned has caused this Confirming
Assignment to be duly executed and delivered by its duly authorized officer on
the day and year first above written.
[SELLING SUBSIDIARY]
By: _____________________________
BEVERLY CALIFORNIA CORPORATION
By: _____________________________
C-3
<PAGE> 76
EXHIBIT D
DAILY REPORT
[See attached]
<PAGE> 77
EXHIBIT E
DAILY TRUSTEE REPORT
[See Attached]
E-B1
<PAGE> 78
EXHIBIT F
MONTHLY TRUSTEE REPORT
[See Attached]
F-1
<PAGE> 1
EXHIBIT 10.45
EXECUTION COPY
TRUST INDENTURE
dated as of December 1, 1994
FROM
BEVERLY FUNDING CORPORATION
(as Issuer)
TO
CHEMICAL BANK
(as Trustee)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE HEALTH CARE NOTES
SECTION 2.1. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.2. Terms of Health Care Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.3. Denominations; Health Care Notes Issuable in Series. . . . . . . . . . . . . . . . . . . . 9
SECTION 2.4. Execution, Authentication, and Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.5. Temporary Health Care Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.6. Registration; Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . . 11
SECTION 2.7. Mutilated, Destroyed, Lost, or Stolen Health Care Notes. . . . . . . . . . . . . . . . . . 13
SECTION 2.8. Persons Deemed Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.9. Payment of Principal and Interest; Principal and Interest Rights Preserved. . . . . . . . . 14
SECTION 2.10. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.11. Amount and Delivery of Health Care Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.12. Book-Entry Health Care Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.13. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.14. Definitive Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.15. Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
COVENANTS
SECTION 3.1. Payment of Principal and Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.2. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.3. Money for Payments To Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4. Opinions as to Trust Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.5. Performance of Obligations; Servicing of Receivables. . . . . . . . . . . . . . . . . . . . 23
SECTION 3.6. Annual Statement as to Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.7. Purchase of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.8. Lines of Business; Change of Location . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.9. Additional Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.10. Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.11. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.12. Notice of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.13. Limitation on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.14. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.15. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.16. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.17. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.18. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.19. Notice of Events of Default or Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.20. Representations and Warranties of the Issuer Relating to the Issuer . . . . . . . . . . . . 29
SECTION 3.21. Representations and Warranties of the Issuer Relating to this Indenture, any Series
Supplement, the Related Documents and the Purchased Receivables . . . . . . . . . . . . . . 31
SECTION 3.22. Rating Agency Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.2. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.3. Repayment of Moneys Held by Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . 36
SECTION 5.4. Additional Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.5. Appointment of Servicers; Collection of Medicaid, Medicare and Department of Veteran's
Affairs Receivables; Sale of Purchased Receivables. . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.6. Limitation of Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.7. Unconditional Rights of Health Care Noteholders To Receive Principal and Interest. . . . . 41
SECTION 5.8. Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.9. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.10. Delay or Omission Not a Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.11. Control by Health Care Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 5.12. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.13. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.15. Action on Health Care Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.16. Performance and Enforcement of Certain Obligations. . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.17. Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.2. Notice of Defaults and Amortization Events. . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.3. Certain Rights of the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.4. Not Responsible for Recitals or Issuance of Health Care Notes. . . . . . . . . . . . . . . 47
SECTION 6.5. May Hold Health Care Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.6. Interest on Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.7. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.8. Corporate Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.9. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.10. Acceptance of Appointment by Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business of Trustee. . . . . . . . . . . 52
SECTION 6.12. Co-Trustee and Separate Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.13. Reports to Holders of Health Care Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. Collection of Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.2. Trust Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.3. General Provisions Regarding Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.4. Release of Trust Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.5. Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Health Care Noteholders. . . . . . . . . . . . . 58
SECTION 8.2. Supplemental Indentures with Consent of Health Care Noteholders. . . . . . . . . . . . . . 60
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 8.3. Execution of Supplemental Indentures or Amendments to Sale and Servicing Agreement. . . . . 61
SECTION 8.4. Effect of Supplemental Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.5. Reference in Health Care Notes to Supplemental Indentures. . . . . . . . . . . . . . . . . 62
SECTION 8.6. Amendments of Sale and Servicing Agreement Without Consent of Health Care Noteholders . . . 62
SECTION 8.7. Amendment of Sale and Servicing Agreement With Consent of Health Care Noteholders . . . . . 63
ARTICLE IX
OPTIONAL REDEMPTION OF HEALTH CARE NOTES
SECTION 9.1. Optional Redemption by Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.2. Form of Optional Redemption Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.3. Health Care Notes Payable on Redemption Date or Optional Partial Optional Redemption
Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.4. Sale of Collateral to Effect Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Compliance Certificates and Opinions, etc. . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.2. Form of Documents Delivered to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.3. Acts of Health Care Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.4. Notices to Health Care Noteholders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.5. Alternative Payment and Notice Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.6. Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.8. Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.9. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.10. [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 69
SECTION 10.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.13. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.14. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
Exhibit A Transferee Certificate
iv
<PAGE> 6
TRUST INDENTURE, dated as of December 1, 1994, between BEVERLY
FUNDING CORPORATION, a Delaware corporation (the "Issuer"), and CHEMICAL BANK,
a New York banking corporation, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of
this Indenture to provide for one or more Series of Health Care Notes, issuable
as provided in this Indenture. Each such Series of Health Care Notes will be
issued only under a separate Series Supplement to this Indenture duly executed
and delivered by the Issuer and the Trustee. The Issuer is entering into this
Indenture, and the Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
GRANTING CLAUSES
For the consideration recited above and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Issuer, and as security for the due and punctual payment in
full of the Obligations, the Issuer hereby pledges, assigns, transfers, sets
over, conveys, hypothecates, delivers and confirms the Collateral, all and
singular, to the Trustee, and hereby grants to the Trustee a continuing first
and prior security interest in, and general first lien on, the Collateral. The
Issuer further assigns to the Trustee all of the Issuer's right to take, or
consent to, any action, inaction, condition or circumstance under, or with
respect to, any or all of the Collateral. Until payment in full of all the
Obligations, the pledge, assignment, transfer, setting over, conveyance,
hypothecation, delivery and confirmation of, and security interest in, the
Collateral pursuant hereto shall continue in full force and effect.
The security interests granted pursuant hereto (and the rights
and powers granted to the Trustee hereunder with respect thereto or to the
Collateral) are granted as security only, and shall not subject the Trustee to,
or transfer or in any way affect or modify, any obligation or liability of the
Issuer under any of the Collateral or any transaction which gave rise thereto.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. For all purposes of this
Indenture, unless otherwise specified in the applicable Series Supplement, or
as the context may otherwise require, capitalized terms used herein shall have
the respective meanings set forth below, or if not defined below, the
respective meanings set forth in the Sale and Servicing Agreement:
"Act" has the meaning specified in Section 10.3(a).
1
<PAGE> 7
"Aggregate Outstanding Amount" means, with respect to any
Series, the principal amount of all Outstanding Health Care Notes of such
Series at the date of determination.
"Authorized Officer" means any officer of the Issuer who is
authorized to act for the Issuer in matters relating hereto and who is
identified on the list of Authorized Officers delivered to the Trustee on the
date hereof (as such list may be modified or supplemented by the Issuer from
time to time thereafter).
"Book-Entry Health Care Notes" means a beneficial interest in
the Health Care Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.12.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions or trust companies in New York, New
York, Fort Smith, Arkansas or the city in which the Corporate Trust Office is
located, are authorized or obligated by law, regulation or executive order to
remain closed.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means, with respect to any Series of Health
Care Notes, the date of issuance of such Series specified in the applicable
Series Supplement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
"Collateral" shall mean all of the Issuer's right, title and
interest in, to and under the following, whether now owned or hereafter
acquired: (a) the Sale and Servicing Agreement and the other Related Documents,
(b) the Purchased Receivables and all accounts, chattel paper, contract rights,
instruments, general intangibles and other obligations of any kind consisting
of, arising from, or relating to the Purchased Receivables and all rights in
and to all other Contractual Obligations securing or otherwise relating to the
Purchased Receivables, (c) all bank accounts (including, without limitation,
the Collection Account and the Distribution Account (and all subaccounts
thereof) and the Expense Account) and all amounts, instruments, Securities and
investments credited to, deposited or held in any such account, (d) the
Records, (e) all Eligible Investments and (f) all additions and accessions to,
and all substitutions or replacements for, and all payments, dividends,
interest, cash, instruments, proceeds, products, distributions (whether in
money, Securities or other property) and collections from or with respect to
any or all of the foregoing.
"Collection Account" has the meaning specified in Section
7.2(a).
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"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution and delivery of this Indenture
such Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body then performing such duties.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee located at 450 West 33rd Street, New York, New York
10001; or such other address as the Trustee may designate from time to time by
notice to the Health Care Noteholders and the Issuer, or the principal
corporate trust office of any successor Trustee (or such other addresses as a
successor Trustee may designate from time to time by notice to the Health Care
Noteholders and the Issuer).
"Debt" of any Person means, at any date, without duplication:
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business and payable no more than 120 days from the date of
incurrence thereof, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person under take-or-pay or similar
contracts, (vi) all obligations of such Person to reimburse or indemnify the
issuer of a letter of credit or Guaranty for drawings or payments thereunder,
(vii) all obligations of such Person in respect of interest rate swap
agreements, currency swap agreements and other similar agreements and
arrangements designed to protect such person against adverse movements in
interest rates or foreign exchange rates, (viii) all Debt of others secured by
a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person; and (ix) all Debt of others Guaranteed by such Person; provided, that,
the obligations created pursuant to the daily estimated settlement procedures
set forth in Article VI of the Sale and Servicing Agreement shall not
constitute "Debt".
"Default" means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Distribution Account" has the meaning specified in Section
7.2(b).
"DTC Agreement" has the meaning, with respect to any Series,
specified in the applicable Series Supplement.
"Event of Default" has the meaning specified in Section 5.1.
"Executive Officer" means, with respect to any corporation,
the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, any Vice President, the Secretary or the Treasurer of such
corporation; and with respect to any partnership, any general partner thereof.
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"Expense Account" has the meaning specified in Section 7.2(c).
"Expense Subaccount" has the meaning specified in Section
7.2(b).
"Final Maturity Date" means, with respect to any Health Care
Note of any Series, the date, if any, specified in such Health Care Note and
the applicable Series Supplement as the fixed date on which the unpaid
principal amount of such Health Care Note is due and payable.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person or in any manner providing for the payment of
any Debt of any other Person or otherwise protecting the holder of such Debt
against loss (whether by agreement to keep-well, to purchase assets, goods,
securities or services, or to maintain financial statement condition or
otherwise); provided, that, the term "Guaranty" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guaranty" used as a verb has a corresponding meaning.
"Health Care Note Owner" means, with respect to a Book-Entry
Health Care Note, the Person who is the beneficial owner of such Book-Entry
Health Care Note, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly or
as an indirect participant, in accordance with the rules of such Clearing
Agency).
"Health Care Noteholder" means the Person in whose name a
Health Care Note is registered.
"Health Care Notes" means the medium term health care-related
receivables backed notes of one or more Series each authorized by, and
authenticated and delivered under, this Indenture and the related Series
Supplements.
"Health Care Note Register" and "Health Care Note Registrar"
have the respective meanings specified in Section 2.6.
"Holder" has the same meaning specified in the definition of
"Health Care Noteholder" in this Section 1.1.
"Indenture" or "this Indenture" means this instrument as
originally executed and, as from time to time supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, as so supplemented or amended, or both, and shall include
the forms and terms of the Health Care Notes established hereunder. The words
"herein", "hereof", "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
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"Independent" means, when used with respect to any specified
Person, that the Person (1) is in fact independent of the Issuer and any other
obligor upon the Health Care Notes and any other Person with an ownership
interest in the Trust Estate and of any Affiliate of any of the foregoing
Persons, (2) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or any
such other Person with such an ownership interest in the Trust Estate or in any
Affiliate of any of the foregoing Persons, and (3) is not connected with the
Issuer or any such other obligor or any Affiliate of the Issuer or any such
other Person with such an ownership interest in the Trust Estate as an officer,
employee, promoter, underwriter, trustee, partner, director, or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.1 hereof, made by an
Independent appraiser or other expert appointed by an Issuer Order, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in the Indenture and that the signer is Independent within the
meaning thereof.
"Interest Accrual Period" shall have the meaning, with respect
to any Series, specified in the applicable Series Supplement.
"Issuer Order" and "Issuer Request" means a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Trustee.
"Maturity" means, with respect to any Series of Health Care
Notes, the date on which the unpaid principal of such Series of Health Care
Notes becomes due and payable, whether at the Final Maturity Date or by
declaration of acceleration, call for redemption, or otherwise.
"Maximum Rate" shall have the meaning, with respect to any
Series, specified in the applicable Series Supplement.
"Minimum Denomination" means, with respect to any Health Care
Note, the minimum denomination therefor specified in the applicable Series
Supplement, which minimum denomination shall not be less than $500,000.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto.
"Obligations" means all principal, premium, if any, interest
on, and any other amounts payable with respect to, all Health Care Notes of all
Series.
"Officer's Certificate" means a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 10.1 hereof,
and delivered to the Trustee. Unless otherwise specified, any reference in
this Indenture to an Officer's Certificate shall be to an Officer's Certificate
of any Authorized Officer of the Issuer.
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"Opinion of Counsel" means one or more written opinions of
counsel who may, except as otherwise expressly provided in this Indenture, be
counsel for the Issuer and who shall be satisfactory to the Trustee, and which
opinion shall be addressed to the Trustee as Trustee, shall comply with any
applicable requirements of Section 10.1 hereof, and shall be in form and
substance satisfactory to the Trustee.
"Outstanding" means, as of the date of determination, all
Health Care Notes theretofore authenticated and delivered under the Indenture
except:
(i) Health Care Notes theretofore canceled by the Health
Care Note Registrar or delivered to the Health Care Note Registrar for
cancellation;
(ii) Health Care Notes or portions thereof for whose
payment money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent in trust for the Holders of such
Health Care Notes (provided, however, that if such Health Care Notes
are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor, satisfactory to the
Trustee, has been made); and
(iii) Health Care Notes in exchange for or in lieu of which
other Health Care Notes have been authenticated and delivered pursuant
to this Indenture unless proof satisfactory to the Trustee is
presented that any such Health Care Notes are held by a bona fide
purchaser;
provided that in determining whether the Holders of the requisite Aggregate
Outstanding Amount of the Health Care Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Health Care
Notes owned by the Issuer, any other obligor upon the Health Care Notes, any
other Person with an ownership interest in the Trust Estate or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Health Care Notes that the Trustee knows to be so owned
shall be so disregarded. Health Care Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Health Care Notes and that the pledgee is not the Issuer, any other obligor
upon the Health Care Notes, any other Person with an ownership interest in the
Trust Estate or any Affiliate of any of the foregoing Persons.
"Optional Partial Redemption" means a redemption of a portion
of the Health Care Notes of a Series at the applicable Redemption Price
pursuant to Section 9.1(b).
"Optional Partial Redemption Date" means any Distribution Date
(including any Payment Date) on which the Trustee, on behalf of the Issuer,
redeems Health Care Notes pursuant to an Optional Partial Redemption.
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"Paying Agent" means the Trustee or any other Person (which
other Person shall have a short-term deposit rating in the highest rating
category issued by the Rating Agency) that meets the eligibility standards for
the Trustee specified in Section 6.8 and is authorized by the Issuer to make
the payments to and distributions from the Collection Account, the Distribution
Account (and all subaccounts thereof) and the Expense Account, including,
without limitation, payment of principal of and/or interest on the Health Care
Notes on behalf of the Issuer.
"Payment Date" means, with respect to any Series, the date or
dates specified as Payment Dates in the applicable Series Supplement.
"Payment Subaccount" has the meaning specified in Section
7.2(b).
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Predecessor Health Care Note" means, with respect to any
particular Health Care Note, every previous Health Care Note evidencing all or
a portion of the same debt as that evidenced by such particular Health Care
Note; and, for the purpose of this definition, any Health Care Note
authenticated and delivered under Section 2.7 in lieu of a mutilated, lost,
destroyed, or stolen Health Care Note shall be deemed to evidence the same debt
as the mutilated, lost, destroyed, or stolen Health Care Note.
"Proceeding" means any suit in equity, action at law, or other
judicial or administrative proceeding.
"Rating Agency" means Moody's.
"Redemption Date" means, with respect to any Series, the
Payment Date specified by the Issuer for the redemption of the Health Care
Notes of such Series pursuant to Section 9.1.
"Redemption Price" means, at any time with respect to any
Series, the then applicable redemption price as specified in the applicable
Series Supplement.
"Registered Holder" means the Person in whose name a Health
Care Note is registered on the Health Care Note Register on the applicable
Record Date.
"Record Date" means, with respect to a Payment Date, the close
of business on the last day of the calendar month preceding such Payment Date.
"Related Documents" means the Sale and Servicing Agreement,
the Selling Subsidiary Agreements, the DTC Agreements, each Series Supplement
and other documents and certificates delivered in connection therewith.
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<PAGE> 13
"Responsible Officer" means, when used with respect to the
Trustee, any officer of the Trustee assigned by the Trustee to administer its
corporate trust affairs.
"Restricted Payment" has the meaning specified in Section 3.16.
"Sale and Servicing Agreement" means the First Amendment and
Restatement, dated as of December 1, 1994, to the Master Sale and Servicing
Agreement, dated as of December 1, 1990, among the Issuer, Beverly Enterprises
Inc. and various wholly-owned subsidiaries of Beverly Enterprises Inc., as from
time to time amended, supplemented or modified.
"Scheduled Amortization Date" means, with respect to any
Health Care Note of any Series, the date, if any, specified in such Health Care
Note and the applicable Series Supplement as the fixed date on which the unpaid
principal amount, if any, of such Health Care Note begins to be amortized.
"Series" means each series of Health Care Notes issued and
authenticated pursuant to this Indenture and a related Series Supplement.
"Series Alternate Note Interest Rate" shall have the meaning,
with respect to any Series, specified in the applicable Series Supplement.
"Series Base Reserve Percent" shall have the meaning, with
respect to any Series, specified in the applicable Series Supplement.
"Series Dynamic Reserve Floor Percent" shall have the meaning,
with respect to any Series, specified in the applicable Series Supplement.
"Series Interest Rate Spread" shall have the meaning, with
respect to any Series, specified in the applicable Series Supplement.
"Series Liquidation Payment Frequency" shall have the meaning,
with respect to any Series, specified in the applicable Series Supplement.
"Series Note Interest Rate" means, with respect to any Series,
the annual rate at which interest accrues on the Health Care Notes of such
Series, as specified (or, in the case of a floating interest rate, determined
as specified) in the related Series Supplement.
"Series Special Obligations" means all amounts payable to the
Health Care Noteholders of any Series specified as such in the applicable
Series Supplement.
"Series Rate Increment" shall have the meaning, with respect
to any Series, specified in the applicable Series Supplement.
"Series Rating Multiple" shall have the meaning, with respect
to any Series, specified in the applicable Series Supplement.
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<PAGE> 14
"Series Supplement" means an indenture supplemental to this
Indenture entered into pursuant to Section 2.11(8) that authorizes a particular
Series of Health Care Notes .
"State" means any one of the 50 States of the United States of
America, or the District of Columbia.
"Trust Estate" means the Collateral and all other money,
instruments, and other property that are subject or intended to be subject to
the lien and security interest of this Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, or any similar Federal statute hereafter enacted.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code, as in effect in the jurisdiction, relevant to the
related Purchased Receivables, as amended from time to time.
ARTICLE II
THE HEALTH CARE NOTES
SECTION 2.1. Forms Generally. The Health Care Notes of
any Series and the Trustee's certificate of authentication shall be in
substantially the form set forth in the related Series Supplement, with such
appropriate insertions, omissions, substitutions, and other variations as are
required or permitted by this Indenture or by the related Series Supplement and
may have such letters, numbers, or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the
rules of any securities exchange on which the Health Care Notes may be listed,
or as may, consistently herewith, be determined by the officers executing such
Health Care Notes, as evidenced by their execution of the Health Care Notes.
Any portion of the text of any Health Care Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Health Care
Note.
The Definitive Notes shall be printed, lithographed, or
engraved or produced by any combination of these methods (with or without steel
engraved borders) or may be produced in any other manner permitted by the rules
of any securities exchange on which the Health Care Notes may be listed, all as
determined by the officers executing such Health Care Notes, as evidenced by
their execution of such Health Care Notes.
SECTION 2.2. Terms of Health Care Notes.
The terms of the Health Care Notes contained in any Series
Supplement are part of the terms of such Series Supplement and this Indenture.
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SECTION 2.3. Denominations; Health Care Notes Issuable in
Series. The Health Care Notes shall be issuable as registered Health Care
Notes in the Minimum Denomination specified in the applicable Series Supplement
and, except as otherwise provided in such Series Supplement, in integral
multiples of $1,000.
The Health Care Notes may, at the election of and as
authorized by an Authorized Officer of the Issuer, be issued in one or more
Series, and shall be designated generally as the "Health Care Notes" of the
Issuer, with such further particular designations added or incorporated in such
title for the Health Care Notes of any particular Series as an Authorized
Officer of the Issuer may determine. Each Health Care Note shall bear upon its
face the designation so selected for the Series to which it belongs. The
Health Care Notes of each Series are and will be equally and ratably secured by
the Collateral and each Series of Health Care Notes will rank pari passu with
each other Series of Health Care Notes issued hereunder. All Health Care Notes
of the same Series shall be identical in all respects except for the
denominations thereof. All Health Care Notes of a particular Series issued
under this Indenture shall be in all respects equally and ratably entitled to
the benefits hereof without preference, priority, or distinction on account of
the actual time or times of authentication and delivery, all in accordance with
the terms and provisions of this Indenture.
Each Series of Health Care Notes shall be created by a Series
Supplement authorized by an Authorized Officer of the Issuer and establishing
the terms and provisions of such Series. The several Series may differ as
between Series, in respect of any of the following matters:
(1) designation of the Series;
(2) its Series Note Interest Rate (or, in the case the
Series Note Interest Rate is to be a floating rate,
the method of determining the Series Note Interest
Rate and its Maximum Rate, if any) and the Series
Alternate Note Interest Rate, if applicable;
(3) its Payment Dates;
(4) its Scheduled Amortization Date and its Final
Maturity Date;
(5) the place or places for the payment of principal;
(6) [intentionally omitted];
(7) the authorized denominations and whether such Health
Care Notes shall be Book-Entry Health Care Notes;
(8) the provisions for optional redemption by the Issuer;
(9) its amortization terms;
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(10) the definitions of terms related to such Series to be
specified in the related Series Supplement pursuant
to Article I; and
(11) any other provisions expressing or referring to the
terms and conditions upon which the Health Care Notes
of the applicable Series are to be issued under this
Indenture that are not in conflict with the
provisions of this Indenture and that do not prevent
the satisfaction of the Rating Agency Condition upon
the issuance of the Health Care Notes of such Series.
SECTION 2.4. Execution, Authentication, and Delivery. The
Health Care Notes shall be executed on behalf of the Issuer by any one of its
Authorized Officers. The signature of any such Authorized Officers on the
Health Care Notes may be manual or facsimile.
Health Care Notes bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Health Care
Notes or did not hold such offices at the date of such Health Care Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Issuer may deliver Health Care Notes executed
by the Issuer to the Trustee for authentication and delivery pursuant to an
Issuer Order; and the Trustee shall authenticate and deliver such Health Care
Notes as in this Indenture provided and not otherwise.
Each Health Care Note shall be dated as of the date of its
authentication.
No Health Care Note shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose, unless there appears
on such Health Care Note a certificate of authentication substantially in the
form provided for in the related Series Supplement executed by the Trustee by
the manual signature of one of its authorized signatories, and such certificate
upon any Health Care Note shall be conclusive evidence, and the only evidence,
that such Health Care Note has been duly authenticated and delivered hereunder.
SECTION 2.5. Temporary Health Care Notes. Pending the
preparation of Definitive Notes, the Issuer may execute, and upon receipt of an
Issuer Order the Trustee shall authenticate and deliver, temporary Health Care
Notes which are printed, lithographed, typewritten, mimeographed, or otherwise
produced, in any denomination, substantially of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not
inconsistent with the terms of this Indenture as the Authorized Officers
executing such Health Care Notes may determine, as evidenced by their execution
of such Health Care Notes.
If temporary Health Care Notes are issued, the Issuer will
cause Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes,
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the temporary Health Care Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Health Care Notes at the office or agency of the
Issuer to be maintained as provided in Section 3.2 hereof, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Health Care Notes, the Issuer shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of Definitive Notes of
authorized denominations. Until so exchanged, the temporary Health Care Notes
shall in all respects be entitled to the same benefits under this Indenture as
Definitive Notes.
SECTION 2.6. Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the "Health Care Note
Register") in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Health Care Notes
and the registration of transfers of Health Care Notes. Unless otherwise
specified in a Series Supplement, the Trustee shall be "Health Care Note
Registrar" for the purpose of registering Health Care Notes and transfers of
Health Care Notes as herein provided. Upon any resignation of any Health Care
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Health Care Note
Registrar. If a Person other than the Trustee is appointed by the Issuer as
Health Care Note Registrar, the Issuer shall give the Trustee prompt written
notice of the appointment of such Health Care Note Registrar and of the
location, and any change in the location, of the Health Care Note Register, and
the Trustee shall have the right to inspect the Health Care Note Register at
all reasonable times and to obtain copies thereof, and the Trustee shall have
the right to rely upon a certificate executed on behalf of the Health Care Note
Registrar by an Executive Officer thereof as to the names and addresses of the
Holders of the Health Care Notes and the principal amounts and number of such
Health Care Notes. Upon surrender for registration of transfer of any Health
Care Note at the office or agency of the Issuer to be maintained as provided in
Section 3.2 hereof, the Issuer shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Health Care Notes in any authorized denominations,
of a like Series and aggregate principal amount.
At the option of the Holder thereof, Health Care Notes may be
exchanged for other Health Care Notes in any authorized denominations, of a
like Series and aggregate principal amount, upon surrender of the Health Care
Notes to be exchanged at such office or agency. Whenever any Health Care Notes
are so surrendered for exchange, the Issuer shall execute, and the Trustee
shall authenticate and deliver, the Health Care Notes which the Health Care
Noteholder making the exchange is entitled to receive.
All Health Care Notes issued upon any registration of transfer
or exchange of Health Care Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Health Care Notes surrendered upon such registration of
transfer or exchange.
Every Health Care Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing, with such signature guaranteed by a commercial bank or
trust
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<PAGE> 18
company located, or having a correspondent located, in The City of New York or
the city in which the Corporate Trust Office is located, or by a member firm of
a national securities exchange, and such other documents as the Trustee may
require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Health Care Notes, but the Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Health Care Notes, other than exchanges pursuant to Section 2.5
hereof not involving any transfer.
SECTION 2.7. Mutilated, Destroyed, Lost, or Stolen Health
Care Notes. If (i) any mutilated Health Care Note is surrendered to the
Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Health Care Note, and (ii) there is delivered
to the Trustee such security or indemnity as may be required by it to hold the
Issuer and the Trustee harmless, then, in the absence of notice to the Issuer,
the Health Care Note Registrar or the Trustee that such Health Care Note has
been acquired by a bona fide purchaser, the Issuer shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Health Care Note, a new Health
Care Note of like Series, tenor and principal amount, bearing a number not
contemporaneously outstanding; provided, however, that if any such destroyed,
lost or stolen Health Care Note, but not a mutilated Health Care Note, shall
have become or within seven days shall be due and payable, or shall have been
selected or called for redemption, instead of issuing a new Health Care Note,
the Issuer may pay such destroyed, lost or stolen Health Care Note when so due
or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such new Health Care Note or payment of a destroyed, lost or
stolen Health Care Note pursuant to the proviso to the preceding sentence, a
bona fide purchaser of the original Health Care Note in lieu of which such new
Health Care Note was issued presents for payment such original Health Care
Note, the Issuer and the Trustee shall be entitled to recover such new Health
Care Note (or such payment) from the Person to whom it was delivered or any
Person taking such new Health Care Note from such Person to whom such new
Health Care Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled,to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred
by the Issuer or the Trustee in connection therewith.
Upon the issuance of any new Health Care Note under this
Section 2.7, the Issuer may require the payment by the Holder of such Health
Care Note of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Health Care Note issued pursuant to this Section 2.7
in replacement of any mutilated, destroyed, lost or stolen Health Care Note
shall constitute an original additional contractual obligation of the Issuer,
whether or not the mutilated, destroyed, lost or stolen Health Care Note shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Health
Care
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Notes duly issued hereunder. The provisions of this Section 2.7 are exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Health Care Notes.
SECTION 2.8. Persons Deemed Owner. Prior to due
presentment for registration of transfer of any Health Care Note, the Issuer,
the Trustee and any agent of the Issuer or the Trustee may treat the Person in
whose name any Health Care Note is registered (as of the day of determination
or as of such other date as may be specified in the applicable Series
Supplement) as the owner of such Health Care Note for the purpose of receiving
payments of principal of and interest, if any, on, or any other amounts with
respect to, such Health Care Note and for all other purposes whatsoever,
whether or not such Health Care Note be overdue, and neither the Issuer, the
Trustee nor any agent of the Issuer or the Trustee shall be affected by notice
to the contrary.
SECTION 2.9. Payment of Principal and Interest; Principal
and Interest Rights Preserved. (a) The Health Care Notes shall accrue interest
as provided in the form of the Health Care Note attached to the related Series
Supplement at the Series Note Interest Rate (or, if applicable, the Series
Alternate Note Interest Rate) specified or as determined therein, and such
interest shall be payable on each Payment Date as specified therein. Any
installment of interest or principal, if any, payable on any Health Care Note
which is punctually paid or duly provided for by the Issuer on the applicable
Payment Date shall be paid to the Person in whose name such Health Care Note
(or one or more Predecessor Health Care Notes) is registered on the Record Date
for such Payment Date, by check mailed first-class, postage prepaid to such
Person's address as it appears on the Health Care Note Register on such Record
Date or in such other manner as may be provided in the related Series
Supplement, except that with respect to Health Care Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.) or in the name of a Holder of Health Care Notes
representing at least $5,000,000 in aggregate initial principal amount of any
Series, payments will be made by wire transfer in immediately available funds
to the account designated by such nominee or Holder in writing in form
satisfactory to the Trustee at least five (5) Business Days prior to such
Payment Date and, except for the final installment of principal payable with
respect to such Health Care Note on a Payment Date or on any Final Maturity
Date (or the Redemption Price for any Health Care Note called for redemption),
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.3
hereof.
(b) Unless otherwise provided in the applicable Series
Supplement, the Health Care Notes of each Series shall have the Scheduled
Amortization Date and Final Maturity Date as shall be specified in such Health
Care Notes and the related Series Supplement. The principal of each Health
Care Note shall be payable in one or more installments ending no later than the
Final Maturity Date thereof unless payable earlier either because (x) an Event
of Default shall have occurred and be continuing and the Health Care Notes have
been accelerated in accordance with Section 5.2 hereof, or (y) the Issuer shall
have called for the redemption of the Health Care Notes of the applicable
Series pursuant to Section 9.1. The entire unpaid principal amount of each
Health Care Note shall be due and payable on the earliest of the Final Maturity
Date thereof, the date of the acceleration referred to above
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and the Redemption Date, if any, thereof. In addition, payments of principal
on the Health Care Notes of any Series may be made in whole or in part on any
Payment Date on or following its Scheduled Amortization Date or following the
occurrence of an Amortization Event, until paid in full. The Issuer may also
elect to make Optional Partial Redemptions pursuant to Section 9.1(b). All
principal payments on the Health Care Notes of a Series (including Optional
Partial Redemption payments) shall be made pro rata to the Health Care
Noteholders entitled thereto. The Trustee shall notify the Person in whose
name a Health Care Note is registered at the close of business on the Record
Date immediately preceding the Payment Date on which the Issuer expects that
the final installment of principal of and interest on the Health Care Notes of
each Series will be paid (together with any other amounts due and payable to
the Health Care Noteholders of such Series). The Issuer agrees to notify the
Trustee of any Event of Default and, no later than 15 days prior to the related
Record Date, of the Payment Date on which the Issuer expects the final
installment of principal of and interest on the Health Care Notes of each
Series will be paid. The notice to be mailed by the Trustee shall be mailed no
later than ten days prior to such final Payment Date and shall specify that
such final installment will be payable only upon presentation and surrender of
such Health Care Note and shall specify the place where such Health Care Note
may be presented and surrendered for payment of such installment. Notices in
connection with redemptions of Health Care Notes shall be mailed to Health Care
Noteholders as provided in Section 9.2 hereof.
(c) Subject to the foregoing provisions of this Section,
each Health Care Note delivered under this Indenture upon registration or
transfer of or in exchange for or in lieu of any other Health Care Note shall
carry the rights to unpaid principal and interest, if any, that were carried by
such other Health Care Note.
SECTION 2.10. Cancellation. All Health Care Notes
surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. The Issuer may at any time
deliver to the Trustee for cancellation any Health Care Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Health Care Notes so delivered shall be promptly
canceled by the Trustee. No Health Care Notes shall be authenticated in lieu
of or in exchange for any Health Care Notes canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled Health
Care Notes may be held or disposed of by the Trustee in accordance with its
standard retention or disposal policy as in effect at the time unless the
Issuer shall direct by an Issuer Order that they be destroyed or returned to
it.
SECTION 2.11. Amount and Delivery of Health Care Notes.
The aggregate principal amount of Health Care Notes that may be authenticated
and delivered under this Indenture is unlimited, subject to the following:
With respect to only the original issuance of the Health Care
Notes of any Series, compliance with the following conditions and delivery of
the following documents are required:
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(1) Issuer Order. An Issuer Order authorizing and
directing the execution, authentication and delivery of the Health Care Notes
of such Series by the Trustee and specifying the principal amount of Health
Care Notes of such Series to be authenticated.
(2) Authorizations. Either (i) a certificate of
authorization or other official document evidencing the due authorization,
approval or consent of any governmental body or bodies at the time having
jurisdiction in the premises, together with an Opinion of Counsel that the
Trustee is entitled to rely thereon and that the authorization, approval, or
consent of no other governmental body is required for the valid issuance,
authentication and delivery of such Health Care Notes, or (ii) an Opinion of
Counsel that no such authorization, approval, or consent of any governmental
body is required.
(3) Authorizing Certificate. A certificate of an
Authorized Officer of the Issuer certifying that (i) the Issuer has duly
authorized the execution and delivery of this Indenture (in the case of the
first Series issued pursuant to this Indenture), the related Series Supplement
and the execution, authentication and delivery of the Health Care Notes of such
Series, (ii) the Indenture remains in full force and effect as to the Issuer
(in the case of subsequent Series issued pursuant to this Indenture and a
related Series Supplement), (iii) the representations and warranties of the
Issuer contained in this Indenture and any other Related Documents are true and
correct as of the date of issuance of such new Series and (iv) the Series
Supplement for such Series of Health Care Notes shall be in the form attached
thereto, which Series Supplement shall specify the terms and provisions of such
Series, including, without limitation, the Final Maturity Date, if any, the
principal amount and the Series Note Interest Rate (and, if applicable, the
Series Alternate Note Interest Rate) of such Health Care Notes to be
authenticated and delivered.
(4) Certificates of the Issuer. An Officer's Certificate
from the Issuer, dated as of the applicable Closing Date, to the effect that no
Default or Event of Default under this Indenture has occurred and is continuing
and that the issuance of the Health Care Notes applied for will not result in
any Default or Event of Default or in any breach of any of the terms,
conditions or provisions of or constitute a default under any indenture,
mortgage, deed of trust or other agreement or instrument to which the Issuer is
a party or by which it or its property is bound or any order of any court or
administrative agency entered in any Proceeding to which the Issuer is a party
or by which it or its property may be bound or to which it or its property may
be subject; and that all conditions precedent provided in this Indenture
relating to the authentication and delivery of the Health Care Notes applied
for have been complied with.
(5) Opinion of Counsel. An Opinion of Counsel, portions
of which may be delivered by counsel for the Issuer and portions of which may
be delivered by counsel for the Servicer, dated the applicable Closing Date, to
the collective effect that:
(a) the Indenture and such Series Supplement have been
duly qualified under the Trust Indenture Act or no such qualification
is necessary;
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(b) the Issuer has the power and authority to execute and
deliver such Series Supplement (and, in the case of the first Series
to be authenticated hereunder, this Indenture) and to issue the Health
Care Notes, and each of such Series Supplement and, in the case of the
first Series to be authenticated hereunder, this Indenture), and the
Health Care Notes of such Series have been duly authorized and the
Issuer is duly organized and in good standing under the laws of the
jurisdiction of its organization;
(c) such Series Supplement and the Indenture have been
duly authorized, executed and delivered by the Issuer;
(d) the Health Care Notes applied for have been duly
authorized and executed and, when authenticated in accordance with the
provisions of the Indenture and delivered, will constitute valid and
binding obligations of the Issuer entitled to the benefits of the
Indenture and such Series Supplement;
(e) either (A) the Registration Statement covering the
Health Care Notes of such Series is effective under the Securities Act
of 1933 and, to the best of such counsel's knowledge and information,
no stop order suspending the effectiveness of such Registration
Statement has been issued under the Securities Act of 1933 nor have
proceedings therefor been instituted or threatened by the Commission
or (B) the Health Care Notes of such Series are exempt from the
registration requirements under the Securities Act of 1933;
(f) the Issuer is not now and, assuming that the Issuer
uses the proceeds of the sale of the Health Care Notes of such Series
for the purpose of acquiring Receivables in accordance with the terms
of the Sale and Servicing Agreement, following the sale of the Health
Care Notes to the underwriter, underwriters, placement agent or agents
or similar Person or to the Health Care Noteholder thereof, the Issuer
will not be required to be registered under the Investment Company Act
of 1940; and
(g) such other matters as required by the related Series
Supplement or as the Trustee may reasonably require.
(6) Sale and Servicing Agreement; No Amortization Event
or Default. Delivery of an Officer's Certificate from the Issuer dated the
date of delivery of the Health Care Notes to the effect that the conditions
precedent to the Effective Date under the Sale and Servicing Agreement shall
have been fulfilled; and no Amortization Event, Default or Event of Default
shall have occurred and is continuing.
(7) Required Rating. The Trustee shall receive written
evidence that the issuance of the Health Care Notes of such new Series
satisfies the Rating Agency Condition.
(8) Series Supplement. A Series Supplement providing for
the issuance of such new Series shall be entered into between the Issuer and
Trustee.
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(9) Requirements of Series Supplement. Such other funds,
accounts, documents, certificates, agreements, instruments or opinions as may
be required by the terms of the Series Supplement creating such Series or as
the Trustee may reasonably require.
(10) Notices. At least five (5) Business Days prior to
the effectiveness thereof, the Trustee shall provide any Holder of at least 50%
of the Aggregate Outstanding Amount of each preexisting Series a copy of the
Series Supplement creating such new Series.
(11) Other Requirements. Such other documents,
certificates, agreements, instruments or opinions as the Trustee may reasonably
require.
SECTION 2.12. Book-Entry Health Care Notes. If specified
in the related Series Supplement, any Series of Health Care Notes, upon
original issuance, shall be issued in the form of a single typewritten Health
Care Note representing the Book-Entry Health Care Notes, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Issuer. Such Health Care Note shall initially be registered on the Health Care
Note Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Health Care Note Owner shall receive a definitive Health Care
Note representing such Health Care Note Owner's interest in such Health Care
Note, except as provided in Section 2.14. Unless and until definitive, fully
registered Health Care Notes (the "Definitive Notes") have been issued to
Health Care Note Owners pursuant to Section 2.14:
(i) the provisions of this Section 2.12 shall be
in full force and effect;
(ii) the Health Care Note Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including
the payment of principal of and interest on, or any other amounts with
respect to, the Health Care Notes) as the authorized representative of
the Health Care Note Owners;
(iii) to the extent that the provisions of this
Section 2.12 conflict with any other provisions of this Agreement, the
provisions of this Section 2.12 shall control:
(iv) the rights of Health Care Note Owners shall
be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Health Care Note
Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the DTC Agreement, unless and until
Definitive Notes are issued pursuant to Section 2.14, the initial
Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of
and interest on, or any other amounts with respect to, the Health Care
Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits
actions to be taken based upon instructions or directions of Holders
of Health Care Notes evidencing a specified percentage of the
Aggregate Outstanding Amount of the Health Care Notes,
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the Clearing Agency shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Health Care Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Health Care Notes and has delivered such instructions
to the Trustee.
SECTION 2.13. Notices to Clearing Agency. With respect to
any Series of Health Care Notes originally issued in the form of a Book-Entry
Health Care Note, whenever a notice or other communication to the Health Care
Noteholders is required under this Indenture, unless and until Definitive Notes
shall have been issued to Health Care Note Owners pursuant to Section 2.14, the
Trustee shall give all such notices and communications specified herein to be
given to Holders of the Health Care Notes to the Clearing Agency.
SECTION 2.14. Definitive Notes. With respect to any Series
of Health Care Notes originally issued in the form of a Book-Entry Health Care
Note, if (i)(A) the Issuer advises the Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
under the related DTC Agreement, and (B) the Issuer is unable to locate a
qualified successor, (ii) the Issuer at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (iii) after the occurrence of an Event of Default, Health Care Note
Owners representing beneficial interests aggregating more than 50% of the
Aggregate Outstanding Amount of the Health Care Notes of such Series advise the
Trustee and the Clearing Agency Participants in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interests of the Health Care Note Owners of such Series, then the Trustee shall
notify all Health Care Note Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Notes to
Health Care Note Owners requesting the same. Upon surrender to the Trustee of
the single typewritten Health Care Note representing the Book-Entry Health Care
Notes by the Clearing Agency, accompanied by registration instructions, the
Trustee shall issue the Definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Health Care Note Registrar or the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Trustee shall recognize the Holders
of the Definitive Notes as Health Care Noteholders.
SECTION 2.15. Transfer Restrictions.
(a) General. No Holder may, in any transaction or series
of transactions, directly or indirectly (each of the following, a "transfer"),
(i) sell, assign or otherwise in any manner dispose of all or any part of its
interest in any Health Care Note issued to it, whether by act, deed, merger or
otherwise or (ii) mortgage, pledge or create a lien or security interest in
such interest unless such transfer satisfies the conditions set forth in this
Section 2.15. No purported transfer of any interest in any Health Care Note or
any portion thereof which is not made in accordance with this Section shall be
given effect by or be binding upon the Trustee and any such purported transfer
shall be null and void ab initio and vest in the transferee no rights against
the Trustee.
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(b) Conditions to Transfer. A Holder may transfer a
Health Care Note only in accordance with the following provisions:
(i) Transfer of Interests in Health Care Notes.
Health Care Notes may be transferred for one another only in
accordance with such procedures as are substantially consistent with
the provisions of this Section 2.15 (including the certification
requirements) intended to ensure that such exchanges or transfers are
exempt from the registration requirements of the Securities Act and as
may from time to time be adopted by the Issuer.
(ii) Securities Act of 1933. No transfer of any
Health Care Note shall be made unless such transfer is made (A) to the
Issuer, (B) to a "qualified institutional buyer" (as such term is
defined under Rule 144A ("Rule 144A") of the Securities Act of 1933
(the "1933 Act")) in accordance with Rule 144A, (C) pursuant to an
effective registration statement under the 1933 Act or (D) pursuant to
any other available exemption from the registration requirements of
the 1933 Act;provided, however, that with respect to transfers
pursuant to this clause (D), the transferee shall deliver to the
Trustee and the Issuer an opinion of counsel, to the effect that such
an exemption is available, which opinion may be relied upon by the
Trustee.
(iii) Transfer Certificate. All transferees of
Health Care Notes must deliver to the Trustee a certificate
substantially in the form of Exhibit A hereto.
(c) Invalid Transfers. If the Trustee becomes aware that
(i) a transfer or attempted or purported transfer of any interest in any Health
Care Note was consummated in compliance with the provisions of this Section
2.15 on the basis of an incorrect certification from the transferee or
purported transferee, (ii) a transferee failed to deliver to the Trustee any
certificate required to be delivered hereunder or (iii) the holder of any
interest in a Health Care Note is in breach of any representation or agreement
set forth in any certificate or any deemed representation or agreement of such
holder, the Trustee shall not register such attempted or purported transfer,
and if such a transfer has been registered, such transfer shall be absolutely
null and void ab initio and shall vest no rights in the purported transferee
(such purported transferee, a "Disqualified Transferee") and the last preceding
Holder of such Health Care Note that was not a Disqualified Transferee shall be
restored to all rights as a Holder thereof retroactively to the date of
transfer of such Health Care Note by such Holder.
Notwithstanding anything contained herein to the contrary, the Trustee
shall not be responsible for ascertaining whether any transfer complies with
the registration provisions or exemptions from the Securities Act or applicable
state securities law; provided that if a certificate is specifically required
to be delivered to the Trustee by a purchaser or transferee of a Health Care
Note, the Trustee shall be under a duty to examine the same to determine
whether on its face it conforms to the requirements of this Indenture and shall
promptly notify the party delivering the same if such certificate does not so
conform.
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ARTICLE III
COVENANTS
SECTION 3.1. Payment of Principal and Interest. The
Issuer will duly and punctually pay the principal of, interest on and any other
amounts due with respect to the Health Care Notes in accordance with the terms
of the Health Care Notes, the related Series Supplements and this Indenture.
Amounts properly withheld under the Code by any Person from a payment to any
Health Care Noteholder of interest, principal and/or any other amount shall be
considered as having been paid by the Issuer to such Health Care Noteholder for
all purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer
will maintain in the Borough of Manhattan, The City of New York, State of New
York, an office or agency where Health Care Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Health Care Notes and this Indenture may be
served. The Issuer hereby initially appoints the Trustee to serve as its agent
for the foregoing purposes. The Issuer will give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
surrenders, notices, and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Trustee as its agent to receive all
such surrenders, notices, and demands.
SECTION 3.3. Money for Payments To Be Held in Trust. As
provided herein, all payments of amounts due and payable with respect to any
Health Care Notes that are to be made from amounts withdrawn from the
Collection Account and the Distribution Account (and all subaccounts thereof)
pursuant to Sections 7.2(e), 7.2(f), 9.1 and 9.5, as applicable, hereof shall
be made on behalf of the Issuer by the Trustee or by another Paying Agent, and
no amounts so withdrawn from the Distribution Account (or any subaccount
thereof) shall be paid over to the Issuer except as provided in Section 7.2.
On or before each Payment Date and Redemption Date, the Issuer
shall deposit or cause to be deposited in the applicable subaccounts of the
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto, and (unless the Paying Agent is the Trustee) shall promptly
notify the Trustee of its action or failure so to act.
If the Paying Agent is not the Trustee, the Issuer will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of amounts
due with respect to the Health Care Notes in trust for the benefit of
the Persons entitled thereto until such
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sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(2) give the Trustee notice of any default of which it
has actual knowledge by the Issuer (or any other obligor upon the
Health Care Notes) in the making of any payment required to be made
with respect to the Health Care Notes;
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent;
(4) immediately resign as a Paying Agent and forthwith
pay to the Trustee all sums held by it in trust for the payment of
Health Care Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
and
(5) comply with all requirements of the Code with respect
to the withholding from any payments made by it on any Health Care
Notes of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection
therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which the sums were held by such Paying Agent; and upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds,
any money held by the Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Health Care Note and remaining unclaimed for
six years after such amount has become due and payable shall be discharged from
such trust and be paid to the Issuer on Issuer Request; and the Holder of such
Health Care Note shall thereafter, as an unsecured general creditor, look only
to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, or in the city
in which the Corporate Trust Office is located, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining will be repaid to the Issuer. The Trustee shall also
adopt and employ, at the expense and direction of the Issuer, any other
reasonable means of notification of such repayment (including, but not limited
to, mailing notice of such repayment to Holders whose Health Care Notes have
been called but have not been surrendered for redemption or whose right to or
interest in moneys
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due and payable but not claimed is determinable from the records of the Trustee
or of any Paying Agent, at the last address of record for each such Holder).
SECTION 3.4. Opinions as to Trust Estate. (a) On or
before the Closing Date for each Series, the Issuer shall furnish to the
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the Collateral, the
recording and filing of this Indenture, any indentures supplemental hereto, and
any other requisite documents, and with respect to the execution and filing of
any financing statements and continuation statements, as are necessary to
perfect and make effective (or continue) the lien and security interest of this
Indenture therein and reciting the details of such action, or stating that, in
the opinion of such counsel, no such action is necessary to perfect or to make
such lien and security interest effective.
(b) On or before March 31 in each calendar year beginning
at least six (6) months after the issuance of any Series of the Health Care
Notes while such Series is outstanding, the Issuer shall furnish to the Trustee
an Opinion of Counsel either stating that, in the opinion of such counsel, all
required action has been taken with respect hereto, to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any Uniform Commercial Code financing statements and continuation statements
as is necessary to perfect or to maintain the lien and security interest
created hereby in the Collateral and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to
perfect or to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until March 31 in
the following calendar year.
SECTION 3.5. Performance of Obligations; Servicing of
Receivables. (a) The Issuer will not take any action, and will use its best
efforts not to permit any action to be taken by others, that would release any
Person from any material covenant or obligation under any instrument or
agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination, or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture or such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist
it in performing its duties hereunder, and any performance of such duties by a
Person identified to the Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has,
pursuant to the Sale and Servicing Agreement, contracted with the Master
Servicer and the Servicers to assist the Issuer in performing its duties
hereunder.
(c) The Issuer will punctually perform and observe all of
its obligations and agreements contained in this Indenture, the Related
Documents and in the instruments and agreements included in the Trust Estate,
including but not limited to filing or causing to be
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filed all Uniform Commercial Code financing statements and applications
required to be filed by the terms of this Indenture and the Related Documents
in accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Related Document or any provision
thereof without the consent of the Trustee.
(d) If the Issuer shall have knowledge of the occurrence
of a Servicing Default under the Sale and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Rating Agency thereof, and shall specify in
such notice the action, if any, the Issuer is taking with respect of such
default. If a Servicing Default shall arise from the failure of the Servicer
to perform any of its duties or obligations under the Sale and Servicing
Agreement with respect to the Receivables, the Issuer shall take all reasonable
steps available to it to remedy such failure.
(e) The Issuer agrees that:
(i) It will defend its title to the Collateral against
all claims of all Persons whomsoever.
(ii) It will keep the Collateral free from all Liens,
other than the Lien created pursuant hereto, and will pay or cause to
be paid promptly when due all taxes, fees, assessments and other
charges now or hereafter imposed upon any of the Collateral.
(iii) Except pursuant to the Sale and Servicing Agreement,
it will not sell, assign, pledge, exchange or dispose of any of the
Collateral in any manner whatsoever or attempt to do any of the
foregoing or agree to any modification or cancellation of, or
substitution for, any of the Collateral. In the event of any
disposition of any of the Collateral, the Proceeds will remain
Collateral hereunder. The receipt by the Trustee of all or any part
of the Proceeds of any sale, assignment, pledge, exchange or
disposition of any of the Collateral shall not be deemed or construed
to be a consent by the Trustee to any such sale, assignment, pledge,
exchange or other disposition.
(iv) It will keep or cause to be kept accurate and
complete records concerning the Collateral, including without
limitation all payments and Proceeds received therefrom.
(v) It will execute and file such financing statements
(including without limitation amendments thereto and continuation
statements thereof), assignments, and other documents and instruments,
and do all such other acts, relating to the Collateral and the
Trustee's and Health Care Noteholders' respective interests therein as
the Trustee or the Holders of at least 50% in Aggregate Outstanding
Amount of Health Care Notes of any Series may reasonably request; and
will not file or permit to be filed any financing statement (or
amendment or continuation statement) with respect to any of the
Collateral not naming the Trustee as the only secured party. The
Issuer hereby authorizes the Trustee, at the Issuer's expense, to file
financing statements (including
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without limitation amendments thereto and continuation statements
thereof) without the Issuer's signature to perfect the security
interest of the Trustee in any jurisdiction in which such filing may
be necessary or as the Trustee may reasonably request and, to the
extent lawful, appoints the Trustee as its attorney-in-fact (without
requiring the Trustee to act as such) to execute any financing
statements (including without limitation any amendments thereto or
continuation statements thereof).
(vi) It will at any time and from time to time, at its
expense promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or that
the Trustee or the Holders of at least 50% in Aggregate Outstanding
Amount of Health Care Notes of any Series may reasonably request, to
perfect and protect any security interest granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its
rights and remedies hereunder with respect to any Collateral
including, without limitation, (i) if any Collateral is evidenced by a
promissory note or other instrument, such note or instrument shall be
duly endorsed and accompanied by duly executed instruments of transfer
or assignment, all in form and substance satisfactory to the Trustee
and (ii) the Issuer shall execute and file such financing or
continuation statements or amendments thereto, and such other
instruments or notices as may be necessary or as the Trustee or the
Holders of at least 50% in Aggregate Outstanding Amount of Health Care
Notes of any Series may reasonably request, in order to perfect and
preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
SECTION 3.6. Annual Statement as to Compliance. The
Issuer will deliver to the Trustee, within 90 days after the end of each fiscal
year of the Issuer (commencing with the 1995 fiscal year) an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(1) a review of the activities of the Issuer during such
year and of performance under this Indenture and the Related Documents
has been made under such Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has fulfilled all its obligations
under this Indenture and the Related Documents throughout such year,
or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such Authorized
Officer and the nature and status thereof.
SECTION 3.7. Purchase of Receivables. After the Transfer
Termination Date, the Issuer shall not purchase or otherwise fund the purchase
of any Receivables until the Net Note Balance of Health Care Notes of all
Series has been reduced to zero and any other amounts due thereunder, hereunder
or under any Related Document have been paid. The Issuer will not take any
action which would permit the Seller, Beverly or any Selling Subsidiary to have
the right to refuse to perform any of its respective obligations under the Sale
and Servicing Agreement.
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SECTION 3.8. Lines of Business; Change of Location. (a)
The Issuer shall not engage directly or indirectly in any line of business
except as permitted by its Certificate of Incorporation as in effect on the
date of issuance of the initial Series of Health Care Notes hereunder, and the
Issuer shall not amend the related provision of its Certificate of
Incorporation unless the Rating Agency Condition shall have been satisfied.
(b) The Issuer will not, without providing 20 days notice
to the Trustee and without filing such new financing statements or amendments
to any previously filed financing statements as the Trustee may require, (i)
change the location of its chief executive office, principal place of business
or the location of the offices where any Records the Issuer maintains relating
to the Receivables are kept or (ii) change its name, identity or corporate
structure in any manner which would, could or might make any financing
statement or continuation statement filed by the Issuer in accordance herewith
seriously misleading within the meaning of Section 9-402(7) of any applicable
enactment of the UCC.
SECTION 3.9. Additional Stock. The Issuer shall not issue
any additional shares of capital stock of any class or issue warrants or grant
any options or other similar rights with respect thereto.
SECTION 3.10. Maintenance of Existence. The Issuer shall
preserve and maintain its corporate existence and all of its rights, privileges
and franchises necessary in the normal conduct of its business.
SECTION 3.11. Compliance with Laws. The Issuer shall take
no action that would require the registration of the Issuer or any of its
Securities under any Applicable Securities Laws. The Issuer shall comply in
all respects with the requirements of all applicable Requirements of Law, such
compliance to include, without limitation, paying all taxes, assessments,
pension obligations and governmental charges imposed upon the Issuer or its
properties, except such taxes, assessments and governmental charges, if any, as
are being contested in good faith and as to which adequate reserves have been
provided.
SECTION 3.12. Notice of Proceedings. The Issuer shall
promptly give notice in writing to the Trustee and the Rating Agency of all
litigation, arbitration proceedings and regulatory proceedings affecting the
Issuer, the Collateral or the property of the Issuer.
SECTION 3.13. Limitation on Debt. The Issuer shall not
create, assume or suffer to exist any Debt, except for Health Care Notes of one
or more Series issued in compliance with the provisions hereof.
SECTION 3.14. Negative Pledge. Except for (x) Liens
created hereby and (y) Liens (not incurred in connection with the borrowing of
money) which in the aggregate are not material to the Issuer or its assets
(which, in the case of this clause (y) shall not exceed $25,000 in the
aggregate outstanding during the term of this Indenture), the Issuer shall not
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it.
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SECTION 3.15. Consolidations, Mergers and Sales of Assets.
The Issuer shall not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer (by investment, assignment, contribution
or otherwise) all or any substantial portion of its assets to any other Person
(except as permitted by its Certificate of Incorporation as in effect on the
date of the issuance of the initial Series of Health Care Notes hereunder, by
Sections 2.2 or 5.4 of the Sale and Servicing Agreement or by Sections 5.11 and
9.4 of this Indenture). The Issuer will not make loans or advance credit to
other Persons, purchase other assets other than Purchased Receivables or
Eligible Investments, nor make capital expenditures greater than $25,000 per
year.
SECTION 3.16. Restricted Payments. The Issuer shall not
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of its capital stock, or return any capital to its shareholders as
such, or purchase, redeem or otherwise acquire for value any shares of any
class of its capital stock or any warrants, rights or options to acquire any
such shares, now or hereafter outstanding (collectively, a "Restricted
Payment"), unless (x) immediately after (and giving effect to) payment of such
Restricted Payment (1) no Amortization Event, Default or Event of Default
(without regard to any grace periods referenced in the definitions thereof) has
occurred and is continuing and (2) the Net Purchased Receivables equals or
exceeds the Minimum Required Receivables Balance; and (y) declaration and
payment of such Restricted Payment is permitted under (and complies with) all
applicable Requirements of Law.
SECTION 3.17. Corporate Existence. (a) The Issuer shall
keep in full effect its existence, rights and franchises as a corporation under
the laws of the state of its incorporation and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or shall be necessary to protect the validity and enforceability of the
Related Documents and each other instrument or agreement necessary or
appropriate to the proper administration thereof and the transactions
contemplated thereby.
(b) The Issuer shall observe the applicable legal
requirements for the recognition of the Issuer as a legal entity separate and
apart from Beverly and its other Affiliates, including, without limitation, as
follows:
(i) the Issuer shall maintain separate corporate records,
books of account and financial statements (each of which shall be
sufficiently full and complete to permit a determination of the
Issuer's assets and liabilities and to permit a determination of the
obligees thereon and the time for performance on each of the Issuer's
obligations) from those of Beverly and its other Affiliates;
(ii) except as expressly permitted by the Sale and
Servicing Agreement for Collections of Purchased Receivables prior to
transfer thereof to the Collection Account (which transfer is to occur
within two Business Days of receipt of such Collection by the
applicable Servicer), the Issuer shall not commingle any of its assets
or funds with those of Beverly or any of its other Affiliates;
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(iii) the Issuer shall maintain records permitting a
determination on a daily basis of the amount and location of any of
its funds which are commingled as permitted under clause (ii) above;
(iv) the Board of Directors of the Issuer shall be elected
independently from the Board of Directors of Beverly and its other
Affiliates and shall at all times include at least two Independent
Directors (for purposes hereof, Independent Directors" means shall
mean the members of the Board of Directors of the Issuer who are not,
and have not at any time been: (x) a director, officer, employee or
shareholder of Beverly or any other Affiliate thereof, (y) a director,
officer, employee or shareholder of any other Person or entity that,
directly or indirectly, controls or is under common control with
Beverly) or (z) a member of the immediate family of any of the
foregoing;
(v) the Board of Directors and stockholders of the Issuer
shall hold all regular and special meetings appropriate to authorize
corporate actions. Regular meetings of directors will be held at
least annually. The Board of Directors may act from time to time
through one or more committees of the Board in accordance with the
Issuer's by-laws. Appropriate minutes of all meetings of the Issuer's
Board of Directors (and committees thereof) and of the stockholders
meetings shall be kept by the Issuer;
(vi) taking into account the services to be performed on
the Issuer's behalf by the Servicers and the Master Servicer under the
Sale and Servicing Agreement, the Issuer shall have sufficient
officers and employees to run its business and operations. At least
one senior officer of the Issuer (who may also be a member of the
Board of Directors of the Issuer) shall not be a director, officer or
employee of Beverly or any of its other Affiliates;
(vii) decisions with respect to the Issuer's business and
daily operations shall be independently made by the Issuer (although
the officer making any particular decision may also be an officer or
director of Beverly) and shall not be dictated by Beverly or any of
its other Affiliates. Any permitted transactions between the Issuer
and Beverly or any of its other Affiliates (other than the purchase of
Receivables pursuant to the Sale and Servicing Agreement) shall be on
arms-length terms and shall receive prior approval of a majority of
the Board of Directors including at least two Independent Directors of
the Issuer; provided, that dividends from the Issuer to Beverly shall
not require the approval of any Independent Director of the Issuer if
the requisite dividend committee has approved such dividend;
(viii) the Issuer shall act solely in its own corporate name
and through its own authorized officers and agents. Neither Beverly
nor any of its other Affiliates shall be appointed or act as agent of
the Issuer, except as expressly contemplated by the Sale and Servicing
Agreement;
(ix) the Issuer shall prepare instruments of assignment
naming it as purchaser for all Purchased Receivables sold to it. In
all cases, the data and records (including computer records) used by
the Issuer or the Servicers in the collection and
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administration of Purchased Receivables shall reflect the Issuer's
ownership interest therein;
(x) although the Issuer's directors, officers and employees
(other than the Independent Directors and the senior officer referred
to in clause (vi) above) may also be employees of Beverly or any of
its other Affiliates and may participate in their employee benefit
plans, and the Issuer shall reimburse Beverly or any of its other
Affiliates in full for their services, all of which efforts and
services shall be carried on in arms length transactions;
(xi) the Issuer shall be responsible for the payment of all
expenses, indebtedness and other obligations incurred by it and shall
reimburse Beverly or any of its other Affiliates for any
organizational expenses related to the Issuer and the expenses of the
initial offering and sale of the Health Care Notes that Beverly or any
such other Affiliate had incurred;
(xii) neither Beverly nor any of its other Affiliates shall
advance funds to the Issuer, other than capital contributions from
Beverly made to enable the Issuer to pay the purchase price of
Purchased Receivables, and neither Beverly nor any other Affiliate of
Beverly will otherwise supply funds to, or Guaranty debts of, the
Issuer;
(xiii) the Issuer will maintain (x) a separate office which
shall be physically separate from space occupied by Beverly, or any of
its other Affiliates (but may be separate space occupied solely by the
Issuer at the offices of Beverly or any of its other Affiliates) and
shall be identified as the Issuer's office so it can be identified by
outsiders and (y) a phone number separate from Beverly and its other
Affiliates;
(xiv) the Issuer shall not enter into any Guaranty, or
otherwise become liable, with respect to any obligation of Beverly or
any of its other Affiliates;
(xv) the Issuer shall at all times hold itself out to the
public under the Issuer's own name as a legal entity separate and
distinct from Beverly and its Affiliates (the foregoing to include,
but not be limited to, use of materially separate and distinct
letterhead and telephone number(s)); and
(xvi) any financial reports required of the Issuer shall
comply with generally accepted accounting principles and shall be
issued separately from any reports prepared for Beverly and any of its
Affiliates.
SECTION 3.18. Books and Records. The Issuer shall keep
proper books of record and account, in which full and correct entries shall be
made of all its financial transactions and its assets and business in
accordance with United States generally accepted accounting principles,
consistently applied.
SECTION 3.19. Notice of Events of Default or Defaults. The
Issuer agrees to give the Trustee and the Rating Agency prompt written notice
of each Event of
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Default or Default hereunder, each default on the part of the Master Servicer,
any Servicer or any Seller, as the case may be, of its obligations under the
Sale and Servicing Agreement and any Amortization Event under the Sale and
Servicing Agreement.
SECTION 3.20. Representations and Warranties of the Issuer
Relating to the Issuer. The Issuer hereby represents and warrants to the
Trustee as of the date hereof and as of the applicable Closing Date of each
Series of Health Care Notes that:
(a) Organization and Good Standing. The Issuer
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization or incorporation and has full corporate power and
authority and legal right to own its properties and conduct
its business as presently owned or conducted, to execute,
deliver and perform its obligations under this Indenture, each
Series Supplement and the other Related Documents to which it
is a party and to execute and deliver to the Trustee the
Health Care Notes of each Series.
(b) Due Qualification. The Issuer is duly
qualified to do business and is in good standing as a foreign
corporation (or is exempt from such requirements), and has
obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would render any Purchased Receivable
unenforceable by the Issuer or the Trustee or would have a
material adverse effect on the Collateral, the Trust Estate or
the Health Care Noteholders; provided, however, that no
representation or warranty is made with respect to any
qualifications, licenses or approvals which the Trustee would
have to obtain to do business in any jurisdiction in which the
Trustee seeks to enforce directly any Purchased Receivable.
(c) Due Authorization. The execution, delivery
and performance of this Indenture, each Series Supplement and
each other Related Documents to which is a party by the Issuer
and the execution and delivery to the Trustee of the Health
Care Notes of each Series and the consummation by the Issuer of
the transactions provided for in this Indenture and the Related
Documents, have been duly authorized by the Issuer by all
necessary corporate action on the part of the Issuer.
(d) No Conflict. The execution and delivery by
the Issuer of this Indenture, each Series Supplement, each
other Related Document to which it is a party and the Health
Care Notes of each Series, the performance of the transactions
contemplated by this Indenture, each Series Supplement and
each Related Document to which it is a party and the
fulfillment of the terms hereof and thereof applicable to the
Issuer (including, without limitation, the transfer of the
Purchased Receivables to the Issuer and the granting of a
security interest on such Purchased Receivables (and the other
Collateral) to the Trustee), will not conflict with or violate
any Requirements of Law applicable to the Issuer or
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conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice
or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust or
other instrument to which the Issuer is a party or by which it
or its properties are bound.
(e) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the
Issuer, threatened against or affecting the Issuer before any
Governmental Authority seeking to prevent the consummation of
any of the transactions contemplated by this Indenture, each
Series Supplement and each other Related Document to which it
is a party or seeking any determination or ruling that, in the
reasonable judgment of the Issuer, would materially and
adversely affect the performance by the Issuer of its
obligations under this Indenture, each Series Supplement and
each Related Document to which it is a party.
(f) All Consents. All authorizations, consents,
orders or approvals of or registrations or declarations with
any Governmental Authority required to be obtained, effected
or given by the Issuer in connection with the execution and
delivery by the Issuer of the Indenture, each Series
Supplement and each other Related Document to which it is a
party have been duly obtained, effected or given and are in
full force and effect.
(g) Investment Company. The Issuer is not an
"investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment
Company Act.
(h) Place of Business. The Issuer's principal
place of business and chief executive office and the location
of the Records pertaining to the Receivables is 5111 Rogers
Avenue, Suite 40-A, Fort Smith, Arkansas 72919.
SECTION 3.21. Representations and Warranties of the Issuer
Relating to this Indenture, any Series Supplement, the Related Documents and
the Purchased Receivables. The Issuer hereby represents and warrants to the
Trustee as of the date hereof and, as of the Closing Date of each Series of
Health Care Notes, or as of such other date or times as are specified therein,
that:
(a) this Indenture, each Series Supplement and
each Related Documents to which it is a party constitutes a
legal, valid and binding obligation of the Issuer enforceable
against the Issuer in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, affecting the enforcement or
creditors' rights in general, and except as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity);
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(b) each Purchased Receivable and all other
Collateral have been conveyed to the Trust Estate free and
clear of any Lien;
(c) all authorizations, consents, orders or
approvals of or registrations or declarations with any
Governmental Authority required to be obtained, effected or
given by the Issuer in connection with the conveyance of each
Purchased Receivable and all other Collateral to the Trustee
have been duly obtained, effected or given and are in full
force and effect;
(d) the Issuer has taken all reasonable steps
necessary for this Indenture to constitute a grant of a first
priority perfected "security interest" (as defined in the UCC)
in the Trust Estate, which, in the case of existing Collateral
and then proceeds thereof, is enforceable by the Trustee upon
execution and delivery of this Indenture and which will be
enforceable by the Trustee with respect to such Purchased
Receivables and all other Collateral hereafter created and the
proceeds thereof upon such creation. Upon the filing of the
Uniform Commercial Code financing statements and, in the case
of Purchased Receivables and all other Collateral hereafter
created and the proceeds thereof, upon the creation thereof,
the Trustee shall have a first priority perfected security or
ownership interest in such property and proceeds; and
(e) except as otherwise expressly provided in this
Indenture or any Series Supplement, neither the Issuer nor any
Person claiming through or under the Issuer has any claim to
or interest in the Collection Account, the Distribution
Account (or any subaccount thereof) or the Expense Account.
SECTION 3.22. Rating Agency Information. The Issuer will
provide the Rating Agency with all financial and operational information with
respect to the Issuer as the Rating Agency may reasonably require, including
but not limited to financial statements of Beverly (including the Selling
Subsidiaries) and delinquency, default and recovery information on the
Purchased Receivables.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to the Health
Care Notes of any Series except as to: (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Health
Care Notes, (iii) rights of Health Care Noteholders to receive payments of
principal and premium thereof, interest thereon and any amounts due with
respect thereto, (iv) the rights, obligations, and immunities of the Trustee
hereunder and (v) the rights of Health Care Noteholders as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or
any of them, and the Trustee, on demand of and at the expense of
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the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to Health Care Notes of such Series,
when
(1) either:
(A) all Health Care Notes of such Series
theretofore authenticated and delivered (other than (i) Health
Care Notes that have been destroyed, lost, or stolen and that
have been replaced or paid as provided in Section 2.7 hereof
and (ii) Health Care Notes for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3 hereof)
have been delivered to the Trustee for cancellation; or
(B) all Health Care Notes of such Series not
theretofore delivered to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable
at their Final Maturity Date within one year, or
(iii) are to be called for
redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the
expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has,
pursuant to the terms of this Indenture, deposited or caused
to be deposited with the Trustee cash or direct obligations of
or obligations guaranteed by the United States of America, in
trust for such purpose, an amount sufficient to pay and
discharge the entire indebtedness on such Health Care Notes
not theretofore delivered to the Trustee for cancellation, for
principal, premium, interest and any other amounts that would
be payable at their Final Maturity Date or Redemption Date (if
Health Care Notes shall have been called for redemption
pursuant to Section 9.1 hereof), as the case may be;
(2) the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer; and
(3) the Issuer has delivered to the Trustee an Officer's
Certificate, an Opinion of Counsel, and an Independent Certificate
from a firm of certified public accountants, each meeting the
applicable requirements of Section 10.1 hereof and each stating that
all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.
SECTION 4.2. Application of Trust Money. All moneys
deposited with the Trustee pursuant to Section 4.1 hereof shall be held in
trust and applied by it, in
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accordance with the provisions of the Health Care Notes and this Indenture, to
the payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Health Care Notes for the payment
or redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal, interest and other applicable
amounts; but such moneys need not be segregated from other funds except to the
extent required herein or required by law.
SECTION 4.3. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect
to the Health Care Notes, all moneys then held by any Paying Agent other than
the Trustee under the provisions of this Indenture with respect to such Health
Care Notes shall, upon demand of the Issuer, be paid to the Trustee to be held
and applied according to Section 3.3 hereof, and thereupon such Paying Agent
shall be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default. "Event of Default" with
respect to any Series, wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest on any Health
Care Note when and as the same becomes due and payable, and such
default shall continue for a period of five (5) Business Days; or
(2) default in the payment of the principal of or any
installment of the principal of any Health Care Note when and as the
same becomes due and payable; or
(3) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture, in any
Series Supplement or in any Related Document (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section 5.1 specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any Series Supplement, or in any Related Document or in any
certificate or other writing delivered pursuant hereto or thereto or
in connection herewith or therewith proving to have been incorrect in
any material respect as of the time when the same shall have been
made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation
or warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% of the Aggregate
Outstanding Amount of the Health Care Notes of such Series, a written
notice specifying such
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default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(4) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of its property or any part of the Trust Estate in an
involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official or the Issuer or for any substantial
part of its property or any part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(5) the commencement by the Issuer of a voluntary case
under any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer
to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of its
property or any part of the Trust Estate, or make any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing; or
(6) any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied in respect of
an obligation (alleged or otherwise) of the Issuer in excess of
$5,000,000 against any of the property of the Issuer and such
judgment, writ or similar process shall not be released, vacated or
stayed or fully bonded within 30 days after its issue of levy; or
(7) any default shall occur under any obligation of the
Issuer with an outstanding principal of greater than $5,000,000 which
default shall, if not cured, permit the acceleration of all amounts
due and payable under such obligation; or
(8) this Indenture shall, for any reason (other than
pursuant to the terms hereof), cease to create a valid and perfected
first priority lien and security interest in the Collateral, or any
Lien, other than as expressly permitted hereby or by the Related
Documents, shall exist in respect of the Collateral.
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment. Subject to the following sentence, if an Event of Default should
occur and be continuing with respect to a Series, then and in every such case
the Trustee may, and upon the request of the Holders of Health Care Notes
representing more than 50% of the Aggregate Outstanding Amount of the Health
Care Notes of such Series the Trustee shall, declare all the Health Care Notes
of all Series to be immediately due and payable, by a notice in writing to the
Issuer, and upon any such declaration the unpaid principal amount of all such
Health Care Notes, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable.
Notwithstanding the foregoing sentence, if an Event of Default
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described in Section 5.1(4) or (5) should occur and be continuing, all Series
of Health Care Notes shall be automatically accelerated without delivery of any
notice to the Issuer.
At any time after such declaration of acceleration of maturity
has been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article provided, except
with respect to an Event of Default described in Section 5.1(4) or (5), the
Holders of Health Care Notes representing more than 50% of the Aggregate
Outstanding Amount of the Health Care Notes of each Series, by written notice
to the Issuer and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Issuer has paid or deposited with the Trustee a
sum sufficient to pay
(A) all payments of principal of and interest on
all Health Care Notes of all Series and all other amounts that
would then be due hereunder or upon such Health Care Notes if
the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements, and advances of the Trustee and its agents and
counsel; and
(2) all Events of Default with respect to all Series,
other than the nonpayment of the principal of the Health Care Notes of
all Series that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12 hereof.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee. (a) The Issuer covenants that (i) if default is made
in the payment of any interest on, or any other amounts owing with respect to,
any Health Care Note of a Series (other than the principal and premium
thereof), when and as the same becomes due and payable, and such default
continues for a period of five (5) Business Days, or (ii) default is made in
the payment of the principal of or any installment of the principal and premium
of any Health Care Note of a Series, when and as the same becomes due and
payable, the Issuer will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of the Health Care Notes of such Series, the whole
amount then due and payable on such Health Care Notes for principal, premium
and interest (including by way of acceleration of the Health Care Notes), with
interest upon the overdue principal and any other amounts due hereunder and, to
the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the rate then borne by the Health Care
Notes of such Series (or, if the applicable Series Supplement so provides, the
default rate specified therein) and in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel.
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(b) In case the Issuer shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as trustee of an
express trust, may institute a Proceeding for the collection of the sums so due
and unpaid and to foreclose upon or take any other action in respect of the
Collateral, and may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Issuer or other obligor upon such Health Care
Notes and collect in the manner provided by law out of the Collateral or any
property of the Issuer (but subject to the provisions of Section 5.5) or other
obligor upon such Health Care Notes, wherever situated, the moneys adjudged or
decreed to be payable.
(c) If an Event of Default occurs and is continuing, the
Trustee may, as more particularly provided in Section 5.4, in its discretion,
proceed to protect and enforce its rights and the rights of the Health Care
Noteholders, by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or any Related
Document or in aid of the exercise of any power granted herein or any Related
Document, or to enforce any other proper remedy or legal or equitable right
vested in the Trustee by this Indenture or any Related Document or by law (but
subject to the provisions of Section 5.5).
(d) In case there shall be pending, relative to the
Issuer or any other obligor upon the Health Care Notes or any Person having or
claiming an ownership interest in the Trust Estate, Proceedings under Title 11
of the United States Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Issuer or its property
or such other obligor or Person, or in case of any other comparable judicial
Proceedings relative to the Issuer or other obligor upon the Health Care Notes
of any Series or any Person having or claiming any ownership interest in the
Trust Estate, or to the creditors or property of the Issuer or such other
obligor or Person, the Trustee, irrespective of whether the principal of any
Health Care Notes of any Series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section
5.3, shall be entitled and empowered, by intervention in such Proceedings or
otherwise:
(i) to file and prove a claim or claims for the
whole amount of principal, interest and any other documents owing and
unpaid in respect of the Health Care Notes and to file such other
papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of negligence
or bad faith) and of the Health Care Noteholders allowed in such
Proceedings,
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Health Care Notes in
any election of a trustee, a standby trustee or Person performing
similar functions in any such Proceedings,
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(iii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute
all amounts received with respect to the claims of the Health Care
Noteholders and of the Trustee on their behalf, and
(iv) to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the
claims of the Trustee or the Holders of Health Care Notes allowed in
any judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Health Care
Noteholders to make payments to the Trustee, and, in the event that the Trustee
shall consent to the making of payments directly to such Health Care
Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Health Care Noteholder any plan of reorganization, arrangement,
adjustment, or composition affecting the Health Care Notes or the rights of any
Holder thereof or to authorize the Trustee to vote in respect of the claim of
any Health Care Noteholder in any such proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar person.
(f) All rights of action and of asserting claims under
this Indenture, or under any of the Health Care Notes of any Series, may be
enforced by the Trustee without the possession of any of the Health Care Notes
of such Series or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Health Care Notes of such Series.
(g) In any Proceedings brought by the Trustee (and also
any Proceedings involving the interpretation of any provision of this Indenture
to which the Trustee shall be a party), the Trustee shall be held to represent
all the Holders of the Health Care Notes, and it shall not be necessary to make
any Health Care Noteholder a party to any such Proceedings.
SECTION 5.4. Additional Remedies. If an Event of Default
shall have occurred and be continuing with respect to a Series, the Trustee may
do one or more of the following (subject to Section 5.5 hereof):
(1) institute Proceedings in its own name and as trustee
of an express trust for the collection of all amounts then payable on
the Health Care Notes of such Series or under this Indenture with
respect thereto, whether by declaration or otherwise,
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enforce any judgment obtained, and collect from the Issuer and any
other obligor upon such Health Care Notes moneys adjudged due;
(2) the Trustee shall have the right to receive, endorse,
assign or deliver, in its own name or the name of the Issuer, any and
all checks, drafts and other instruments for the payment of money
relating to or constituting part of the Collateral, and the Issuer
hereby waives notice of presentment, protest and nonpayment of any
instrument so endorsed. In furtherance of the foregoing, the Issuer
hereby irrevocably appoints the Trustee, or any of its officers or
designees, the Issuer's lawful attorney-in-fact (without requiring any
of them so to act), with power of substitution, in the name of the
Issuer (i) to endorse the name of the Issuer upon any of the
Collateral, including Proceeds; (ii) to demand, collect, receive
payment of, receipt for and give discharges and releases of any of the
Collateral; (iii) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on any of the Collateral
or to enforce any rights in respect thereof; (iv) to initiate, settle,
compromise, compound, adjust or defend any actions, suits or
proceedings relating to or pertaining to any of the Collateral; (v) if
directed by the Holders of Health Care Notes pursuant to Section 5.11,
to sell, transfer, assign, discount, negotiate or otherwise deal in
all or any portion of the Collateral or Proceeds; (vi) generally to
perform all other acts necessary or desirable to realize on, and
obtain the benefits of, the Collateral and otherwise to carry out the
intention of this Agreement, as fully and effectively as though the
Trustee were the absolute owner thereof, and the Issuer hereby
ratifies and confirms all that the Trustee shall do by virtue of this
appointment; and (vii) to direct the actions of the Master Servicer
and the Servicers and to take any and all other actions as, and in the
name of, the Issuer pursuant to the Sale and Servicing Agreement. In
any action hereunder, the Trustee shall be entitled to the appointment
of a receiver to take possession of all or any portion of the Trust
Estate and the Trustee shall not be responsible or liable for any loss
or destruction of all or any part of the Collateral unless the same
shall happen through negligence or willful misconduct of the Trustee.
Subject to Section 6.1(a), the Trustee shall not, under any
circumstances, absent its negligence or willful misconduct, have any
liability for any error or omission made in the settlement, collection
or payment or other disposition of any or all of the Collateral or of
any instrument received in payment therefor. The costs of collection,
sale or other disposition, notification and enforcement, including,
without limitation, reasonable counsel fees and disbursements, shall
be borne solely, or reimbursed to the Trustee by, the Issuer.
(3) After receipt of directions from the requisite Health
Care Noteholders pursuant to Section 5.11 hereof, the Trustee, with or
without taking possession, may on behalf of the Health Care
Noteholders sell or cause to be sold, in one or more sales, at such
price as the Trustee may deem adequate, and for cash or on credit or
for future delivery, with or without assumption of any credit risk the
Collateral in its entirety but not in part, at a public or private
sale, without demand of performance or notice or intention to sell or
of time or place of sale (except such notice as may be required by
applicable statute and cannot be waived), and the Trustee may be the
purchaser of all
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or any portion of the Collateral so sold. The purchaser(s) at any
such sale shall thereafter hold the same absolutely, free from any
claim or right of whatever kind, including any equity of redemption,
of the Issuer, any such demand, notice, claim, right or equity being
hereby expressly waived and released. The Trustee shall under no
circumstances incur any liability as a result of the sale of the
Collateral or any part thereof, at any sale conducted in accordance
with the foregoing. The Issuer hereby waives any claims against the
Trustee, and the Health Care Noteholders arising by reason of the fact
that the price at which the Collateral may have been sold at any
private sale was less than the price which might have been obtained at
a public sale or was less than the then total unpaid Obligations.
SECTION 5.5. Appointment of Servicers; Collection of
Medicaid, Medicare and Department of Veteran's Affairs Receivables; Sale of
Purchased Receivables. (a) The Trustee (at the express direction of the
Issuer) hereby irrevocably appoints the Servicers as its agents for purposes of
enforcing all rights and remedies of the Trustee in the Collateral set forth
herein, and the Trustee shall in no way be liable for the failure of any such
agents to enforce such rights and remedies, the manner in which such rights and
remedies are enforced or the supervision of such agents. At the request of the
Trustee, the Issuer shall cause the Servicers to promptly pay to the Trustee,
for the benefit of Health Care Noteholders, all proceeds realized upon the
enforcement of such remedies.
(b) Notwithstanding anything to the contrary in this
Agreement, the Trustee shall not be liable or responsible for servicing the
Receivables or for any of the duties or obligations of the Master Servicer or
any Servicer, as the case may be, under the Sale and Servicing Agreement or
this Indenture or otherwise (and shall not be liable or responsible for the
acts or omissions of the Master Servicer or any Servicer, as the case may be,
or failure to act in reliance upon any action or failure to act by the Master
Servicer or any Servicer, as the case may be). Subject to Section 6.1(a), the
Trustee shall not be bound to ascertain or inquire as to the truth or accuracy
of any information provided to it by the Master Servicer or any Servicer, as
the case may be, but may for any purpose conclusively rely upon any information
given to it by any of them.
(c) Notwithstanding any provision hereof or of any
Related Document to the contrary, all Medicaid, Medicare or Department of
Veterans' Affairs or other payments which are made by an Obligor with respect
to any Purchased Receivable shall be collected from such Obligor only by the
Servicer which furnished the services for which such payments are made, except
to the extent that an Obligor may be required to submit any such payments
directly to a Person other than the Servicer pursuant to a court-ordered
assignment which is valid, binding and enforceable under applicable federal and
state Medicaid, Medicare and Department of Veterans' Affairs laws, rules and
regulations; neither this Indenture nor any Related Document shall be construed
to permit any other Person, in violation of applicable federal and state
Medicaid, Medicare or Department of Veterans' Affairs laws, rules and
regulations to collect or receive, or to be entitled to collect or receive, any
such payments prior to the Servicer's receipt thereof. The Trustee shall not
be responsible for the collection of Receivables.
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SECTION 5.6. Limitation of Suits. No Holder of any Health
Care Note of a Series shall have any right to institute any Proceeding,
judicial or otherwise, with respect to this Indenture and such Series, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to such
Series;
(2) the Holders of more than 50% of the then Aggregate
Outstanding Amount of the Health Care Notes of such Series shall have
made written request to the Trustee to institute such Proceeding in
respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request, and offer of indemnity has failed to institute such
Proceedings; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Holders
of a at least 50% of the Aggregate Outstanding Amount of the Health
Care Notes of such Series:
it being understood and intended that no one or more Holders of Health Care
Notes of a Series shall have any right in any manner whatever by virtue of, or
by availing of, any provision of this Indenture to affect, disturb or prejudice
the rights of any other Holders of Health Care Notes or to obtain or to seek to
obtain priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from groups of the requisite amounts of
Holders of Health Care Notes of two or more Series, the Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
SECTION 5.7. Unconditional Rights of Health Care
Noteholders To Receive Principal and Interest. Notwithstanding any other
provisions in this Indenture, the Holder of any Health Care Note shall have the
right, which is absolute and unconditional, to receive payment of the principal
of and interest, if any, on, and any other amounts with respect to, such Health
Care Note on or after the respective due dates thereof expressed in such Health
Care Note or in this Indenture (or, in the case of redemption, on or after the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
SECTION 5.8. Restoration of Rights and Remedies. If the
Trustee or any Health Care Noteholder has instituted any Proceeding to enforce
any right or remedy
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under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Trustee or to such Health
Care Noteholder, then and in every such case the Issuer, the Trustee and the
Health Care Noteholders shall, subject to any determination in such Proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Health Care
Noteholders shall continue as though no such Proceeding had been instituted.
SECTION 5.9. Rights and Remedies Cumulative. No right or
remedy conferred upon or reserved to the Trustee or to the Health Care
Noteholders herein or any Related Document is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, under any Related
Document or otherwise, shall not prevent the concurrent assertion or employment
of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or
omission of the Trustee or any Holder of any Health Care Note to exercise any
right or remedy accruing hereunder or under any Related Document upon any
Default or Event of Default shall impair any such right or remedy or constitute
a waiver of any such Default or Event of Default or an acquiescence therein.
Every right and remedy given herein or in any Related Document or by law to the
Trustee or to the Health Care Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Health Care
Noteholders, as the case may be.
SECTION 5.11. Control by Health Care Noteholders. The
Holders of more than 50% of the Aggregate Outstanding Amount of the Health Care
Notes of any Series shall have the right to direct the time, method, and place
of (x) conducting any Proceeding for any remedy available to the Trustee with
respect to the Health Care Notes of such Series or (y) exercising any trust or
power conferred on the Trustee hereunder or under any Related Document with
respect to such Series; provided that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture or any Related Document;
(2) any direction to the Trustee to sell or liquidate the
Trust Estate pursuant to Section 5.4 of this Indenture shall be by the
Holders of the Health Care Notes of any Series representing not less
than 50% of the Aggregate Outstanding Amount of such Series, shall be
subject to Section 5.5 hereof. The direction of such Holders of
Health Care Notes shall specify the time and place of such proposed
sale and the proposed Person to acquire the Collateral to be sold or
liquidated.
(3) the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction;
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provided, however, that, subject to Section 6.1 hereof, the Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Health Care Noteholders not
consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the
acceleration of the Maturity of the Health Care Notes of all Series as provided
in Section 5.2 hereof, the Holders of Health Care Notes of not less than 50% of
the then Aggregate Outstanding Amount of the Health Care Notes of each Series
may waive any past Default or Event of Default and its consequences except a
Default (a) in payment of principal and premium of, interest on, or any Series
Special Obligations with respect to, any of the Health Care Notes, (b) in
respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Health Care Note of all Series
affected or (c) with respect to an Event of Default described in Section 5.1(4)
or (5). In the case of any such waiver, the Issuer, the Trustee and the
Holders of the Health Care Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent therein.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Health Care Note by his acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered,
or omitted by it as Trustee, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Trustee, (b) any suit instituted by any Health Care Noteholder, or group of
Health Care Noteholders, in each case holding in the aggregate more than 10% of
the Aggregate Outstanding Amount of the Health Care Notes of a Series, or (c)
any suit instituted by any Health Care Noteholder for the enforcement of the
payment of principal of or interest on, or any other amounts with respect to,
any Health Care Note on or after the respective due dates expressed in such
Health Care Note and in this Indenture (or, in the case of redemption, on or
after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance
of this Indenture or the Related Documents; and the Issuer (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and
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covenants that it will not hinder, delay, or impede the execution of any power
granted to the Trustee herein or in the Related Documents, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
SECTION 5.15. Action on Health Care Notes. The Trustee's
right to seek and recover judgment on the Health Care Notes of a Series or
under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture or the
Sale and Servicing Agreement. Neither the Lien of this Indenture, the absolute
sale represented by the Sale and Servicing Agreement nor any rights or remedies
of the Trustee or the Health Care Noteholders for any Series shall be impaired
by the recovery of any judgment by the Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Trust Estate
or upon any of the assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain
Obligations. (a) Whether or not an Amortization Event, a Default or an Event
of Default has occurred or is continuing, the Issuer agrees to take all such
lawful action to compel or secure the performance and observance by the Seller,
the Master Servicer, Beverly and the Servicers, as applicable, of each of its
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement, in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement, including, without
limitation, the transmission of notices of default on the part of the Seller,
the Master Servicer, Beverly or the Servicers and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller, the Master Servicer, Beverly or the Servicers of each of their
obligations under the Sale and Servicing Agreement. The Issuer hereby appoints
the Trustee its attorney-in-fact, with full power of substitution, for the
purpose of taking such action in the name of the Issuer, in the event the
Issuer fails to take such action, which appointment is coupled with an interest
and is irrevocable. Under no circumstances shall this Section 5.16(a) be
construed to create any duty of the Trustee not otherwise expressly provided
for in this Indenture.
(b) If an Event of Default has occurred and is
continuing, the Trustee may, and, at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of at least 50% of the Aggregate Outstanding Amount of any Series of
Health Care Notes shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Seller, the Master Servicer, Beverly or
Servicers under or in connection with the Sale and Servicing Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Seller, the Master Servicer or the Servicers of each of
their obligations thereunder and to give any consent, request, notice,
direction, approval, extension or waiver to the Sale and Servicing Agreement,
and any right of the Issuer to take such action shall be suspended.
SECTION 5.17. Application of Proceeds. The proceeds of any
sale or liquidation of Collateral pursuant to Section 5.11 of this Indenture
taken by the Trustee shall (after payment of the costs and expenses of the
Trustee) be applied as provided in Section 6.3 of the Sale and Servicing
Agreement and Article VII of this Indenture. In the event of any conflict
between the Sale and Servicing Agreement and Article VII of this Indenture,
whether
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existing now or by virtue of any amendment or supplement to either of such
documents, the provisions of Article VII of this Indenture shall control.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities. (a)
Except during the continuance of an Event of Default as to which the Trustee
has actual knowledge:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof or any Related Document are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture or such Related
Document.
(b) In case an Event of Default known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of at least 50% of the Aggregate
Outstanding Amount of the Health Care Notes of any Series, relating to
the time, method and place of conducting any Proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture or any Related Document.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
eligibility of or affording protection to the Trustee shall be subject to the
provisions of this Section.
(e) Except as provided in Section 7.3(c), the Trustee
shall not be liable for interest on any money received by it.
(f) No provision of this Indenture or any Related
Document shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, unless it shall
have first received indemnity reasonably satisfactory to it against such risk
or liability.
(g) The permissive right of the Trustee to take actions
enumerated in this Indenture or any Related Document shall not be construed as
a duty, and the Trustee shall not be answerable for other than its own
negligence or willful misconduct.
SECTION 6.2. Notice of Defaults and Amortization Events.
Within 10 days after having actual knowledge of the occurrence of any Default
or any Amortization Event, the Trustee shall transmit by mail to all Holders of
Health Care Notes and the Rating Agency, notice of such Default or such
Amortization Event hereunder known to the Trustee.
SECTION 6.3. Certain Rights of the Trustee. Except as
otherwise provided in Section 6.1 hereof in connection with the administration
of this Indenture or with any Related Document:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Issuer mentioned
herein or in any Related Document shall be sufficiently evidenced by
an Issuer Request or Issuer Order;
(c) whenever in the administration of this Indenture or
acting under any Related Document the Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may request from the Issuer and, in
the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel, and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
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(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture or any
Related Document at the request or direction of any of the Health Care
Noteholders pursuant to this Indenture or any Related Document, unless
such Health Care Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with such
request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled, on reasonable prior notice to the Issuer, to
examine the books, records and premises of the Issuer, personally or
by agent or attorney, during the Issuer's normal business hours;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action it
takes or omits to take in good faith which action or omission it
believes to be authorized or within its rights or powers; and
(i) for all purposes of this Indenture and any Related
Document, the Trustee shall deemed to have knowledge or awareness of
facts and circumstances only when a Responsible Officer has actual
knowledge of such facts and circumstances or has received written
notice of such facts and circumstances.
SECTION 6.4. Not Responsible for Recitals or Issuance of
Health Care Notes. (a) The recitals contained herein and in the Health Care
Notes, except the certificates of authentication on the Health Care Notes,
shall be taken as the statements of the Issuer, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations
with respect to any Receivable or the Trust Estate or as to the validity or
sufficiency of this Indenture, any Related Document or of the Health Care
Notes. The Trustee shall not be accountable for the use or application by the
Issuer of Health Care Notes or the proceeds thereof or any money paid to the
Issuer or upon Issuer Order pursuant to the provisions hereof.
(b) Except as otherwise expressly provided herein and
without limiting the generality of the foregoing, the Trustee shall have no
responsibility or liability for or with respect to the existence or validity of
any Receivable, the perfection of any security interest (whether as of the date
hereof or at any future time), the validity of the assignment of any portion of
the Trust Estate to the Trustee or of any intervening assignment, the receipt
by it or the Servicers or the Master Servicer of any Receivable, the
performance or enforcement of any
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Receivable, the compliance by the Issuer or the Servicers or the Master
Servicer with any covenant or the breach by the Issuer or the Servicers or the
Master Servicer of any warranty or representation made hereunder or in any
related document or the accuracy of any such warranty or representation, any
investment of money in the Collection Account or any loss resulting therefrom,
the acts or omissions of the Issuer or the Servicers or the Master Servicer,
any action of the Servicers or the Master Servicer taken in the name of the
Trustee or the validity of the Sale and Servicing Agreement.
(c) The Trustee shall: (i) review each certificate
delivered to it pursuant to clause (B) of Section 4.2(b) of the Sale and
Servicing Agreement and determine whether such certificate appears on its face
to comply with the terms of the Sale and Servicing Agreement, (ii) review each
Officer's Certificate delivered to it pursuant to Section 5.6 of the Sale and
Servicing Agreement to determine whether such Officer's Certificate appears on
its face to comply with the terms of the Sale and Servicing Agreement; (iii)
review each public accountant's statement delivered to it pursuant to Section
5.7 of the Sale and Servicing Agreement to determine whether such statement
appears on its face to comply with the terms of the Sale and Servicing
Agreement; (iv) review each Monthly Trustee Report delivered to it to (A)
determine whether it appears on its face to be regular and to comply with the
terms of the Sale and Servicing Agreement and (B) examine the Loss Ratio and
Delinquency Ratio for positive indications by the Master Servicer of an
Amortization Event; and (v) review each Daily Trustee Report delivered to it to
(A) determine whether it appears on its face to be regular and to comply with
the terms of the Sale and Servicing Agreement, (B) verify the daily balances
set forth on page 2 thereof to the amounts on deposit in the applicable Issuer
Accounts based upon the accounting records of the Trustee and (C) examine the
Net Purchased Receivables and the Minimum Required Receivables Balance for
positive indications by the Master Servicer of an Amortization Event. The
Trustee shall advise the Person delivering such certificate, statement or
report of any defect noted by the Trustee in connection with such review and,
if in connection therewith, the Trustee notes the occurrence of an Amortization
Event or an Event of Default, the Trustee shall give notice thereof to
Noteholders in accordance with Section 6.2 of this Indenture and otherwise
comply with the applicable requirements hereof and of the Sale and Servicing
Agreement. This Section 6.4(c) shall be subject in all respects to Section 6.1
of this Indenture.
(d) The Trustee shall not have any obligation or
liability under any Receivable by reason of or arising out of this Indenture or
the receipt by the Trustee of any payment relating to any Receivable pursuant
hereto, nor shall the Trustee be required or obligated in any manner to perform
or fulfill any of the obligations of the Issuer under or pursuant to any
Receivable, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it, or the sufficiency of any
performance by any party, under any Receivable.
(e) Until the complete satisfaction and discharge of this
Indenture, the Trustee shall retain all reports, statements and other documents
delivered to it in accordance with provisions of the Sale and Servicing
Agreement.
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SECTION 6.5. May Hold Health Care Notes. Subject to the
terms of this Indenture, the Trustee, any Paying Agent, any Health Care Note
Registrar or any other agent of the Issuer in its individual or any other
capacity, may become the owner or pledgee of Health Care Notes and may
otherwise deal with the Issuer with the same rights it would have if it were
not Trustee, Paying Agent, Health Care Note Registrar, or such other agent.
SECTION 6.6. Interest on Money Held in Trust. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Issuer and except to the extent of income
or other gain on investments that are deposits in or certificates of deposits
or other obligations of the Trustee in its commercial capacity and income or
other gain actually received by the Trustee on Eligible Investments.
SECTION 6.7. Compensation and Reimbursement. (a) The
Issuer agrees:
(1) to pay the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation, expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and its agents for, and to hold
them harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection
with the acceptance or administration of this trust, including the
reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of
any of their powers or duties hereunder or under any Related Document.
(b) [intentionally omitted]
(c) The Trustee shall have, and the Issuer hereby grants
to the Trustee, as security for the performance of the Issuer under this
Section 6.7, a lien prior to the lien of the Health Care Notes of any Series on
the Collateral (to the extent of the allocations of Collections set forth in
Section 6.3 of the Sale and Servicing Agreement); provided, however, that such
lien shall in no event extend to funds or Eligible Investments held in trust
for the payment of principal of, interest on, or any other amounts in respect
of, the Health Care Notes of any Series.
SECTION 6.8. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a corporation
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000 and
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subject to supervision or examination by the United States of America. If such
Trustee publishes reports of conditions at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.8, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VI.
SECTION 6.9. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of
a successor trustee pursuant to this Article VI shall become effective until
the acceptance of appointment by the successor trustee under Section 6.10
hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of resignation to
the Issuer and by mailing notice of resignation by first-class mail, postage
prepaid, to holders of the Health Care Notes at their addresses appearing on
the Health Care Note Register. Upon receiving notice of resignation, the
Issuer shall promptly appoint a successor trustee or trustees by written
instrument, in duplicate, executed by an Authorized Officer, one copy of which
instrument shall be delivered to the Trustee so resigning and one copy to the
successor trustee or trustees. If no successor trustee shall have been
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee or any Health
Care Noteholder may, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(c) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 hereof;
or
(2) (i) the Trustee shall become incapable of acting, (ii)
there shall have been entered a decree or order for relief by a court
having jurisdiction in the premises in respect of the Trustee in an
involuntary case under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
conservator, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Trustee or for any substantial part of its
property, or ordering the winding up or liquidation of its affairs and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days or (iii) the Trustee commences a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, conservator, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the
Trustee or of any substantial part of its property, or the making by
it of any assignment for the benefit of creditors or the
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Trustee fails generally to pay its debts as such debts become due or
takes any corporate action in furtherance of any of the foregoing;
then, in any such case the Issuer by an Issuer Order may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate, executed on
behalf of the Issuer by an Authorized Officer, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
trustee, or, any Health Care Noteholder may, on behalf of such Holder and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(d) The Holders of at least 50% of the Aggregate
Outstanding Amount of the Health Care Notes of any Series, or the Issuer with
the consent of at least 50% of the Aggregate Outstanding Amount of Health Care
Notes of any Series, may at any time remove the Trustee, with respect to such
Series, and appoint a successor trustee by delivering to the Trustee to be
removed, to the successor trustee so appointed and to the Issuer, copies of the
record of the Act taken by the Holders of the Health Care Notes, as provided
for in Section 10.3 hereof.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Issuer, by an Issuer Order, shall promptly appoint a
successor trustee.
If within one year after such resignation, removal, or incapability or the
occurrence of such vacancy, a successor trustee shall be appointed by Act of
the Holders of at least 50% of the Aggregate Outstanding Amount of the Health
Care Notes of each Series delivered to the Issuer and the retiring trustee, the
successor trustee so appointed shall forthwith upon its acceptance of such
appointment become the successor trustee and supersede the successor trustee
appointed by the Issuer. If no successor trustee shall have been so appointed
by the Issuer or the Health Care Noteholders and shall have accepted
appointment in the manner hereinafter provided, any Health Care Noteholder may,
on behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(f) The Issuer shall give notice of each removal of the
Trustee by mailing notice of such event by first-class mail, postage prepaid,
to the Holders of Health Care Notes as their names and addresses appear in the
Health Care Note Register. Each notice shall include the name of the successor
trustee and the address of its Corporate Trust Office.
SECTION 6.10. Acceptance of Appointment by Successor
Trustee. Every successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer and its predecessor trustee an instrument
accepting such appointment hereunder and thereupon the resignation or removal
of the predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become vested with all the
rights,
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powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Issuer or the successor trustee, such predecessor trustee shall,
upon payment of its charges then unpaid, execute and deliver an instrument
transferring to such successor trustee all the rights, powers, and trusts of
the Trustee so ceasing to act; and shall duly assign, transfer and deliver to
such successor trustee all property and money held by such Trustee so ceasing
to act hereunder subject nevertheless to its lien, if any, provided for in
Section 6.7 hereof. Upon request of any such successor trustee, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and conforming to such successor trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor trustee as
provided in this Section 6.10, the Issuer shall mail notice thereof by
first-class mail, postage prepaid, to the Holders of the Health Care Notes at
their last addresses appearing upon the Health Care Note Register. If the
Issuer fails to mail such notice within 10 days after acceptance of appointment
by the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Issuer.
No successor trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible
under this Article VI.
SECTION 6.11. Merger, Conversion, Consolidation or
Succession to Business of Trustee. Any corporation into which the Trustee may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder provided such corporation shall be otherwise qualified and eligible
under this Article VI, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Health Care
Notes have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating trustee may adopt such authentication and deliver the Health
Care Notes so authenticated with the same effect as if such successor trustee
had itself authenticated such Health Care Notes.
SECTION 6.12. Co-Trustee and Separate Trustee. At any time
or times, for the purpose of meeting the legal requirements of any jurisdiction
in which any part of the Trust Estate may at the time be located, the Issuer
and the Trustee shall have power to appoint, and upon the written request of
the Trustee or of the Holders of Health Care Notes representing at least 50% of
the then Aggregate Outstanding Amount of the Health Care Notes of any Series,
the Issuer shall for such purpose join with the Trustee in the execution,
delivery, and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Trustee either to act as
co-trustee, jointly with the Trustee, of all or any part of such Trust Estate,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions of this
Section. If the Issuer does not join in such appointment within 15 days after
the receipt by it
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of a request so to do, or in case an Event of Default has occurred and is
continuing, the Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section 6.12 shall
satisfy the requirements of Section 6.8 hereof.
Should any written instrument from the Issuer be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request be executed, acknowledged and
delivered by the Issuer.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the
following terms, namely:
(1) The Health Care Notes shall be authenticated and
delivered and all rights, powers, duties and obligations hereunder in
respect of the custody of securities, cash and other personal property
held by, or required to be deposited or pledged with, the Trustee
hereunder, shall be exercised solely by the Trustee.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to
the extent that under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such Act, in which event such rights, powers,
duties, and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(3) The Trustee at any time by an instrument in writing
executed by it, with the concurrence of the Issuer evidenced by an
Officer's Certificate, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this Section, and, in
case an Event of Default has occurred and is continuing, the Trustee
shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Issuer.
Upon the written request of the Trustee, the Issuer shall join with
the Trustee in the execution, delivery, and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided
in this Section.
(4) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder.
(5) The Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee, and the appointment of any such
co-trustee shall not constitute any such co-trustee the agent of the
Trustee.
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(6) Any Act of Health Care Noteholders delivered to the
Trustee shall be deemed to have been delivered to each such co-trustee
and separate trustee.
The provisions of Sections 6.1, 6.2, 6.8 and 6.10 hereof shall
apply to each co-trustee and separate trustee hereunder with the same force and
effect as they apply to the Trustee.
SECTION 6.13. Reports to Holders of Health Care Notes. The
Trustee shall deliver to each Noteholder, to the extent set forth in the
applicable Series Supplement, the information, documents, notices and reports
it receives which are required to be delivered to it by or on behalf of the
Master Servicer pursuant to the Sale and Servicing Agreement or by or on behalf
of the Issuer pursuant to this Indenture.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Trustee pursuant to this Indenture. The Trustee shall
apply all such money received by it as provided in this Indenture.
SECTION 7.2. Trust Accounts. (a) The Issuer has
established account No. 323-312993 (the "Collection Account") with the Trustee.
Funds in the Collection Account shall not be commingled with any other moneys.
All moneys deposited from time to time in the Collection Account, all deposits
therein pursuant to this Indenture or any Related Document, and all investments
made in Eligible Investments with such moneys, including all income or other
gain from such investments, shall be held by, and in the name of, the Trustee
in the Collection Account as part of the Trust Estate as herein provided.
(b) The Issuer has established account No. 323-313000
(the "Distribution Account") with the Trustee. With respect to each Series of
Health Care Notes issued hereunder, the Issuer will establish two subaccounts
of the Distribution Account into which all deposits with respect to such Series
pursuant to Section 6.3 of the Sale and Servicing Agreement shall be made, one
for principal, interest and premium (a "Payment Subaccount") and the other for
payment of other amounts owing the Health Care Noteholders of such Series
(including, without limitation, any Series Special Obligations) (an "Expense
Subaccount"). Funds in the subaccounts to the Distribution Account shall not
be commingled with any other moneys. All moneys deposited from time to time in
the Distribution Account, all deposits therein pursuant to this Indenture or
any Related Document, and all investments made in Eligible Investments with
such moneys, including all income or other gain from such investments, shall be
held by and in the name of the Trustee in the Distribution Account as part of
the Trust Estate as herein provided. All payments to be made from time to time
by the
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Trustee out of funds in the Distribution Account pursuant to this Indenture
shall, unless a Series Supplement provides for a different Paying Agent for
such Series, be made by, and in the name of, the Trustee as the Paying Agent of
the Issuer.
(c) The Issuer has established Account No. 323-332374
(the "Expense Account," and together with the Collection Account and the
Distribution Account, the "Issuer Accounts"). All moneys deposited from time
to time in the Expense Account, all deposits therein pursuant to this Indenture
or any Related Document, and all investments made in Eligible Investments with
such moneys, including all income or other gain from such investments, shall be
held by, and in the name of, the Trustee in the Expense Account as part of the
Trust Estate as provided herein; provided, however, that all amounts on deposit
in the Expense Account shall be applied pursuant to Section 7.2(h) of this
Indenture and shall not be available for payment to the Health Care Noteholders
or for any other purpose.
(d) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the amounts in an Issuer
Account may be invested and reinvested by the Trustee upon Issuer Order which
shall state that the investments are Eligible Investments (or otherwise
according to Section 7.3(d)), which Eligible Investments shall bear interest or
be sold at discount; provided, however, that such Eligible Investments shall
not mature later than the following Business Day (with respect to the
Collection Account) or the Business Day prior to the next Distribution Date
(with respect to the Distribution Account and the Expense Account) or, if a
notice of redemption in full has been sent to Health Care Noteholders of any
Series, an amount in the applicable subaccounts of the Distribution Account
equal to the Redemption Price shall mature not later than the second Business
Day prior to the Redemption Date. All income or other gain from investments of
moneys deposited in the Issuer Accounts shall be deposited by the Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to the Collection Account.
(e) Amounts shall be deposited in, and withdrawn from,
the Collection Account by the Trustee as provided in Section 6.3 of the Sale
and Servicing Agreement and Section 9.1 of this Indenture.
(f) Amounts shall be deposited in the subaccounts to the
Distribution Account by the Trustee as provided in Section 6.3 of the Sale and
Servicing Agreement and withdrawn by the Trustee in the priority specified in
Sections 7.2(g) and 7.2(i) of this Indenture or withdrawn pursuant to Section
9.1 of this Indenture.
(g) On each Payment Date, the Trustee shall pay to
Holders of Health Care Notes of the related Series all amounts on deposit in
the related Payment Subaccount in respect of the Health Care Notes of such
Series to the extent of amounts due and unpaid on the Health Care Notes of such
Series for principal and interest in the following order of priority:
(i) to accrued and unpaid interest on the Health
Care Notes of such Series (based on amounts on deposit in the
Payment Subaccount on the Business Day immediately prior to
such Payment Date);
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(ii) during the Amortization Period or during the
Liquidation Period for such Series, to principal of the Health
Care Notes of such Series until the principal balance of such
Health Care Notes is paid in full (based on amounts on deposit
in the related Payment Subaccount on the third Business Day
preceding such Payment Date); and
(iii) if amounts remain on deposit in such Payment
Subaccount representing an Optional Partial Redemption, to the
principal of the Health Care Notes of such Series until the
principal balance of such Health Care Notes is paid in full;
provided, that the principal balance of such Health Care Notes
shall be reduced by the principal component of the related
Redemption Price.
(h) On each Distribution Date, the Trustee shall make the
following payments from the amounts on deposit in the Expense Account, in the
following manner (based on amounts on deposit on the previous Business Day):
(i) to the Master Servicer, an amount equal to
the accrued and unpaid Servicing Fee as of such date (to the
extent of deposits into the Expense Account pursuant to
Sections 6.3(a)(i) and 6.3(b)(i) of the Sale and Servicing
Agreement);
(ii) to the Trustee, an amount equal to the
accrued and unpaid Trustee's Fee and other amounts requested
as of such date (to the extent of deposits into the Expense
Account pursuant to Sections 6.3(a)(ii) and 6.3(b)(ii) of the
Sale and Servicing Agreement); and
(iii) first, to the Trustee, for any remaining
due and unpaid Daily Costs due to it, and then to the
appropriate Persons pro rata for the payment of all due and
unpaid Daily Costs (as set forth in an Officer's Certificate
of the Master Servicer delivered to the Trustee before 11:00
a.m. New York City time on such Distribution Date) (to the
extent of deposits into the Expense Account pursuant to
Section 6.3(a)(vii) and (b)(vi) of the Sale and Servicing
Agreement.
(i) On each Distribution Date, the Trustee shall pay to
the Holders of Health Care Notes of the related Series all amounts on deposit
in the related Expense Subaccount as follows (based on amounts on deposits on
the previous Business Day):
(i) to the payment in full of all Series
Special Obligations (to the extent of deposits into the
Expense Subaccount pursuant to Sections 6.3(a)(v) and
6.3(b)(v) of the Sale and Servicing Agreement); and
(ii) to the payment in full of all Daily Costs
due and owing to such Holders (to the extent of deposits into
the Expense Subaccount pursuant to Section 6.3(a)(vii) and
6.3(b)(vi) of the Sale and Servicing Agreement.
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(j) On each Optional Partial Redemption Date, the Trustee
shall pay to the Holders of the related Series all amounts on deposit in the
related Payment Subaccount and Expense Subaccount in respect of the Health Care
Notes being redeemed (based on amounts on deposit on the third Business Day
preceding such Optional Partial Redemption Date, after giving effect to all
distributions to be made on such Optional Partial Redemption Date pursuant to
Section 7.2(g) if such Optional Partial Redemption Date is also a Payment Date)
to fund the Redemption Price with respect to such Optional Partial Redemption
(reducing the principal balance of such Series by the principal component of
the related Redemption Price).
SECTION 7.3. General Provisions Regarding Accounts.
(a) The Issuer shall not direct the Trustee to make any investment of any funds
or to sell any investment held in an Issuer Account unless the security
interest granted to the Trustee and perfected in such Issuer Account will
continue to be perfected in such investment or the proceeds of such sale, in
either case without any further action by the Issuer or the Trustee.
(b) If any amounts are needed for disbursement from an
Issuer Account, and sufficient uninvested funds are not available to make such
disbursement, in the absence of an Issuer Order for the liquidation of
investments in an amount sufficient to provide the required funds, the Trustee
shall cause to be sold or otherwise converted to cash a sufficient amount of
the investments in such Issuer Account. The Trustee may cause any such sale to
be transacted through any lawful medium, including the Trustee's own
facilities, and the Trustee may pay the expenses of such sale out of the
proceeds thereof.
(c) Subject to Section 6.1(c) hereof, the Trustee shall
not in any way be held liable by reason of any insufficiency in any Issuer
Account resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Trustee's failure to make payments on
such Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(d) If (1) the Issuer shall have failed to give
investment directions for either Issuer Account to the Trustee by 11:15 a.m.
Eastern Time (or such other time as may be agreed by the Issuer and Trustee) on
any Business Day; (2) a Default or Event of Default shall have occurred and be
continuing with respect to the Health Care Notes of any Series but such Health
Care Notes shall not have been accelerated pursuant to Section 5.2 hereof, or
if such Health Care Notes shall have been accelerated following an Event of
Default, and amounts collected or receivable from the related Trust Estate are
being applied in accordance with Section 5.17 as if there had not been such an
acceleration, or (3) an Event of Default with respect to the Health Care Notes
of such Series shall have occurred and be continuing, the Health Care Notes of
all Series shall have been accelerated pursuant to Section 5.2, and amounts
collected or receivable from the Trust Estate are being applied in accordance
with Section 5.17; then the Trustee shall, to the fullest extent practicable,
invest and reinvest funds in such Issuer Account in money market accounts that
invest in the Eligible Investments described in clause (i) of such definition.
(e) Notwithstanding anything herein to the contrary, with
respect to all deposits to the Distribution Account, all such amounts shall be
deposited directly into the
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Payment Subaccount or Expense Subaccount, as applicable. All payments to the
Health Care Noteholders of a Series shall be made from the Payment Subaccount,
other than amounts in respect of Series Special Obligations or Daily Costs
payable to such Health Care Noteholders, which shall be made from the Expense
Subaccount.
SECTION 7.4. Release of Trust Estate. (a) Subject to
the payment of its fees and expenses pursuant to Section 6.7 hereof, the
Trustee may, and when required by the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, or
convey the Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Trustee as provided in this Article
VII shall be bound to ascertain the Trustee's authority, inquire into the
satisfaction of any conditions precedent, or see to the application of any
moneys.
(b) The Trustee shall, at such time as there are no
Health Care Notes outstanding and all sums due the Trustee pursuant to Section
6.7 hereof have been paid, release any remaining portion of the Trust Estate
that secured the Health Care Notes, from the lien of this Indenture and release
to the Issuer or any other Person entitled thereto any funds then on deposit in
the Collection Account for such Series. The Trustee shall release property
from the Lien of this Indenture pursuant to this Section 7.4(b) only upon
receipt of an Issuer Request accompanied by an Officer's Certificate and an
Opinion of Counsel.
SECTION 7.5. Opinion of Counsel. The Trustee shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Sections 7.4(a) and 7.4(b) hereof, accompanied by copies of
any instruments involved, and the Trustee shall also require, as a condition to
such action, an Opinion of Counsel at the expense of the Issuer, in form and
substance satisfactory to the Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Health Care Notes or the rights of the Health Care Noteholders in contravention
of the provisions of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of the
Trust Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Trustee in connection with any such action.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of
Health Care Noteholders. With the consent of Health Care Notes representing at
least 50% of the Aggregate Outstanding Amount of Health Care Notes of each
Series adversely affected thereby, if any, and upon satisfaction of the Rating
Agency Condition, the Issuer and the Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter
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into one or more indentures supplemental hereto (which if this Indenture is
required to be qualified under the Trust Indenture Act, shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Trustee, for any of the following
purposes:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the
lien of this Indenture additional property;
(2) to add to the conditions, limitations, and restrictions
on the authorized amount, terms and purposes of issuance,
authentication, and delivery of Health Care Notes, as herein set
forth, and additional conditions, limitations, and restrictions
thereafter to be observed;
(3) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Health Care Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of
the Holders of the Health Care Notes, or to surrender any right or
power herein conferred upon the Issuer;
(5) [intentionally omitted];
(6) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture;
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to one or more Series of
the Health Care Notes and to add to or change any of the provisions of
this Indenture as shall be necessary to facilitate the administration
of the trusts hereunder by more than one trustee, pursuant to the
requirements of Section 6.12 hereof;
(8) if this Indenture is required to be qualified under the
Trust Indenture Act, to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the Trust Indenture Act and to
add to this Indenture such other provisions as may be expressly
required by the Trust Indenture Act;
(9) to set forth the terms of any Series that has not
theretofore been authorized by a Series Supplement and to enter into
the related Series Supplement pursuant to Section 2.3;
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(10) to amend Section 2.11 hereof, but only with respect to a
Series that has not theretofore been authorized by a Series
Supplement;
(11) to make any change necessary to maintain the then
current rating on any Series of Health Care Notes by any Rating
Agency; or
(12) to make any other change which in the opinion of the
Trustee (based on advice of counsel) is not adverse to any Holder of
Health Care Notes.
Notwithstanding anything in this Section 8.1 to the contrary,
no consent of the Holders of Health Care Notes shall be required (regardless of
any adverse effect) with respect to any supplemental indenture of the type set
forth in clause (9) of this Section 8.1 which only sets forth the Series
specific terms set forth in the following clauses of Section 2.3 hereof: (1),
(2), (3) (but such Series Supplement shall not alter the Distribution Dates),
(4) (so long as the Scheduled Maturity Date of the new Series is not prior to
the Scheduled Maturity Date of any outstanding Series), (5), (7), (8), (9)
(solely to the extent of Redemption Dates and the Redemption Prices) and (10),
but solely to the extent any of such terms relate to specific terms permitted
to be established above without the consent of the Noteholders of any Health
Care Note or define such terms as Series Base Reserve Percentage, Series
Dynamic Reserve Floor Percentage, Series Rate Increment and Series Rating
Multiple.
The Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
SECTION 8.2. Supplemental Indentures with Consent of
Health Care Noteholders. With the consent of the Holders of not less than 50%
of the then Aggregate Outstanding Amount of the Health Care Notes each Series,
and upon satisfaction of the Rating Agency Condition, by act of such Holders
delivered to the Issuer and the Trustee, the Issuer and the Trustee, when
authorized by an Issuer Order, may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture relating to
such Series or of modifying in any manner the rights of the Holders of the
Health Care Notes of such Series under this Indenture; provided, however, no
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Health Care Note of each Series affected thereby:
(1) change the Scheduled Amortization Date or Final Maturity
Date of, or any Payment Date for the payment of any installment of
principal or interest on, by Health Care Note, or reduce the principal
amount thereof, the Series Note Interest Rate (or method of
determination thereof) thereon or the Redemption Price with respect
thereto, change the provision of this Indenture and the related Series
Supplement relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of
Health Care Notes, or change any place of payment where, or in the
coin or currency in which, any Health Care Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article VII,
to the
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payment of any such amount due on the Health Care Notes on or after
the respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(2) reduce the percentage of the Aggregate Outstanding Amount
of the Health Care Notes of a Series, the consent of the Holders of
which is required for any such supplemental indenture, or the consent
of the Holders of which is required for any action or waiver of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this
Indenture;
(3) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(4) reduce the percentage of the Aggregate Outstanding Amount
of the Health Care Notes required to direct the Trustee to direct the
Issuer to sell or liquidate the Trust Estate pursuant to Section 5.4
or Section 5.11 hereof;
(5) modify any provision of this Section 8.2 or to provide
that certain additional provisions of this Indenture or the Related
Documents cannot be modified or waived without the consent of the
Holder of each Outstanding Health Care Note affected thereby;
(6) modify any of the provisions of this Indenture or the
related Series Supplement in such manner as to affect the calculation
of the amount of any payment of interest or principal due on any
Health Care Note of any Series on any Payment Date (including the
calculation of any of the individual components of such calculation)
or to affect the rights of the Holders of Health Care Notes of any
Series to the benefit of any provisions for the mandatory redemption
of Health Care Notes of such Series contained herein or in the related
Series Supplement;
(7) provide for payments on Health Care Notes of the same or
of different Series to be other than on a parity basis; or
(8) permit the creation of any Lien ranking prior to or on a
parity with the Lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the Lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Health Care Note of any
Series of the security provided by the Lien of this Indenture.
It shall not be necessary for any Act of Health Care
Noteholders under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve
the substance thereof.
Promptly after the execution by the Issuer and the Trustee of
any supplemental indenture pursuant to this Section or Section 8.1, the Trustee
shall mail to the Holders of the Health Care Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the
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Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 8.3. Execution of Supplemental Indentures or
Amendments to Sale and Servicing Agreement. In executing, or permitting the
additional trusts created by, any supplemental indenture or any amendment to
the Sale and Servicing Agreement permitted by this Article VIII or the
modifications thereby of the trusts created by this Indenture, the Trustee
shall be entitled to receive, and subject to Sections 6.1 and 6.3 hereof, shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture or such amendment to the Sale and
Servicing Agreement is authorized or permitted by this Indenture. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
or such amendment to the Sale and Servicing Agreement that affects the
Trustee's own rights, duties, liabilities, or immunities under this Indenture
or such agreement or otherwise.
SECTION 8.4. Effect of Supplemental Indenture. Upon
the execution of any supplemental indenture pursuant to the provisions hereof,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to each Series of Health Care Notes affected thereby or
all Health Care Notes, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Health Care Notes of each Series and
other secured parties hereunder affected thereby shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 8.5. Reference in Health Care Notes to
Supplemental Indentures. Health Care Notes authenticated and delivered after
the execution of any supplemental indenture pursuant to this Article IX may,
and if required by the Trustee shall, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer or the Trustee shall so determine (based upon the advice of counsel),
new Health Care Notes so modified as to conform, in the opinion of the Trustee
and the Issuer, to any such supplemental indenture may be prepared and executed
by the Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Health Care Notes.
SECTION 8.6. Amendments of Sale and Servicing Agreement
Without Consent of Health Care Noteholders. With the consent of Health Care
Notes representing at least 50% of the Aggregate Outstanding Amount of Health
Care Notes of each Series adversely affected thereby, if any, and upon
satisfaction of the Rating Agency Condition, the Trustee may consent to any
amendment to the Sale and Servicing Agreement for any of the following
purposes:
(1) to add to the covenants of the Seller, Master Servicer,
Beverly or any Servicer, for the benefit of the Holders of the Health
Care Notes, or to surrender any right or power therein conferred upon
the Seller, Master Servicer, Beverly or any Servicer;
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(2) to cure any ambiguity, to correct or supplement any
provision herein or in the Sale and Servicing Agreement which may be
inconsistent with any other provision herein or in the Sale and
Servicing Agreement or to make any other provisions with respect to
matters or questions arising under the Sale and Servicing Agreement;
(3) to make any change necessary to maintain the then current
rating on any Series of Health Care Notes by any Rating Agency;
(4) to amend the definitions of "Facilities" and/or of
"Ineligible Receivables" to permit additional facilities and
additional types of Receivables to comply with the requirements for
purchase thereof under the Sale and Servicing Agreement;provided,
that: (i) the Rating Agency Condition shall have been satisfied; and
(ii) favorable legal opinions, in substantially the respective forms
of those delivered on the Effective Date (but with respect to the
additional facilities and Receivables permitted to be sold under the
Sale and Servicing Agreement as a consequence of such amendment), are
delivered in connection with such amendment and (iii) no Amortization
Event shall have occurred or be continuing;
(5) to provide for alternative calculation of the Minimum
Required Receivables Balance (or any component thereof);
SECTION 8.7. Amendment of Sale and Servicing Agreement
With Consent of Health Care Noteholders. With the consent of at least 50% of
the then Aggregate Outstanding Amount of Health Care Notes of each Series, and
upon satisfaction of the Rating Agency Condition, the Trustee may consent to
any amendment of the Sale and Servicing Agreement; provided, that, without the
consent of all Health Care Noteholders affected thereby, no such amendment
shall:
(1) [intentionally omitted];
(2) provide for payments on Health Care Notes of the same or
of different Series to be other than on a parity basis;
(3) modify any of the payment provisions thereof which may be
applicable to, or benefit, any such Health Care Noteholders; or
(4) permit the creation of any Lien ranking prior to or on a
parity with the Lien of the Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the Lien of the Indenture on any property at any time
subject thereto or deprive the Holder of any Health Care Note of any
Series of the security provided by the Lien of the Indenture.
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ARTICLE IX
OPTIONAL REDEMPTION OF HEALTH CARE NOTES
SECTION 9.1. Optional Redemption by Issuer. (a) The
Issuer may, at its option, redeem all but not less than all of the Health Care
Notes of a Series as permitted by the related Series Supplement on any
Redemption Date at the times and at the Redemption Price specified in such
Series Supplement, subject to the conditions set forth below. If the Issuer
shall elect to redeem the Health Care Notes of a Series in full pursuant to
this Section 9.1(a), it shall furnish notice of such election (which shall be
irrevocable) containing the information described in Section 9.2 (together with
evidence satisfactory to the Trustee of compliance with the provisions of
Section 9.1(c)) to the Trustee not later than 45 days prior to the Redemption
Date and shall deposit into the Collection Account (to the extent not already
on deposit) on or prior to 11:00 a.m. New York City time on the third Business
Day prior to the Redemption Date the Redemption Price of the Health Care Notes
to be redeemed. On or prior to 11:00 a.m. New York City time on the Business
Day prior to any Redemption Date, the Trustee, pursuant to an Issuer Order
delivered to the Trustee, shall transfer the Redemption Price from the
Collection Account into the applicable subaccounts to the Distribution Account.
(b) The Issuer may elect, by Issuer Order delivered to
the Trustee on or before the sixth Business Day prior to the proposed Optional
Partial Redemption Date (which shall include a duly completed form of notice
meeting the requirements of Section 9.2 to be sent to the related Health Care
Noteholders not later than one (1) Business Day thereafter), cause amounts on
deposit in the Collection Account to be applied to the partial redemption of
Health Care Notes of any Series at their Redemption Price; provided, that the
Issuer, by Issuer Order delivered to the Trustee (together with evidence
satisfactory to the Trustee of compliance with the provisions of Section
9.1(c)), may elect to revoke an election for an Optional Partial Redemption
upon payment to the related Health Care Noteholders of any Special Series
Obligations (x) due to such Health Care Noteholders because of any such notice
of Optional Partial Redemption or of such revocation or (y) otherwise due or
owing (on a pro rata basis) in respect of the Health Care Notes being redeemed.
Partial Optional Redemption of Health Care Notes shall take place in minimum
principal amounts of $5,000,000. All Optional Partial Redemption payments
shall be payable to the related Health Care Noteholders pro rata in the manner
set forth in Sections 2.9 and 7.2(g) and (j) of this Indenture. On or prior to
11:00 a.m. New York City time on the third Business Day prior to any Partial
Optional Redemption Date, the Trustee, pursuant to an Issuer Order delivered to
the Trustee, shall either (i) transfer the Redemption Price from the Collection
Account into the applicable subaccounts to the Distribution Account or (ii)
revoke such Optional Partial Redemption. As soon as practicable following
receipt by the Trustee of notice of such revocation, the Trustee shall so
notify each Health Care Noteholder of the related Series pursuant to Section
10.4 of this Indenture.
(c) Notwithstanding the foregoing, the Issuer's right to
redeem Health Care Notes of any Series pursuant to Sections 9.1(a) or 9.1(b)
shall be conditioned on the following:
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(1) The Redemption Price may be paid solely from the
proceeds of refinancing all or a portion of such Series of Health Care
Notes, from a sale of Purchased Receivables pursuant to Section 9.4
(in the case of a redemption in full), or from the application of the
proceeds of Purchased Receivables on deposit in the Collection Account
pursuant to Section 6.3(a)(viii) of the Sale and Servicing Agreement.
In no event shall any funds provided, directly or indirectly, by
Beverly or any of its Affiliates be utilized (except pursuant to sales
of Purchased Receivables pursuant to Section 9.4); and
(2) The Issuer's board of directors shall adopt a
resolution specifically authorizing such redemption.
SECTION 9.2. Form of Optional Redemption Notice.
Unless otherwise specified in the Series Supplement relating to a Series of
Health Care Notes, notice of redemption under Section 9.1 hereof shall be given
by the Trustee (x) by first-class mail, postage prepaid, mailed not less than
thirty days nor more than 45 days prior to the applicable Redemption Date, or
(y) by facsimile sent not less than five (5) Business Days prior to the
applicable Partial Optional Redemption Date, in each case to each Holder of
Health Care Notes to be redeemed, as of the close of business on the Record
Date preceding the applicable Redemption Date or Partial Optional Redemption
Date at such Holder's address appearing in the Health Care Note Register.
All notices of redemption shall state:
(1) the Redemption Date or Partial Optional Redemption
Date;
(2) the Redemption Price;
(3) the place where such Health Care Notes are to be
surrendered for payment of the Redemption Price (which shall be the
office or agency of the Issuer to be maintained as provided in Section
3.2 hereof) (in the case of a Redemption in full);
(4) that on the Redemption Date or Partial Optional
Redemption Price the Redemption Price will become due and payable and
that interest on the principal portion thereof shall cease to accrue
from and after said date; and
(5) that any Partial Optional Redemption is subject to
revocation.
Notice of redemption of the Health Care Notes to be redeemed
shall be given by the Trustee in the name and at the expense of the Issuer.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Health Care Note selected for redemption shall not impair or affect the
validity of the redemption of any other Health Care Note.
SECTION 9.3. Health Care Notes Payable on Redemption
Date or Optional Partial Optional Redemption Date. Notice of redemption having
been given as provided in Section 9.2 hereof, unless such redemption has been
revoked pursuant to Section 9.1(b), the
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Health Care Notes or portion thereof to be redeemed, shall on the applicable
Redemption Date or Partial Optional Redemption Date become due and payable at
the Redemption Price and, unless the Issuer shall default in the payment of the
Redemption Price, no interest shall accrue on the Redemption Price for any
period after the date to which accrual interest is calculated for purposes of
calculating the Redemption Price.
SECTION 9.4. Sale of Collateral to Effect Redemption.
In order to effect the redemption of all of the Health Care Notes of all Series
at the Redemption Price the Issuer may, by Issuer Order, instruct the Trustee
to effect a sale of all of the Collateral, which Issuer Order shall set forth,
for the Trustee's benefit, the minimum price for which the Collateral can be
sold (as set forth below); provided, that no such sale shall be effected if the
proceeds of such sale (x) are insufficient to pay the aggregate Redemption
Prices of all Series of Health Care Notes and any other amounts due thereon,
hereunder or under any Related Document or (y) are not equal to the "fair
market value" of the Collateral (as set forth below). Such instruction of the
Issuer to the Trustee shall specify the time and place of such proposed sale
and the proposed Person to acquire the Collateral. Fair market value of the
Collateral shall be the amount set forth as the fair market value of the
Collateral in an Officer's Certificate of the Master Servicer to the Trustee
(upon which certificate the Trustee may conclusively rely without independent
investigation). The Trustee shall deposit any proceeds of such sale
immediately into the Collateral Account. The purchaser(s) at any such sale
shall thereafter hold the Collateral absolutely, free from any claim or right
of whatever kind, including any equity of redemption, of the Issuer, any such
demand, notice, claim, right or equity being hereby expressly waived and
released. The Trustee shall under no circumstances incur any liability as a
result of the sale of the Collateral, or any part thereof, at any sale
conducted in accordance with the foregoing. The Issuer hereby waives any
claims against the Trustee and the Health Care Noteholders arising by reason of
the fact that the price at which the Collateral may have been sold at any
private sale was less than the price which might have been obtained at a public
sale or was less than the then total unpaid Obligations.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Compliance Certificates and Opinions, etc.
Upon any application or request by the Issuer to the Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Trustee
at Issuer expense (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, and (iii) if this Indenture and any Series Supplement are
required to be qualified under the Trust Indenture Act, an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section 10.1 (if such certificate is required by the Trust
Indenture Act), except that, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this Indenture
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relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
SECTION 10.2. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, the Seller, the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the
Seller, the Issuer, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
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Whenever in this Indenture, in connection with any application
or certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however,
be construed to affect the Trustee's right to rely upon the truth and accuracy
of any statement or opinion contained in any such document as provided in
Article VI hereof.
SECTION 10.3. Acts of Health Care Noteholders. (a) Any
request, demand, authorization, direction, notice, consent, waiver, or other
action provided by this Indenture to be given or taken by Health Care
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Health Care Noteholders in person or
by agents duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Health Care Noteholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1 hereof) conclusive in favor of the Trustee and the Issuer, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved in any manner that the Trustee
deems sufficient.
(c) The ownership of Health Care Notes shall be proved by
the Health Care Note Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Health Care Notes
shall bind the Holder of every Health Care Note issued upon the registration
thereof or in exchange therefor or in lieu thereof, in respect of anything
done, omitted or suffered to be done by the Trustee or the Issuer in reliance
thereon, whether or not notation of such action is made upon such Health Care
Note.
SECTION 10.4. Notices to Health Care Noteholders;
Waiver. Where this Indenture provides for notice to Health Care Noteholders of
any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class, postage prepaid, to
each Health Care Noteholder entitled to such notice, at his address as it
appears on the Health Care Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.
In any case where notice to Health Care Noteholders is given by mail, neither
the failure to mail such notice nor any defect in any notice so mailed to any
particular Health Care Noteholder shall affect the
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sufficiency of such notice with respect to other Health Care Noteholders, and
any notice that is mailed in the manner herein provided shall conclusively be
presumed to have been duly given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Health Care Noteholders shall be filed with
the Trustee but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage, or similar activity, it shall be
impractical to mail notice of any event of Health Care Noteholders when such
notice is required to be given pursuant to any provision of this Indenture,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to each Rating
Agency, failure to give any such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute
a Default or Event of Default.
SECTION 10.5. Alternative Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Health Care Notes
to the contrary, the Issuer may enter into any agreement with any Holder of a
Health Care Note providing for a method of payment, or notice by the Trustee or
any Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices. The Issuer will furnish to
the Trustee a copy of each such agreement and the Trustee will cause payments
to be made and notices to be given in accordance with such agreements.
SECTION 10.6. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 10.7. Successors and Assigns. All covenants and
agreements in this Indenture by the Issuer shall bind its successors and
assigns, whether so expressed or not.
SECTION 10.8. Separability. In case any provision in
this Indenture or in the Health Care Notes shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 10.9. Benefits of Indenture. Nothing in this
Indenture or in the Health Care Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, and the
Health Care Noteholders, and any other party secured hereunder, and any other
Person with an ownership interest in any part of the Trust Estate, any benefit
of any legal or equitable right, remedy, or claim under this Indenture.
SECTION 10.10. [Intentionally Omitted].
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SECTION 10.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS. THE PARTIES HERETO EACH IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, EACH HEREBY
IRREVOCABLY WAIVING ANY OBJECTION TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING SO BROUGHT AS WELL AS ANY CLAIM OF INCONVENIENT FORUM. THE PARTIES
HERETO EACH HEREBY CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, OR ANY DOCUMENT DELIVERED PURSUANT
HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SPECIFIED
AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO ANY OTHER ADDRESS OF WHICH
IT SHALL HAVE GIVEN WRITTEN NOTICE TO THE OTHER PARTIES. THE PARTIES HERETO
EACH WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OF ERROR BY
REASON OF SUCH SERVICE, IF MADE PURSUANT TO THE TERMS HEREOF, AND AGREES THAT
SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID PERSONAL SERVICE UPON IT AND
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS. THE FOREGOING
SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING SUIT IN THE COURTS OF
ANY JURISDICTION. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT CAN EFFECTIVELY DO SO UNDER APPLICABLE LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS.
SECTION 10.12. Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 10.13. Nonpetition Covenant. The Trustee or any
Health Care Noteholder as such shall not, prior to the date which is 370 days
after the discharge of this Indenture, acquiesce, petition or otherwise,
directly or indirectly, invoke or cause the Issuer to invoke the process of any
governmental authority for the purpose of commencing or sustaining a case
against the Issuer under any Federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the issuer or any substantial part of
its property or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 10.14. Confidentiality. Notwithstanding any
provision of this Indenture to the contrary, in no event shall the Trustee have
access to any patient records
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required by any law, rule or regulation of any Governmental Authority, the
JCAHO or any similar agency, or any other regulatory or professional
organization to which the Issuer, the Seller or any Selling Subsidiary belongs
or is subject, to be kept confidential; provided, however, that the Issuer
shall use its reasonable efforts to furnish, or cause to be furnished,
information reasonably requested by the Trustee relating to the Collateral
without violating any such law, rule or regulation.
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
BEVERLY FUNDING CORPORATION
By: /s/ John W. MacKenzie
----------------------------
Name: John W. MacKenzie
Title: Assistant Secretary
CHEMICAL BANK, as Trustee
By: /s/ Regina Bishop
----------------------------
Name: Regina Bishop
Title: Assistant Vice President
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EXHIBIT A
FORM OF TRANSFER CERTIFICATE
[Date]
Chemical Bank,
as Trustee
Re: Purchase or Transfer of $[__________] aggregate
principal amount of Series [ ] Health Care Notes
(the "Notes") of Beverly Funding Corporation (the
"Issuer") _______________________
Reference is hereby made to the Trust Indenture, dated as of December
1, 1994 (the "Indenture") between the Issuer and Chemical Bank, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
In connection with the purchase by or the transfer to the undersigned
of $ __________ aggregate principal amount of the Notes, the undersigned does
hereby certify that:
1. That he is [Title of Officer] of [Name of Transferee] (the
"Transferee"), a [savings institution] [corporation] [trust] [a bank] duly
organized and existing under the laws of [the State of __________] [the United
States] [country], on behalf of which he makes this affidavit.
2. The Transferee is not, and on [insert date of transfer of
Certificate to Transferee] will not be, and on such date will not be investing
"plan assets" of an employee benefit plan subject to ERISA or other plan
subject to Section 4975 of the Code, with respect to which J.P. Morgan
Securities Inc., Beverly Funding Corporation or Chemical Bank is a "party in
interest" (within the meaning of Section 3(14) of ERISA), or a "disqualified
person" (within the meaning of Section 4975 of the Code), unless the purchase
and holding of Notes by such plan (or any entity the assets of which constitute
"plan assets" of any such plan) is subject to a statutory or administrative
exemption.
3. The Transferee understands that the Notes have not been and
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act") and are being sold to us in a transaction that is exempt from
the registration requirements of the Securities Act.
4. Such Notes are being transferred (a) in accordance with Rule
144A under the Securities Act, the Transferee is a "qualified institutional
buyer" within the meaning of Rule 144A and the Transferee is acquiring the
Notes in a transaction meeting the requirements of Rule 144A and in accordance
with any applicable securities laws of any state of the United
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<PAGE> 79
States or any other jurisdiction, (b) pursuant to an effective registration
statement under the Securities Act or (c) pursuant to any other available
exemption from the registration requirements of the Securities Act.
5. The Transferee understands that it may not transfer any
interest or beneficial interest in the Notes unless the transferee delivers to
the Trustee a certificate in substantially the form of this certificate.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
[Insert name of Transferee]
By: _____________________________
Name:
Title:
A-2
<PAGE> 1
Exhibit 10.46
EXECUTION COPY
SERIES SUPPLEMENT, dated as of December 1, 1994 (this
"Supplement"), by and between BEVERLY FUNDING CORPORATION, a Delaware
corporation (the "Issuer"), and CHEMICAL BANK, a New York banking corporation
(together with its successors in trust thereunder as provided in the Indenture
referred to below, the "Trustee"), as trustee under the Indenture.
PRELIMINARY STATEMENT
Section 8.1(9) of the Indenture provides, among other things,
that the Issuer and the Trustee may at any time and from time to time enter
into one or more indentures supplemental to the Indenture for the purposes of
authorizing the issuance by the Issuer of a Series of Health Care Notes and
specifying the terms thereof. The Issuer has duly authorized the creation of a
Series of Health Care Notes with an initial aggregate principal amount of
$50,000,000 to be known as the Issuer's Series 1994-A Health Care Notes (the
"Health Care Notes"), and the Issuer and the Trustee are executing and
delivering this Supplement in order to provide for the Health Care Notes.
All terms used in this Supplement that are defined in the
Indenture, either directly or by reference therein, have the meanings assigned
to them therein, except to the extent such terms are defined or modified in
this Supplement or the context clearly requires otherwise. In the event that
any term or provision contained herein shall conflict with or be inconsistent
with any term or provision contained in the Indenture, the terms and provisions
of this Supplement shall govern.
SECTION 1. Designation. The initial Series of Health Care
Notes shall be designated generally as the Issuer's Series 1994-A Health Care
Notes.
SECTION 2. Interest. Interest on the Health Care Notes shall
be determined and computed as follows:
Interest on the Health Care Notes shall be payable quarterly
until the commencement of the Amortization Period or the Liquidation Period,
after which interest will be payable on the monthly Payment Dates at the rate
specified herein. Interest on the Health Care Notes shall accrue at the Series
Note Interest Rate during the initial Interest Accrual Period and during each
Interest Accrual Period thereafter until the commencement of the Liquidation
Period or the Amortization Period; provided, however, that if an Amortization
Event occurs at any time after the Series Note Interest Rate has been
determined in respect of a three-month Interest Accrual Period, the Series Note
Interest Rate shall remain in effect until the Payment Date coinciding with the
last day of such three-month Interest Accrual Period. Thereafter, interest on
the Health Care Notes will accrue at the Series Alternate Note Interest Rate.
<PAGE> 2
For purposes of calculating the Series Note Interest Rate or
Series Alternate Note Interest Rate with respect to each Interest Accrual
Period subsequent to the initial Interest Accrual Period, the Trustee shall
determine LIBOR in accordance with the provisions set forth below, taking into
account the duration of the applicable Interest Accrual Period (as set forth in
the definition thereof):
(i) On each Interest Determination Date, the Trustee shall
determine the annual rate of interest published or reported by the
Telerate Service (by reference to the screen page currently designated
as "Page 3750" on that service or such other service as may be
nominated by the British Bankers' Association as the information
vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for Dollar deposits) at approximately 11:00
a.m. (London time) on the Interest Determination Date as being the
rate of interest offered in the London interbank market for three-
month or one-month U.S. Dollar deposits, as applicable, for delivery
on the first day of such Interest Accrual Period. LIBOR shall be such
rate of interest. If the offered rate so appearing is replaced by the
corresponding rates of more than one bank, this sub-paragraph (i)
shall be applied, with any necessary consequential changes, to the
arithmetic mean (rounded, if necessary, up to the nearest 1/16
percent) of the rates (being at least two) which so appear, as
determined by the Trustee.
(ii) If for any reason such offered rate does not so appear,
or if the relevant page is unavailable, the Trustee will request each
of the Reference Banks acting in each case through its respective
principal London office to provide the Trustee with its offered
quotation to leading banks for Euro-dollar deposits in London in
respect of an amount equal to the aggregate principal amount of the
Health Care Notes as of the first date in such Interest Accrual Period
(taking into account payments of principal to be made on such date)
for a period of three-months or one-month, as applicable, as at 11:00
a.m. (London time) on such Interest Determination Date. If at least
two of the Reference Banks provide such offered quotations LIBOR shall
be the arithmetic mean (rounded, if necessary, up to the nearest 1/16
percent) of the rates so provided, as determined by the Trustee.
(iii) If on any Interest Determination Date LIBOR may not be
determined pursuant to sub-paragraph (i) or (ii) above, LIBOR shall be
whichever is the higher of:
(x) LIBOR as determined for the last preceding Interest
Accrual Period of the same duration as the applicable Interest
Accrual Period, if any, to which one of the preceding
sub-paragraphs shall have applied; and
(y) the rate per annum which the Trustee determines to
be either (a) the arithmetic mean (rounded, if necessary, up
to the nearest 1/16 percent) of the U.S. Dollar lending rates
which at least two New York City banks selected by the Trustee
are quoting, on the relevant Interest Determination Date in
respect of an amount equal to the aggregate principal amount
of Health Care Notes as of the first day in such Interest
Accrual Period (taking into account payments of
2
<PAGE> 3
principal to be made on such date), for a period of
three-months or one-month, to the Reference Banks or those of
them (being at least two in number) to which such quotations
are, in the opinion of the Trustee, being so made, or (b) if
the Trustee can determine no such arithmetic mean, the lowest
U.S. Dollar lending rate which at least two major New York
City banks selected by the Trustee are quoting on such
Interest Determination Date to leading European Banks in
respect of an amount equal to the aggregate principal amount
of Health Care Notes as of the first day in such Interest
Accrual Period (taking into account payments of principal made
on such date), for a period of three-months or one-month, as
applicable; provided, however, that if the banks so selected
by the Trustee are not quoting lending rates as mentioned
above, the interest rates shall be the interest rates
specified in (x) above.
The Trustee shall, as soon as practicable on each Interest
Determination Date, determine the Series Note Interest Rate and Series
Alternate Note Interest Rate. The Trustee shall calculate the amount of
interest due on the Health Care Notes based on a year of 360 days and actual
days elapsed (rounding the resultant figures to the nearest cent (half a cent
being rounded upwards)).
On each Interest Determination Date, the Trustee shall
promptly give notice of the Series Note Interest Rate and the Series Alternate
Note Interest Rate, regardless of which interest rate is applicable, for the
relevant Payment Date to the Health Care Noteholders in accordance with Section
10.4 of the Indenture and to the Issuer and the Paying Agents, if any. The
Trustee shall also make such information available to the Health Care
Noteholders at the offices of the Trustee and the Paying Agent. On or prior to
1:00 p.m. (New York City time) on the third Business Day prior to each Payment
Date, Redemption Date and Optional Partial Redemption Date, the Issuer shall
notify the Trustee, the initial Holder of the Health Care Notes and each other
Health Care Noteholder requesting such information from the Issuer in writing
of the specific amounts of interest, principal and other amounts to be paid to
the Health Care Noteholders on such Payment Date pursuant to Section 7.2 of the
Indenture.
In determining LIBOR as set forth above, (i) three-month
quotations shall be used so long as the Series Note Interest Rate is applicable
and (ii) one-month quotations shall be used so long as the Series Alternate
Note Interest Rate is applicable. The establishment of LIBOR, the Series Note
Interest Rate, the Series Alternate Note Interest Rate and the interest accrued
on the Health Care Notes by the Trustee shall (in the absence of manifest
error) be final, conclusive and binding upon the Health Care Noteholders, the
Issuer and any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns.
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<PAGE> 4
SECTION 3. Authentication Date; Payment Dates; Stated
Maturity Date; Principal Payments; Book-Entry Health Care Notes.
(a) Original Issuance. The Health Care Notes shall be
authenticated and delivered by the Trustee to or upon the order of the Issuer
on December 15, 1994 (the "Closing Date"), in an aggregate principal amount not
to exceed $50,000,000, and shall be dated their date of authentication. The
Health Care Notes shall be issued in the minimum denominations set forth herein
and in the Indenture.
(b) Payment Dates. Prior to the Amortization Period or
Liquidation Period, the Payment Dates for the Health Care Notes are March 15,
June 15, September 15, and December 15 of each calendar year commencing with
the March 1995 Payment Date, and during the Amortization Period or Liquidation
Period, the Payment Dates for the Health Care Notes are the 15th day of each
month thereafter, or if any such day is not a Business Day, the next succeeding
Business Day, in any event until the repayment of the Health Care Notes in
full. In the event an Amortization Event occurs during an Interest Accrual
Period, such Interest Accrual Period shall be deemed shortened to end on the
next following redetermined Payment Date which occurs at least two Business
Days following such Amortization Event, and all subsequent Interest Accrual
Periods shall be determined based on monthly Payment Dates.
(c) Final Maturity Date. The Final Maturity Date for the
Health Care Notes, on which the unpaid principal amount, if any, of the Health
Care Notes is due, is the June 2000 Payment Date.
(d) Scheduled Amortization Date. The Scheduled Amortization
Date for the Health Care Notes, on which the unpaid principal amount, if any,
of the Health Care Notes may be paid in part on an amortizing basis pursuant to
Sections 2.9(b) and 7.2(g) of the Indenture, is the June 1999 Payment Date.
(e) Principal Payments. Principal will be payable in
respect of the Health Care Notes as provided herein and in the Indenture. All
such principal payments shall be made in accordance with the provisions of
Article VII of the Indenture.
(f) Book-Entry Health Care Notes. The Health Care Notes
will not be initially issued as Book-Entry Health Care Notes.
SECTION 4. Optional Redemption. The Health Care Notes are
subject (upon compliance with the conditions specified in the Indenture,
including without limitation Section 9.1) to redemption in whole on any
Redemption Date, or in part on any Optional Partial Redemption Date, at the
option of the Issuer for a redemption price (the "Redemption Price") equal to
(i) the following percentages of the principal amount thereof plus accrued
interest to the Redemption Date plus (ii) any Series Special Obligations owing
in respect of the Health Care Notes being redeemed accrued to the Redemption
Date or Optional Partial Redemption Date, as applicable, or otherwise payable
in connection with such redemption.
4
<PAGE> 5
<TABLE>
<CAPTION>
Payment Date Percentage
------------ ----------
<S> <C>
Prior to December 1995 Payment Date 101%
thereafter, prior to December 1996 Payment Date 100.75%
thereafter, prior to December 1997 Payment Date 100.50%
thereafter, prior to December 1998 Payment Date 100.25%
thereafter 100.10%
</TABLE>
The Issuer's ability to pay any premium in connection with any
optional redemption of Health Care Notes has not been rated by the Rating
Agency, and payment to the Health Care Noteholders of such amounts are subject
to the priority of payments set forth in Section 6.3 of the Sale and Servicing
Agreement and Section 7.2 of the Indenture.
SECTION 5. Series Special Obligation.
The following obligations constitute "Series Special
Obligations" for purposes of this Series Supplement.
(a) Default Interest. To the extent allowable by law, any
payments due hereunder which are not paid when due (whether by acceleration or
otherwise, and irrespective of any grace period applicable thereto) shall bear
interest at a default rate of interest equal to 2% in excess of the greater of
(i) the Series Note Interest Rate or Series Alternate Note Interest Rate then
in effect, as applicable, or (ii) the "base rate" or "prime rate" announced
from time to time by Morgan Guaranty Trust Company of New York at its principal
offices in New York, which default rate shall remain in effect until such
payments and any interest thereon have been paid in full.
(b) Increased Costs. If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Holder of agreeing to make or making, funding
or maintaining its investment in the Health Care Notes, then the Issuer shall,
within three days following a written request (which request shall set forth in
reasonable detail the basis for requesting such amounts) by such Holder to the
Issuer and the Master Servicer, pay to such Holder additional amounts
sufficient to compensate such Holder for such increased cost. Any such request
submitted to the Issuer and the Master Servicer by such Holder shall be
conclusive and binding for all purposes, absent manifest error.
If any Holder determines that compliance with any law or
regulation or any guidelines or request from any central bank or other
governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to
5
<PAGE> 6
be maintained by such Holder or any corporation controlling such Holder and
that the amount of such capital is increased by or based upon the existence of
such Holder's holding of any Health Care Notes, then, upon a written request
(which request shall set forth in reasonable detail the basis for requesting
such amounts) by such Holder to the Issuer and the Master Servicer, the Issuer
shall within three days following such request pay to such Holder, as specified
from time to time by such Holder, an additional amount sufficient to compensate
such Holder in light of such circumstances, to the extent that such Holder
reasonably determines such increase in capital to be allocable to the existence
of such Holder's Health Care Notes. Any such request submitted to the Issuer
and the Master Servicer by such Holder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Breakage Costs. The Issuer shall compensate each
Holder, within ten days upon written request therefor (which request shall set
forth in reasonable detail the basis for requesting such amounts) by that
Holder to the Issuer and the Master Servicer for all losses, expenses and
liabilities (including, without limitation, any loss or expense arising from
interest or fees paid or payable by that Holder to lenders of funds borrowed by
it or other funding arrangements entered into by it to make or carry its
investment in the Health Care Notes and any loss sustained by that Holder in
connection with the termination of such funding arrangements or the
re-employment of such funds), that such Holder may sustain: (i) if any payment
or prepayment (by acceleration of maturity or otherwise) of the Health Care
Notes occurs on a date that is not the last day of an Interest Accrual Period,
(ii) if any payment or prepayment (by acceleration of maturity or otherwise) of
the Health Care Notes is not made on any date and in the amount specified in a
notice given by the Issuer at least three (3) Business Days prior to any
payment to such Holder, or (iii) as a consequence of any other default by the
Issuer to repay principal or interest in respect of the Health Care Notes when
required by the terms of this Agreement. The determination of amounts payable
under this Subsection 5(c) by such Holder shall be conclusive and binding in
all matters in the absence of manifest error.
(d) Series Special Obligations Not Rated. The Issuer's
ability to pay any Series Special Obligation in connection with the Health Care
Notes has not been rated by the Rating Agency, and payment to the Health Care
Noteholders of such amounts are subject to the priority of payments set forth
in Section 6.3 of the Sale and Servicing Agreement and Section 7.2 of the
Indenture.
SECTION 6. Certain Defined Terms. With respect to the Health
Care Notes, the following definitions shall apply:
"Authenticating Agent" shall mean the Trustee.
"Closing Date" shall mean December 15, 1994.
"Health Care Noteholder" shall mean the Holder of any Health
Care Note.
"Interest Accrual Period" shall mean, with respect to any
Payment Date, the period commencing on and including the prior Payment Date (or
the Closing Date in the case
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<PAGE> 7
of the initial Payment Date) and ending on and including the day preceding such
Payment Date.
"Interest Determination Date" shall mean the second business
day preceding the commencement of each Interest Accrual Period. The term
"business day" for purposes of this definition only shall mean a day on which
the Trustee and commercial banks located in the City of London are open for the
transaction of commercial banking business.
"LIBOR" shall mean, for each Interest Accrual Period, the
London interbank offered rate for three-month or one- month U.S. Dollar
deposits, as applicable, determined on the related Interest Determination Date
by the Trustee pursuant to the provisions of Section 2 of this Series
Supplement.
"Minimum Denomination" shall mean $500,000.
"Payment Date" has the meaning set forth in Section 3(b) of
this Supplement.
"Rating Agency Condition" shall mean, for so long the initial
Holder of the Health Care Notes holds at least 50% of the Aggregate Outstanding
Amount of Health Care Notes, the consent of such Holder together with the
consent of the Rating Agency, as set forth in the definition of "Rating Agency
Condition" in the Sale and Servicing Agreement.
"Reference Banks" shall mean, collectively, The Long-Term
Credit Bank of Japan, Limited, Morgan Guaranty Trust Company of New York and
Chemical Bank.
"Series Alternate Note Interest Rate" shall equal 6.5375% per
annum, with respect to the initial Interest Accrual Period, and with respect to
any applicable Interest Accrual Period thereafter shall be a per annum rate
equal to the Series Interest Rate Spread plus one-month LIBOR determined as of
the related Interest Determination Date.
"Series Base Reserve Percent" shall mean 1.5%.
"Series Dynamic Reserve Floor Percent" shall mean 10%.
"Series Interest Rate Spread" shall mean, with respect to any
Interest Accrual Period, the percentage equal to 0.35%.
"Series Liquidation Payment Frequency" shall mean a monthly
Payment Date frequency applicable during the Liquidation Period or Amortization
Period.
"Series Note Interest Rate" shall equal 6.7875% per annum with
respect to the initial Interest Accrual Period and, with respect to each
applicable Interest Accrual Period thereafter shall be a per annum rate equal
to the Series Interest Rate Spread plus three-month LIBOR determined as of the
related Interest Determination Date.
7
<PAGE> 8
"Series Rate Increment" shall equal 1.00%.
"Series Rating Multiple" shall mean 3.00.
"Series Special Obligations" shall have the meaning set forth
in Section 5 of this Supplement.
Further, "DTC Agreement" and "Maximum Rate" shall not be
applicable, nor have a definition, for purposes of the Health Care Notes and
this Supplement.
SECTION 7. Form of the Health Care Notes. The Health Care
Notes shall be in the form of Exhibit A hereto.
SECTION 8. Copies to Holders. For so long as the initial
Holder of the Health Care Notes holds at least 50% of the Aggregate Outstanding
Amount of Health Care Notes, unless and to the extent otherwise specified in
writing by such Holder to the Trustee, (x) the Issuer shall deliver to such
Noteholder each Daily Report and Daily Trustee Report which are required to be
delivered to the Issuer pursuant to the Sale and Servicing Agreement and (y)
the Trustee shall deliver to such Noteholder all other information, documents,
notices and reports the Trustee receives which are required to be delivered to
the Trustee pursuant to the Sale and Servicing Agreement, the Indenture and
this Series Supplement. At the written request of any other Noteholder, the
Trustee shall deliver to such requesting Noteholder, such current or future
information, documents, notices and reports as the same are delivered to the
Trustee pursuant to the Sale and Servicing Agreement, the Indenture or this
Supplement, or in respect of any past information, documents, notices and
reports the Trustee shall at its election either make the same available for
inspection at its Corporate Trust Office or deliver the same to such requesting
Noteholder.
SECTION 9. Ratification of Agreement. As supplemented by
this Supplement, the Indenture is in all respects ratified and confirmed and
the Indenture, as so supplemented by this Supplement, respectively, shall be
read, taken, and construed as one and the same instrument.
SECTION 10. Counterparts. This Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and
the same instrument.
SECTION 11. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
8
<PAGE> 9
IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Supplement to be duly executed by their respective officers thereunto duly
authorized as of the 15th day of December, 1994.
BEVERLY FUNDING CORPORATION, as Issuer
By: /s/ John W. MacKenzie
---------------------------------
Name: John W. MacKenzie
Title: Assistant Secretary
CHEMICAL BANK, as Trustee
By: /s/ Regina Bishop
---------------------------------
Name: Regina Bishop
Title: Assistant Vice President
<PAGE> 10
EXHIBIT A
PRINCIPAL PAYMENTS OF THIS NOTE ARE PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
HEALTH CARE NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
THIS HEALTH CARE NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER THIS HEALTH CARE NOTE NOR ANY
INTEREST HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES AND EITHER (A) TO "QUALIFIED INSTITUTIONAL BUYERS"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OF 1933. ANY TRANSFEREES OF HEALTH CARE NOTES MUST
DELIVER TO THE TRUSTEE A DULY EXECUTED CERTIFICATE SUBSTANTIALLY IN
THE FORM OF EXHIBIT A TO THE INDENTURE (AS DEFINED HEREIN).
NO EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND NO OTHER PLAN SUBJECT
TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE"),
WITH RESPECT TO WHICH J.P. MORGAN SECURITIES INC., OR BEVERLY FUNDING
CORPORATION OR CHEMICAL BANK IS A "PARTY IN INTEREST" (WITHIN THE
MEANING OF SECTION 3(14) OF ERISA), OR A "DISQUALIFIED PERSON" (WITHIN
THE MEANING OF SECTION 4975 OF THE CODE), MAY PURCHASE THIS HEALTH
CARE NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND THE HOLDING
OF THIS HEALTH CARE NOTE OR SUCH INTEREST BY SUCH PLAN (OR ANY ENTITY
THE ASSETS OF WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS
SUBJECT TO A STATUTORY OR ADMINISTRATIVE EXEMPTION.
A-1
<PAGE> 11
BEVERLY FUNDING CORPORATION
Health Care Notes
SERIES 1994-A
NO. _____ $___________________
CUSIP ______________
Beverly Funding Corporation, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to THE LONG-TERM CREDIT
BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, or registered assigns, the
principal sum of FIFTY MILLION ($50,000,000.00) DOLLARS payable in installments
on each Payment Date in accordance with the Indenture commencing on the
earliest of (x) the date determined as provided on the reverse hereof (the
"Scheduled Amortization Date"), (y) the date of acceleration of the Health Care
Notes following the occurrence of an Event of Default and (z) the commencement
of the Amortization Period, and ending on or before the June 2000 Payment Date
(the "Final Maturity Date"). The Issuer also promises to pay interest on each
Payment Date at the rate per annum specified in the Series Supplement and the
Indenture. Interest on the unpaid principal amount on this Health Care Note
will accrue for each Interest Accrual Period (which initial Interest Accrual
Period will commence on December 15, 1994). Such principal of and interest on
this Health Care Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Health Care Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Issuer with respect to this Health Care Note shall be
applied in the manner set forth in the Indenture referred to on the reverse
hereof.
Reference is made to the further provisions of this Health
Care Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Health Care Note.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Health Care Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-2
<PAGE> 12
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer.
Dated: BEVERLY FUNDING CORPORATION
By:______________________________
Name:
Title:
This is one of the Health Care Notes referred to in the within
mentioned Indenture.
CHEMICAL BANK,
as Trustee
By:___________________________
Authorized Signatory
A-3
<PAGE> 13
This Health Care Note is one of a duly authorized issue of
Health Care Notes of the Issuer, designated as its Health Care Notes (herein
called the "Health Care Notes"), issued and to be issued in one or more Series,
and this Health Care Note is one of the Health Care Notes designated as the
Issuer's Series 1994-A Health Care Notes (herein called the "Series 1994-A
Health Care Notes"), all issued and to be issued under an Indenture dated as of
December 1, 1994 and a Series Supplement (the "Series Supplement") thereto with
respect to the Series 1994-A Health Care Notes dated as of December 1, 1994
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
both between the Issuer and Chemical Bank, as trustee (the "Trustee", which
term includes any successor Trustee under the Indenture), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights thereunder of the Issuer, the Trustee and
the Holders of the Health Care Notes. All terms used in this Health Care Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented
or amended.
THE SERIES 1994-A HEALTH CARE NOTES AND ANY OTHER SERIES OF
HEALTH CARE NOTES ISSUED BY THE ISSUER ARE AND WILL BE EQUALLY AND RATABLY
SECURED BY THE COLLATERAL PLEDGED AS SECURITY THEREFOR AS PROVIDED IN THE
INDENTURE AND THE SERIES 1994-A HEALTH CARE NOTES WILL RANK PARI PASSU WITH ANY
OTHER SERIES OF HEALTH CARE NOTES ISSUED UNDER THE INDENTURE BY THE ISSUER OR
TO BE ISSUED THEREUNDER.
The principal of this Health Care Note shall be payable no
later than the Final Maturity Date. Principal may be payable in whole earlier
either because (x) an Event of Default shall have occurred and be continuing
and the Health Care Notes have been accelerated in accordance with Section 5.2
of the Indenture, or (y) the Issuer shall have called for the redemption in
full of the Series 1994-A Health Care Notes pursuant to Section 9.1 of the
Indenture. In addition, payments of principal on this Health Care Note may be
made in whole or in part (x) on each Payment Date beginning with the June 1999
Payment Date (the "Scheduled Amortization Date"), (y) on any Optional Partial
Redemption Date if an Optional Partial Redemption has been elected by the
Issuer to be made pursuant to Section 9.1 of the Indenture or (z) on any
Payment Date following the occurrence of an Amortization Event under the Sale
and Servicing Agreement, until paid in full or required to be paid in full upon
the Final Maturity Date. All principal payments on the Health Care Notes shall
be made pro rata to the Health Care Noteholders entitled thereto.
Payments of interest on this Health Care Note are due and
payable on each Payment Date, together with any installment of principal, to
the extent not in full payment of this Health Care Note, required to be made on
such Payment Date, and shall be made by check mailed to the Person whose name
appears as the registered Holder of this Health Care Note (or one or more
Predecessor Health Care Notes) on the Health Care Note Register as of the close
of business on the last day of the month preceding the Payment Date (the
"Record Date"), except that with respect to Health Care Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.) or in the name of a Holder of at least $5,000,000 in
initial principal amount of Health Care Notes of any Series, payments will be
made by wire transfer in immediately available funds to the
A-4
<PAGE> 14
account designated by such nominee or Holder in writing in form satisfactory to
the Trustee at least five (5) Business Days prior to such Payment Date. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Health Care Note Register as of the applicable
Record Date without requiring that this Health Care Note be submitted for
notation of payment, and the mailing of such check shall constitute payment of
the amount thereof regardless of whether such check is returned undelivered.
Any reduction in the principal amount of this Health Care Note (or any one or
more Predecessor Health Care Notes) effected by any payments made on any
Payment Date shall be binding upon all future Holders of this Health Care Note
and of any Health Care Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds
are expected to be available, as provided in the Indenture, for payment in full
of the then remaining unpaid principal amount and all other amounts owing in
respect of this Health Care Note on a Payment Date, then the Trustee, in the
name of and on behalf of the Issuer, will notify the Person who was the
registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed no later than ten days prior to such Payment Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this Health Care Note at the Trustee's principal corporate trust office or at
the office of the Trustee's agent appointed for such purposes located in The
City of New York.
To the extent allowable by law, any payments (including
interest) due hereunder which are not paid when due (whether by acceleration or
otherwise, and irrespective of any grace period applicable thereto) shall bear
interest at a default rate of interest equal to 2% in excess of the greater of
(i) Series Note Interest Rate or Series Alternate Note Interest Rate, as
applicable, or (ii) the "base rate" or "prime rate" announced from time to time
by Morgan Guaranty Trust Company of New York at its principal offices in New
York, which default rate shall remain in effect until such payments and any
interest accrued thereon have been paid in full. In addition, under certain
circumstances, the holders of the Health Care Notes will be entitled to payment
of certain Series Special Obligations and other amounts pursuant to the
Indenture and the Supplement.
As provided in the Indenture, the Series 1994-A Health Care
Notes may be redeemed, in whole or in part, at the option of the Issuer on any
Payment Date or in part, at the option of the Issuer, on any Optional Partial
Redemption Date, as applicable, at the Redemption Price, subject to the
conditions set forth in Section 9.1 of the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Health Care Note may be
registered on the Health Care Note Register of the Issuer, upon surrender of
this Health Care Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in The City of New York or the city
in which the Corporate Trust Office is located, or a member firm of a national
securities exchange, and such other documents as the Trustee may require, and
thereupon one or more new Health Care Notes of authorized denomination and in
the same
A-5
<PAGE> 15
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of
transfer or exchange of this Health Care Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Prior to the due presentment for registration of transfer of
this Health Care Note, the Issuer, the Trustee and any agent of the Issuer or
the Trustee may treat the Person in whose name this Health Care Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Health Care Note be overdue, and neither the Issuer, the Trustee, nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, pursuant to the conditions therein set
forth, the amendment thereof and the modification of the rights and obligations
of the Issuer and the rights of the Holders of the Health Care Notes of a
Series under the Indenture at any time by the Issuer with the consent of the
Holders of Health Care Notes specified in the Indenture. The Indenture also
contains provisions permitting the Holders of Health Care Notes of a Series
representing specified percentages of the Aggregate Outstanding Amount of the
Health Care Notes of such Series, on behalf of the Holders of all the Health
Care Notes of such Series, to take certain actions which may affect other
Holders, including waiving compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such action, consent or waiver by the Holder of this Health
Care Note (or any one of more Predecessor Health Care Notes) shall be
conclusive and binding upon such Holder and upon all future Holders of this
Health Care Note and of any Health Care Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such action, consent or waiver is made upon this Health Care Note. The
Indenture also permits the Trustee to amend certain terms and conditions set
forth in the Indenture without the consent of Holders of the Health Care Notes
issued thereunder.
The Series 1994-A Health Care Notes are issuable only in
registered form in denominations as provided in the Indenture and the Series
Supplement, subject to certain limitations therein set forth.
THIS HEALTH CARE NOTE, THE INDENTURE AND THE RELATED SERIES
SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK.
No reference herein to the Indenture and no provision of this
Health Care Note or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Health Care Note at the times, place, and rate, and in the
coin or currency herein prescribed.
A-6
<PAGE> 16
The Holder of this Health Care Note agrees that it will not,
prior to the date which is 370 days after the discharge of the Indenture,
acquiesce, petition or otherwise, directly or indirectly, invoke or cause the
Issuer to invoke the process of any governmental authority for the purpose of
commencing or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property or ordering the winding up or
liquidation of the affairs of the Issuer.
A-7
<PAGE> 17
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns, and transfers unto____________________________
Please insert Social Security
or other identifying number of
assignee: ___________________
the within Health Care Note of Beverly Funding Corporation (the "Issuer")
standing in the name(s) of the undersigned in the Health Care Note Register of
the Issuer and does hereby irrevocably constitute and appoint ________________
attorney to transfer such Health Care Note in such Health Care Note Register,
with full power of substitution in the premises.
Dated:_______________________ ______________________________________
[Signature]
______________________________________
[Signature]
Notice: The signature(s) to this
assignment must correspond
with the name(s) as written
upon the face of this Health
Care Note in every particular
without alteration or any
change whatsoever. The
signature(s) must be
guaranteed by a commercial
bank or trust company
located, or having a
correspondent location, in
the City of New York or the
city in which the Corporate
Trust office is located, or
by a member firm of a
national securities exchange.
Notarized or witnessed
signatures are not acceptable
as guaranteed signatures.
Signature Guarantee:
_____________________________
Name of Institution
_____________________________
A-8
<PAGE> 18
Authorized Officer
A-9
<PAGE> 1
EXHIBIT 10.49
THIRD AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY CALIFORNIA CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
AND THE NIPPON CREDIT BANK, LTD. LOS ANGELES AGENCY, AS AGENT
DATED AS OF NOVEMBER 1, 1994
THIS THIRD AMENDMENT dated as of November 1, 1994 (this "Amendment"), is
entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation
("BEI"), BEVERLY CALIFORNIA CORPORATION, a California corporation ("Borrower"),
the SUBSIDIARY GUARANTOR listed on the signature pages hereof (together with
BEI, the "Guarantors"), the LENDERS listed on the signature pages hereof (such
lenders, together with each Person that may or has become a party to the Credit
Agreement (as defined below) pursuant to subsection 10.8 thereof, are referred
to herein individually as a "Lender" and collectively as the "Lenders", THE
NIPPON CREDIT BANK, LTD., Los Angeles Agency ("NIPPON"), as agent for the
Lenders (in such capacity, the "Agent"). This Amendment amends the Credit
Agreement dated as of March 2, 1993 by and among BEI, Borrower, Agent and
Lenders, as amended by that certain First Amendment to Credit Agreement
dated as of May 6, 1994 by and among BEI, Borrower, Agent and the Lenders, as
further amended by that certain Second Amendment to Credit Agreement dated as of
May 19, 1994 by and among BEI, Borrower, Agent and the Lenders (said Credit
Agreement, as so amended, the "Credit Agreement"), as set forth herein,
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
WHEREAS, Lenders and Agent have agreed to approve such amendments;
WHEREAS, Guarantors desire to reaffirm the effectiveness respectively of
the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement;
<PAGE> 2
NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Agent and Lenders agree as follows:
AGREEMENT
SECTION 1. AMENDMENTS TO DEFINITIONS
(a) Subsection 1.1. of the Credit Agreement is hereby amended by deleting
therefrom the definition of "Morgan Credit Agreement" and replacing such
definition with the following:
" 'Morgan Credit Agreement' means that certain Credit Agreement, dated as
for November 1, 1994, among Borrower, BEI, the banks party thereto, Morgan, as
issuing bank and as agent, as amended, supplemented or modified."
(b) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Effective Date" in its entirely
and replacing such definition with the following:
" 'Morgan Effective Date' means November 1, 1994."
(c) Subsection 1.1. of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Financing Documents" in its
entirety and replacing such definition with the following:
" 'Morgan Financing Documents' means the Morgan Credit Agreement and the
Notes, the Subsidiary Guaranty and the Pledge Agreement (each as defined in the
Morgan Credit Agreement)."
(d) Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting therefrom the definition of "Morgan Collateral" in its entirety and
replacing such definition with the following:
" 'Morgan Collateral' means the personal property that constitutes
Collateral (as defined in the Morgan Credit Agreement), that is required to be
pledged under the Morgan Credit Agreement of the Morgan Effective Date."
2
<PAGE> 3
SECTION 2. AMENDMENTS TO SUBSECTIONS 5.13A AND 5.15 OF THE CREDIT AGREEMENT
Subsection 5.13A(iii) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(iii) Liens on the LTCB Collateral securing the obligations ("LTCB
Obligations") of BEI and its Subsidiaries under the LTCB Financing Documents and
Liens on the Morgan Collateral securing obligations ("Morgan Obligations") of
BEI and its Subsidiaries under the Morgan Documents; provided that, in each case
the amount of Debt (including, without limitation, any obligation with respect
to any letter of credit or similar instrument) and contingent obligations
secured thereby does not exceed the amount that has been or may be borrowed
thereunder, subject to conditions precedent, as of the Morgan Effective Date."
Subsection 5.15(a) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and replacing it with the following:
"(a) Debt (including, without limitation, any obligation with respect to
any letter of credit or similar instrument) and contingent obligations
outstanding on the Morgan Effective Date and listed on Schedule IV attached to
the Morgan Credit Agreement."
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Agent and Lenders to enter into this Amendment, each of
BEI and Borrower represents and warrants to Agent and Lenders that:
(a) The representations and warranties of each Loan Party contained in the
Credit Agreement are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of the date
hereof except to the extent that such representations and warranties
specifically relate to an earlier date, in which case they are true, correct and
complete in all material respects as of such earlier date;
(b) No event has occurred and is continuing or would result from the
execution of this Amendment that constitutes an Event of Defaut of Potential
Event of Default;
3
<PAGE> 4
(c) Each Loan Party has performed in all material respects all agreements
and satisified all conditions that the Credit Agreement and this Amendment
provide shall be performed by it on or before the date hereof;
(d) the execution, delivery and performance of this Amendment and the
Credit Agreement as amended by this Amendment, by each Loan Party are within the
corporate power and authority of each such Loan Party and, as of the Third
Amendment Effective Date (as hereinafter defined), will be duly authorized by
all necessary corporate action on the part of each Loan Party, and this
Amendment, as of the Third Amendment Effective Date, is duly executed and
delivered by each of such Loan Parties and will constitute a valid and binding
agreement of each of such Loan Parties, enforceable against such Loan Parties in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. The Credit Agreement constitutes and, as of the Third Amendment
Effective Date, the Credit Agreement, as amended by this Amendment, will
constitute, a valid and binding agreement of BEI and Borrower, enforceable
against BEI and Borrower in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles, relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(e) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to any Loan Party, the Certificate or
Articles of Incorporation or Bylaws of any Loan Party or any order, judgment or
decree of any court or other agency of government binding on any Loan Party,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any instrument that is material,
individually or in the aggregate, and that is binding on such Loan Party, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of any Loan Party (other than any Liens created under any
of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require
any approval or consent of any Person under any instrument that is material,
individually or in the aggregate, and that is binding on such Loan Party.
4
<PAGE> 5
(f) The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Credit Agreement as amended by this
Amendment, do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body.
SECTION 4. CONDITION TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Third Amendment
Effective Date"):
A. On or before the Third Amendment Effective Date, BEI, Borrower and each
Subsidiary Guarantor shall deliver to Lenders (or to Agent for Lenders with
sufficient originally executed copies, as appropriate, for each Lender and its
counsel) the following, each, unless otherwise noted, dated the Third Amendment
Effective Date:
(i) Resolutions of its Board of Directors approving and authorizing
the execution, delivery, and performance of this Amendment, certified as of
the Third Amendment Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
(ii) Signature and incumbency certificates of its officers executing
this Amendment certified by its secretary or an assistant secretary; and
(iii) Executed counterparts of its Amendment.
B. On or before the Third Amendment Effective Date, Requisite Lenders shall
have delivered to Agent a counterpart of this Amendment originally executed by a
duly authorized officer of each such Lender or by telex or telephonic
confirmation.
C. On or before the Third Amendment Effective Date:
(i) Borrower shall have caused payment to Agent of all amounts
regarding the costs and expenses reasonably incurred by Agent in connection
with this Amendment which Borrower has agreed to pay; and
5
<PAGE> 6
(ii) the Morgan Credit Agreement (as defined in the Credit Agreement
as amended by this Amendment) shall have become effective in all respects.
D. On or before the Third Amendment Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and Agent and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Agent may reasonably request.
SECTION 5. THE GUARANTIES
Each Guarantor acknowledges that it has reviewed the terms and provisions
of the Credit Agreement and this amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Guarantor hereby
confirms that the Guaranty Agreement and the Collateral Documents to which it is
a party or otherwise bound and all Collateral encumbered thereby will continue
to guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all Obligations, Guarantied Obligations (as defined
in the applicable Guaranty Agreements) and Secured Obligations (as defined in
the Collateral Documents), as the case may be, including, without limitation,
the payment and performance of all Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement as amended by this
Amendment and the Notes defined therein.
Each Guarantor acknowledges and agrees that any of the Guaranty Agreements
and the Collateral Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
sell be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Guarantor represents and
warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and the Guaranty Agreement and the
Collateral Document to which it is a party or otherwise bound are true, correct
and complete in all material respects on an as of the Third Amendment Effective
Date to the same extent as though made on and as of that date except to the
extent that such representations and warranties specifically relate to an
earlier date, in which case they are
6
<PAGE> 7
true, correct and complete in all material respects as of such earlier date.
Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document and (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed to
require the consent of any Guarantor to any future amendments to the Credit
Agreement.
SECTION 6. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment (other
than the provisions of Section 1 hereof) shall become effective upon the
execution of a counterpart hereof by all Lenders and each of the Loan Parties
and receipt of written or telephonic notification of such execution and
authorization of delivery thereof.
SECTION 7. FEES AND EXPENSES
Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.4 of the Credit Agreement incurred by Agent and its counsel with
respect to this Amendment and the documents and transactions contemplated hereby
shall be for the account of Borrower.
SECTION 8. EFFECT OF AMENDMENT
It is hereby agreed that, except as specifically provided herein, this
Amendment does not in any way affect or impair the terms and conditions of the
Credit Agreement, and all terms and conditions of the Credit Agreement are to
remain in full force and effect unless otherwise specifically amended or changed
pursuant to the terms and conditions of this amendment.
7
<PAGE> 8
SECTION 9. APPLICABLE LAW
This Amendment and the rights and obligations of the parties hereto and all
other aspects hereof shall be deemed to be made under, shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of New
York without regard to principles of conflicts of laws.
8
<PAGE> 9
WITNESS the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
/s/ SCHUYLER HOLLINGSWORTH, JR.
----------------------------------
By: Schuyler Hollingsworth, Jr.
Title: Senior Vice President
and Treasurer
Borrower:
BEVERLY CALIFORNIA CORPORATION
/s/ SCHUYLER HOLLINGSWORTH, JR.
----------------------------------
By: Schuyler Hollingsworth, Jr.
Title: Senior Vice President
and Treasurer
Agent:
THE NIPPON CREDIT BANK, LTD.
LOS ANGELES AGENCY
as Agent and as a Lender
/s/ BERNARDO E. CORREA-HENSCHKE
----------------------------------
By: Bernardo E. Correa-Henschke
Title: Vice President & Manager
S-1
<PAGE> 10
Lenders:
THE NIPPON CREDIT BANK, LTD.
LOS ANGELES AGENCY
as Agent and as a Lender
/s/ BERNARDO E. CORREA-HENSCHKE
----------------------------------
By: Bernardo E. Correa-Henschke
Title: Vice President & Manager
TORONTO DOMINION (TEXAS), INC.
/s/ DIANE BAILEY
----------------------------------
By: Diane Bailey
Title: Vice President
The Subsidiary Guarantors
Beverly Enterprises --
Alabama, Inc.
Beverly Enterprises --
Arkansas, Inc.
Beverly Enterprises --
Florida, Inc.
Beverly Enterprises --
Georgia, Inc.
Beverly Enterprises --
Maryland, Inc.
Beverly Enterprises --
Massachusetts, Inc.
Beverly Enterprises --
Minnesota, Inc.
Beverly Enterprises --
Mississippi, Inc.
Beverly Enterprises --
Missouri, Inc.
S-2
<PAGE> 11
Beverly Enterprises --
Nebraska, Inc.
Beverly Enterprises --
North Carolina, Inc.
Beverly Enterprises --
Oregon, Inc.
Beverly Enterprises --
Wisconsin, Inc.
Commercial Management,
Inc.
Hallmark Convalescent
Homes, Inc.
Hospital Facilities
Corporation
Moderncare of Lumberton,
Inc.
Nebraska City S-C-H, Inc.
South Dakota -- Beverly
Enterprise, Inc.
Vantage Healthcare
Corporation
AGI-Camelot, Inc.
AGI-McDonnell County
Health Care, Inc.
Beverly Enterprises --
Arizona, Inc.
Beverly Enterprises --
California, Inc.
Beverly Enterprises --
Colorado, Inc.
Beverly Enterprises --
Connecticut, Inc.
S-3
<PAGE> 12
Beverly Enterprises --
Garden Terrace, Inc.
Beverly Enterprises --
Hawaii, Inc.
Beverly Enterprises --
Idaho, Inc.
Beverly Enterprises --
Illinois, Inc.
Beverly Enterprises --
Indiana, Inc.
Beverly Enterprises --
Kansas, Inc.
Beverly Enterprises --
Kentucky, Inc.
Beverly Enterprises --
Louisiana, Inc.
Beverly Enterprises --
Michigan, Inc.
Beverly Enterprises --
New Jersey, Inc.
Beverly Enterprises --
Ohio, Inc.
Beverly Enterprises --
Pennsylvania, Inc.
Beverly Enterprises --
South Carolina, Inc.
Beverly Enterprises --
Tennessee, Inc.
Beverly Enterprises --
Texas, Inc.
Beverly Enterprises --
Utah, Inc.
S-4
<PAGE> 13
Beverly Enterprises --
Virginia, Inc.
Beverly Enterprises --
Washington, Inc.
Beverly Enterprises --
West Virginia, Inc.
Beverly Indemnity, Ltd.
Beverly Manor, Inc. of
Hawaii
Beverly Savana Cay Manor, Inc.
Columbia-Valley Nursing
Home, Inc.
Computran Systems, Inc.
Continental Care Centers
of Council Bluffs, Inc.
Forest City Building, Ltd.
Home Medical Systems, Inc.
Kenwood View Nursing Home, Inc.
Liberty Nursing Homes, Incorporated
Medical Arts Health Facility of
Lawrenceville, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of America
S-5
<PAGE> 14
Salem No. 1, Inc.
South Alabama Nursing Home, Inc.
Taylor County Health
Facility, Incorporated
/s/ SCHUYLER HOLLINGSWORTH, JR.
-----------------------------------
By: Schuyler Hollingsworth, Jr.
Title: Senior Vice President
and Treasurer
S-6
<PAGE> 1
EXHIBIT 10.50
EXECUTION VERSION
FOURTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY CALIFORNIA CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN,
THE LENDERS LISTED HEREIN,
AND
THE NIPPON CREDIT BANK, LTD.
LOS ANGELES AGENCY, AS AGENT
DATED AS OF NOVEMBER 9, 1994
THIS FOURTH AMENDMENT dated as of November 9, 1994 (this
"AMENDMENT"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY CALIFORNIA CORPORATION, a California
corporation ("BORROWER"), the SUBSIDIARY GUARANTORS listed on the signature
pages hereof (together with BEI, the "GUARANTORS"), the LENDERS listed on the
signature pages hereof (such lenders, together with each Person that may or has
become a party to the Credit Agreement (as hereinafter defined) pursuant to
subsection 10.8 thereof, are referred to herein individually as a "LENDER" and
collectively as the "LENDERS"), and THE NIPPON CREDIT BANK, LTD., Los Angeles
Agency ("NIPPON"), as agent for the Lenders (in such capacity, the "AGENT").
This Amendment amends the Credit Agreement dated as of March 2, 1993 by and
among BEI, Borrower, Agent and Lenders, as amended by that certain First
Amendment to Credit Agreement dated as of May 6, 1994, as further amended by
that certain Second Amendment to Credit Agreement dated as of May 19, 1994, and
as further amended by that certain Third Amendment to Credit Agreement dated as
of November 1, 1994 (as so amended, the "CREDIT AGREEMENT"), as set forth
herein.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
WHEREAS, Lenders and Agent have agreed to approve such amendments;
WHEREAS, Guarantors desire to reaffirm the effectiveness respectively
of the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement;
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions herein
contained, BEI, Borrower, Guarantors, Agent and Lenders agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above
and elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall have
the respective meanings given to those terms in the Credit Agreement, as
amended by this Amendment. The rules of construction set forth in Section I of
the Credit Aqreement shall, to the extent not inconsistent with the terms of
this Amendment, apply to this Amendment and are hereby incorporated by
reference.
2. AMENDMENT TO CREDIT AQREEMENT. Subject to conditions set forth
in paragraph 4 hereof, the Credit Agreement is hereby amended as follows:
(a) The definitions of "Applicable Margin", "Consolidated
Capital Expenditures", "Consolidated EBITDA", "Consolidated Interest
Charges", "Consolidated Net Interest Expense" and "Debt" set forth in
Subsection 1.1 are amended by deleting such definitions in their
entirety and replacing them with the following:
"'APPLICABLE MARGIN' means, for any day, the rate per
annum which is determined pursuant to the Pricing Schedule and
added to the Adjusted Eurodollar Rate for each such Eurodollar
Rate Loan."
"'CONSOLIDATED CAPITAL EXPENDITURES' means, for any
period, the sum, without duplication, of (i) the total amount
of additions to property and equipment of BEI and its
Consolidated Subsidiaries during such period of the types
classified as "Capital expenditures" or "Payments for
acquisitions, net of cash acquired" on the consolidated
statement of cash flows included in the 1993 Base Financials
and (ii) all Investments made by BEI or any of its
Subsidiaries during such period in Beverly Japan Corporation;
provided that "Consolidated Capital Expenditures" shall
exclude (A) the application of insurance or condemnation
proceeds to rebuilding facilities, (B) any acquisition by BEI
or any of its Subsidiaries of any assets in connection with
and as part of a Workout Transaction, (C) any acquisition by
BEI or any of its Subsidiaries of any assets as part of a
Lease Conversion and (D) the amount of any Debt incurred or
assumed for the purpose of financing all or any part of the
cost of constructing any asset to the extent that such amount
does not exceed 75% of the cost of acquiring or constructing
such asset."
2
<PAGE> 3
"'CONSOLIDATED EBITDA' means, for any period, the sum
of (i) Consolidated Net Income for such period plus (ii)
Consolidated Net Interest Expense for such period,
Consolidated income taxes for such period and Consolidated
depreciation and amortization expenses for such period, in
each case to the extent such amounts were deducted in
determining Consolidated Net Income for such period minus
(iii) Consolidated extraordinary items of gain or loss or
other Consolidated nonrecurring items and Consolidated gains
or losses related to sales of assets or terminations of leases
for such period."
"'CONSOLIDATED INTEREST CHARGES' means, for any
period, all items for such period of the types classified as
"interest" on the consolidated statement of operations
included in the 1993 Base Financials.
"'CONSOLIDATED NET INTEREST EXPENSE' means, for any
period, Consolidated Interest Charges minus Consolidated
Interest Income.
"'DEBT' of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all obligations of such Person with
respect to letters of credit and similar instruments,
including, without limitation, obligations under reimbursement
agreements, (vi) all mandatory redeemable preferred stock
with such Person, (vii) all Debt of others secured by a Lien
on any asset of such Person, whether or not the Debt is
assumed by such Person, and (viii) all Debt of others
guaranteed by such Person."
(b) Subsection 1.1 is further amended by deleting the
following definitions:
COMMERCIAL PAPER BACKSTOP FACILITY
COMMERCIAL PAPER PROGRAM
MOODY'S RATING
PERMITTED COMMERCIAL PAPER
S&P RATING
3
<PAGE> 4
SPECIAL PURPOSE COMMERCIAL PAPER ISSUER
(c) Subsection 1.1 is further amended by the addition the
following definitions in alphabetical order:
"'1993 BASE FINANCIALS' means the consolidated
balance sheet of BEI and its Consolidated Subsidiaries as of
December 31, 1993 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year
then ended, together with the notes thereto, included in BEI's
1993 Form 10-K and reported on without qualification by Ernst
& Young."
"'CONSOLIDATED INTEREST INCOME' means, for any
period, all items for such period of the types classified as
"interest income" on the consolidated statement of operations
included in the 1993 Base Financials.
"'LEASE CONVERSION' means any acquisition by BEI or
any of its Subsidiaries of a facility and related property
that had theretofore been leased by BEI or any such Subsidiary
and that BEI or any of its Subsidiaries continues to operate.'
"'PERMITTED RECEIVABLES FINANCING SECURITIES' means
debt securities or preferred stock issued by a Special Purpose
Receivables Financing Subsidiary pursuant to a Receivables
Financing Program and borrowings by a Special Purpose
Receivables Financing Subsidiary under a related Receivables
Financing Backstop Facility."
"'PRICING SCHEDULE' shall mean Schedule 1.1(a)."
"'PRIME RATE MARGIN' means, for any day, the rate per
annum which is determined pursuant to the Pricing Schedule and
added to the Prime Rate for each such Prime Rate Loan."
"'RECEIVABLES FINANCING BACKSTOP FACILITY' means a
credit facility entered into by a Special Purpose Receivables
Financing Subsidiary for the purposes of providing liquidity
with respect to securities issued by such Special Purpose
Receivables Financing Subsidiary and of financing transactions
of the type intended to be financed with the proceeds of such
securities."
"'RECEIVABLES FINANCING PROGRAM' means a program
pursuant to which a Special Purpose Receivables Financing
Subsidiary issues debt securities or preferred stock secured
by (i) Medicaid, Medicare or other patient accounts receivable
or Permitted
4
<PAGE> 5
Receivables Financing Securities purchased from BEI and its
Subsidiaries or (ii) security interests in Medicaid, Medicare
or other patient accounts receivable or Permitted Receivables
Financing Securities granted by BEI and its Subsidiaries."
"'SPECIAL PURPOSE RECEIVABLES FINANCING SUBSIDIARY'
means a Wholly-Owned Subsidiary of BEI the sole purpose of
which is to issue debt securities and/or preferred stock and
to purchase Medicare, Medicaid or other patient accounts
receivable of BEI and its Subsidiaries and/or Permitted
Receivables Financing Securities and make advances to BEI and
its Subsidiaries secured by security interests in such
Medicare, Medicaid or other patient accounts receivable and/or
Permitted Receivables Financing Securities, which accounts
receivable, Permitted Receivables Financing Securities and/or
security interests therein may be pledged to secure such debt
securities and/or preferred stock and/or borrowings by such
Special Purpose Receivables Financing Subsidiary under a
Receivables Financing Backstop Facility."
"'WORKOUT TRANSACTION' means any adjustment,
renegotiation, exchange, subordination, amendment, sale or
other disposition of any note receivable, Investment or other
similar asset of BEI or any of its Subsidiaries, any release,
subordination, renegotiation or other adjustment or any Lien
securing any Debt or other obligation of any Person held by or
owed to BEI or any of its Subsidiaries, any acquisition of any
asset by BEI or any of its Subsidiaries or the making of any
Investment by BEI or any of its Subsidiaries, in each case in
connection with (i) the foreclosure, enforcement or
realization by BEI of any such Subsidiary on any Lien securing
and Debt or other obligation of any Person held by or owed to
BEI or any such Subsidiary or (ii) any renegotiation,
composition, adjustment, amendment or restructuring of, or any
other similar arrangement with respect to, any such Debt or
obligation, in each case in connection with the bankruptcy,
insolvency, financial distress or other similar condition of
such Person; provided that any such adjustment, renegotiation,
exchange, subordination, amendment, sale, disposition, release
or acquisition or the making of any such Investment (A) will,
in the reasonable opinion of any Authorized Financial Officer
of BEI, in light of the circumstances affecting the relevant
obligor, be likely to maximize the amount to be realized by
BEI and its Subsidiaries with respect to such Debt or other
obligation or (B) is imposed on BEI or any of its Subsidiaries
pursuant to voting arrangements mandated by any law or
contract arrangements binding upon BEI or such Subsidiary."
5
<PAGE> 6
(d) Subsection 2.7B is amended by deleting such subsection
in its entirety and replacing it with the following:
"B. PRIME RATE LOANS. During such periods as such
Loan is a Prime Rate Loan, at a rate per annum equal at all
times to the Prime Rate in effect from time to time plus the
Prime Rate Margin; provided, that after the occurrence and
during the continuation of any Event of Default, the Prime
Rate Loans shall bear interest, from the date on which such
Event of Default shall have occurred until such amount is paid
in full at a rate per annum equal at all times to 2.0% per
annum above the rate of interest otherwise payable under this
subsection 2.7B, in each case, payable monthly in arrears for
the proceeding month (or portion thereof) on each Interest
Payment Date for such Loan occurring during such periods, on
the date such Loan is Converted to a Eurodollar Rate Loan and
on the date of any payment or prepayment thereof, unless such
amounts are past due, in which case they shall be payable on
demand."
(e) Subsection 5.1D. is amended by deleting such subsection
in its entirety and replacing it with the following:
"D. simultaneously with the delivery of each set of
financial statements referred to in subsections 5.1A and 5.1B
above, (1) a Compliance Certificate, signed by an Authorized
Financial Officer of BEI, (i) setting forth in reasonable
detail the calculations required to establish whether the
requirements of subsections 5.5 to 5.8, inclusive, and
subsection 5.23 have been complied with on the date of such
financial statements, (ii) setting forth in reasonable detail
calculations of the ratio of Adjusted Consolidated Debt (as
defined in Schedule 1.1(a) hereto) to Consolidated Capital (as
defined in Schedule 1.1(a) hereto) and the Cash Coverage Ratio
(as defined in Schedule 1.1(a) hereto) as at the date of the
balance sheet contained therein and for the period of four
fiscal quarters ending on such date, (iii) stating whether
any Potential Event of Default or Event of Default exists on
the date of such certificate and, if any Potential Event of
Default or Event of Default then exists, setting forth the
details thereof and the action which BEI or the Borrower, as
the case may be, is taking or proposes to take with respect
thereto and (iv) setting forth in reasonable detail any Debt
incurred, any asset sales, or any purchase or unscheduled
prepayment of any Debt, preferred stock or common stock, in
each case in excess of $5,000,000 in one transaction or in a
series of related transactions, of BEI or any of its
Subsidiaries
6
<PAGE> 7
during the period covered by such financial statements; and
(2) a schedule setting forth, for each facility that
constitutes a portion of the Collateral, information regarding
occupancy, revenues and operating income for such fiscal
quarter and the fiscal year to date, and such other
information as the Agent may reasonably request;"
(f) Subsection 5.1 is amended by adding the word "and" at
the end of clause "H" thereof, deleting clause "I" thereof, deleting
the final word "and" from clause "J" thereof and relettering clause
"J" thereof as clause "I".
(g) Subsection 5.5 is amended by deleting such subsection in
its entirety and replacing it with the following:
"5.5 FIXED CHARGE COVERAGE RATIO
The Fixed Charge Coverage Ratio at any date shall not
be less than the ratio set forth below opposite the period in
which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through 12/30/95 1.10 to 1.00
12/31/95 through 12/30/97 1.15 to 1.00
12/31/97 and thereafter 1.20 to 1.00"
</TABLE>
(h) Subsection 5.7 is amended by deleting such subsection in
its entirety and replacing it with the following:
"5.7 CONSOLIDATED DEBT RATIO
On the last day of each fiscal quarter, the ratio of
(a) the sum of Consolidated Debt as of the last day of each of
the four fiscal quarters ending on such date less the sum of
Consolidated Subordinated Debt as of the last day of each of
the four fiscal quarters to (b) the sum of Consolidated Net
Worth as of the last day of such four fiscal quarters plus the
sum of Consolidated Subordinated Debt as of the last day of
each of such four fiscal quarters shall not be more than 1.20
to 1.00 through December 31, 1996, and 1.10 to 1.00
thereafter."
(i) Subsection 5.8 is amended by deleting such subsection in
its entirety and replacing it with the following:
"5.8 CONSOLIDATED DEBT FOR BORROWER MONEY TO
CONSOLIDATED EBITDA RATIO
7
<PAGE> 8
On the last day of each fiscal quarter, the ratio of
(a) the quotient derived by dividing the sum of Consolidated
Debt For Borrowed Money as of the last day of each of the four
fiscal quarters ending on such date, by four, to (b) the sum
of (i) Consolidated EBITDA and (ii) EBITDA for Sold Facility
for each facility the Debt of which is guaranteed by BEI or a
Subsidiary and which is included in Consolidated Debt for
Borrowed Money (x) for such four fiscal quarters through
December 31, 1996, shall not be more than 5.00 to 1.00 and (y)
for such fiscal quarters thereafter, shall not be more than
4.50 to 1.00."
(j) Subsection 5.11 is amended by deleting clause (b) of
such subsection in its entirety and replacing it with the following:
"(b) Any Investment in (i) direct obligations of the
United States or any agency thereof, or obligations guaranteed
by the United States or any agency thereof, (ii) commercial
paper with maturities of not more than 180 days rated at least
P-1 by Moody's Investors Service or A-1 by Standard & Poor's
Corporation, (iii) deposit accounts in, and certificates of
deposit, repurchase agreements and bankers' acceptances of,
Nippon Credit Trust Company or United States branches of other
commercial banks whose unsecured senior long-term debt is
rated A or better by Moody's Investors Service or Standard &
Poor's Corporation, in each case maturing within one year from
the date of acquisition thereof, (iv) in addition to the
accounts and instruments referred to in clause (iii), deposit
accounts and certificates of deposit in United States branches
of banks insured by the Federal Deposit Insurance Corporation
which do not aggregate more than $100,000 in any one bank, or
(v) Investments made by BEI or any of its Subsidiaries in one
or more Special Purpose Receivables Financing Subsidiaries by
means of the sale of, or the granting of security interests
in, Medicare, Medicaid or other patient accounts receivable
owing to BEI or such Subsidiary, in either case to such
Special Purpose Receivables Financing Subsidiaries pursuant to
a Receivables Financing Program, provided that the net amount
of all uncollected accounts receivable owing to BEI or any of
its Subsidiaries that have been so sold or in which a security
interest has been so granted shall not exceed 175% of the
aggregate principal or redemption amount of all Permitted
Receivables Financing Securities then outstanding;"
(k) Subsection 5.13A is amended by deleting clause (xii) of
such subsection in its entirety and replacing it with the following:
8
<PAGE> 9
"(xii) Liens on Medicare, Medicaid or other patient
accounts receivable of BEI or any of its Subsidiaries, or on
Permitted Receivables Financing Securities, granted to secure
Permitted Receivables Financing Securities, provided that the
net amount of all uncollected accounts receivable owing to
BEI or any of its Subsidiaries over which such a Lien is
granted, together, without duplication, with the net amount of
all uncollected accounts receivable owing to BEI or any of its
Subsidiaries that are assigned to secure such Permitted
Receivables Financing Securities, shall not exceed, at any
time, 175% of the aggregate principal or redemption amount of
all Permitted Receivables Financing Securities then
outstanding.
(l) Subsection 5.15(e) is amended by deleting such
subsection in its entirety and replacing it with the following:
"(e) Permitted Receivables Financing Securities, provided that
the aggregate principal and redemption amount of all Permitted
Receivables Financing Securities outstanding at any time shall not
exceed $100,000,000;"
(m) Subsection 5.23 is amended by deleting such subsection
in its entirety and replacing it with the following:
"5.23 CAPITAL EXPENDITURES
BEI and its Subsidiaries will not pay or incur
Capital Expenditures in any fiscal year set forth below which
exceed in aggregate amount for such year the amount set forth
opposite such year below:
<TABLE>
<S> <C>
Fiscal year ending December 31, 1993 - $110,000,000;
Fiscal year ending December 31, 1994 - $125,000,000;
Fiscal year ending December 31, 1995 - $130,000,000;
Fiscal year ending December 31, 1996 - $135,000,000;
Fiscal year ending December 31, 1997 - $140,000,000;
Fiscal year ending December 31, 1998 - $145,000,000;
and
Each fiscal year thereafter - $150,000,000;
</TABLE>
Provided, however, that, if in any fiscal year the Capital
Expenditures are less than the amount permitted by this
Subsection 5.23 (without giving effect to any additional
amount permitted by this proviso), the aggregate amount of
Capital Expenditures permitted in the next succeeding fiscal
year will be increased by an amount equal to such shortfall."
9
<PAGE> 10
(n) The Credit Agreement is amended by the addition of
Schedule l.l(a), in the form of Exhibit A attached hereto, immediately
following the signature pages.
(0) Exhibit VIII of the Credit Agreement is amended as follows:
(i) Section A of Exhibit VIII of the Credit
Agreement is hereby amended by deleting section A.1 of
Attachment No. 1 thereof in its entirety and replacing it with
section A.1 set forth in Exhibit B attached hereto.
(ii) Section A of Exhibit VIII of the Credit
Agreement is hereby further amended by deleting section A.3 of
Attachment No. 1 thereof in its entirety and replacing it with
section A.3 set forth in Exhibit C attached hereto.
(iii) Section A of Exhibit VIII of the Credit
Agreement is hereby further amended by deleting section A.4 of
Attachment No. 1 thereof in its entirety and replacing it with
section A.4 set forth in Exhibit D attached hereto.
(iv) Section A of Exhibit VIII of the Credit
Agreement is hereby further amended by the addition of a new
section A. 5 of Attachment No. 1 thereof in the form of
Exhibit E attached hereto, immediately following section A.4
of Attachment No. 1 thereof.
(v) Section A of Exhibit VIII of the Credit
Agreement is hereby amended by deleting the existing section E
in its entirety and replacing it with a new section E in the
form of Exhibit F attached hereto.
3. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and
the Lenders to enter into this Amendment, each of BEI and Borrower represents
and warrants to the Agent and the Lenders that:
(a) The representations and warranties of each Loan Party
contained in the Credit Agreement are true, correct and complete in
all material respects on and as of the date hereof to the same extent
as though made on and as of the date hereof except to the extent that
such representations and warranties specifically relate to an earlier
date, in which case they are true, correct and complete in all
material respects as of such earlier date;
(b) No event has occurred and is continuing or would result
from the execution of this Amendment that constitutes an Event of
Default or Potential Event of Default;
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<PAGE> 11
(c) Each Loan Party has performed in all material respects
all agreements and satisfied all conditions that the Credit Agreement
and this Amendment provide shall be performed by it on or before the
date hereof;
(d) The execution, delivery and performance of this
Amendment, and the Credit Agreement as amended by this Amendment, by
each Loan Party which is a party thereto are within the corporate
power and authority of each such Loan Party and, as of the Fourth
Amendment Effective Date (as hereinafter defined), will be duly
authorized by all necessary corporate action on the part of each Loan
Party, and this Amendment as of the Fourth Amendment Effective Date
(as hereinafter defined), are duly executed and delivered by each of
such Loan Parties which is a party thereto and will constitute a valid
and binding agreement of each of such Loan Parties, enforceable
against such Loan Parties in accordance with their terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability. The Credit Agreement constitutes and, as of the
Fourth Amendment Effective Date (as hereinafter defined), the Credit
Agreement, as amended by this Amendment, will constitute, a valid and
binding agreement of BEI and Borrower, enforceable against BEI and
Borrower in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles, relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(e) The execution and delivery by each applicable Loan Party
of this Amendment and the performance by each such Loan Party of the
Credit Agreement as amended by this Amendment, do not and will not (i)
violate any provision of any law or any governmental rule or
regulation applicable to any Loan Party, the Certificate or Articles
of Incorporation or Bylaws of any Loan Party or any order, judgment or
decree of any court or other agency of government binding on any Loan
Party, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any instrument
that is material, individually or in the aggregate, and that is
binding on such Loan Party, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of any
Loan Party (other than any Liens created under any of the Loan
Documents in favor of Agent on behalf of Lenders), or (iv) require any
approval or consent of any Person under any instrument that is
material, individually or in the aggregate, and that is binding on
such Loan Party.
(f) The execution and delivery by each applicable Loan Party
of this Amendment and the performance by each such
11
<PAGE> 12
Loan Party of the Credit Agreement as amended by this Amendment, do
not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or requlatory body.
4. CONDITIONS TO EFFECTIVENESS. Section 2 of this Amendment shall
become effective only upon the satisfaction of all of the following conditions
precedent (the date of satisfaction of such conditions being referred to herein
as the "FOURTH AMENDMENT EFFECTIVE DATE"):
(a) On or before the Fourth Amendment Effective Date,
Borrower shall deliver to the Lenders (or to the Agent for the Lenders
with sufficient originally executed copies, as appropriate, for each
Lender and its counsel) the following, each, unless otherwise noted,
dated the Fourth Amendment Effective Date, duly executed and delivered
by the parties thereto:
(i) Signature and incumbency certificates of each
of BEI, Borrower and each Subsidiary Guarantor of its
respective officers executing this Amendment certified by such
party's respective secretary or assistant secretary;
(ii) Executed counterparts of this Amendment; and
(iii) A Certificate, signed by an Authorized
Financial Officer of BEI, setting forth in reasonable detail
calculations of the ratio of Adjusted Consolidated Debt (as
defined in Exhibit A hereto) to Consolidated Capital (as
defined in Exhibit A hereto) and the Cash Coverage Ratio (as
defined in Exhibit A hereto) as at the Fourth Amendment
Effective Date.
(b) On or before the Fourth Amendment Effective Date, the
Lenders and their respective counsel shall have received originally
executed copies of one or more favorable written opinions of Robert W.
Pommerville, general counsel for BEI, and Weil, Gotshal & Manges,
counsel for BEI, Borrower and each Subsidiary Guarantor, in form and
substance reasonably satisfactory to the Agent and its counsel, dated
as of the Fourth Amendment Effective Date and setting forth
substantially the matters in the opinions designated in Exhibit G
hereto and as to such other matters as the Agent acting on behalf of
the Lenders may reasonably request.
(c) On or before the Fourth Amendment Effective Date, each
Lender shall have delivered to the Agent a counterpart of this
Amendment originally executed by a duly authorized officer of such
Lender or by telex or telephonic confirmation.
12
<PAGE> 13
(d) On or before the Fourth Amendment Effective Date:
(i) Borrower shall have caused payment to
the Agent of an amendment fee of $25,000.00;
(ii) Borrower shall have caused payment to
the Agent of all amounts regarding the costs and
expenses reasonably incurred by Agent in connection
with this Amendment;
(iii) The Morgan Credit Agreement shall
have become effective in all respects; and
(iv) An amendment to the LTCB Credit
Agreement, which amendment shall be satisfactory to
Agent in all material respects, shall have become
effective in all respects.
(e) Borrower shall have delivered to the Lenders (or to the
Agent for the Lenders with sufficient originally executed copies, as
appropriate, for each Lender and its counsel) a Certificate of the
Secretary or Assistant Secretary of Borrower, dated the Fourth
Amendment Effective Date, certifying that (i) the Certificate of
Incorporation and Bylaws of Borrower, in the form delivered to the
Agent and the Lenders on the Closing Date, are in full force and
effect and have not been amended, supplemented, revoked or repealed
since such date and (ii) that attached thereto are true and correct
copies of resolutions duly adopted by the Board of Directors of
Borrower and continuing in effect, which authorize the execution,
delivery and performance by Borrower of the Amendment and the
consummation of the transactions contemplated hereby.
(f) On or before the Fourth Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection
with the transactions contemplated hereby and all documents incidental
thereto not previously found acceptable by the Agent, acting on behalf
of the Lenders, and its counsel shall be satisfactory in form and
substance to the Agent and such counsel, and the Agent and such
counsel shall have received all such counterpart originals or
certified copies of such documents as the Agent may reasonably
request.
(g) On or before the Fourth Amendment Effective Date,
American Transitional Care Centers of Texas, Inc., American
Traditional Care Dallas-Ft. Worth, Inc., American Transitional Health
Care, Inc., American Transitional Hospitals, Inc., American
Transitional Hospitals of Indiana, Inc., American Transitional
Hospitals of Oklahoma, Inc., American Transitional Hospitals of
Tennessee, Inc., ATH Del Oro, Inc., ATH Heights, Inc., ATH Tucson,
Inc. and Beverly Enterprises Japan Limited each shall have executed a
13
<PAGE> 14
Subsidiary Guaranty Agreement under which each such Subsidiary
Guarantor guarantees the Obligations under the Credit Agreement as
amended by this Amendment.
5. ACKNOWLEDGMENT OF GUARANTORS. Each Guarantor acknowledges that
it has reviewed the terms and provisions of the Credit Agreement and this
Amendment and consents to the amendment of the Credit Agreement effected
pursuant to this Amendment. Each Guarantor hereby confirms that the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, to the fullest extent possible the payment and
performance of all Obligations, Guarantied Obligations (as defined in the
applicable Guaranty Agreements) and Secured Obligations (as defined in the
Collateral Documents), as the case may be, including, without limitation, the
payment and performance of all Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement as amended by this
Amendment and the Notes defined therein.
Each Guarantor acknowledges and agrees that any of the Guaranty
Agreements and the Collateral Documents to which it is a party or otherwise
bound shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of this Amendment. Each Guarantor represents
and warrants that all representations and warranties contained in the Credit
Agreement as amended by this Amendment and the Guaranty Agreements and the
Collateral Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the First Amendment
Effective Date to the same extent as though made on and as of that date except
to the extent that such representations and warranties specifically relate to
an earlier date, in which case they are true, correct and complete in all
material respects as of such earlier date.
Each Guarantor acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Guarantor is not
required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment or any other Loan Document and (ii) that neither the terms of the
Credit Agreement, any other Loan Document nor this Amendment shall be deemed to
require the consent of any Guarantor to any future amendments to the Credit
Agreement.
6. EFFECTIVENESS; COUNTERPARTS. This Amendment may be executed
in any number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Amendment (other than the provisions of Section 2)
shall become effective upon the execution of a counterpart
14
<PAGE> 15
hereof by all Lenders and each of the Loan Parties and receipt of written or
telephonic notification of such execution and authorization of delivery
thereof.
7. FEES AND EXPENSES. The Borrower acknowledges that all costs,
fees and expenses as described in subsection 10.4 of the Credit Agreement
incurred by the Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of the
Borrower.
8. EFFECT OF AMENDMENT. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way affect or
impair the terms and conditions of the Credit Agreement, and all terms and
conditions of the Credit Agreement are to remain in full force and effect
unless otherwise specifically amended or changed pursuant to the terms and
conditions of this Amendment.
9. APPLICABLE LAW. This Amendment and the rights and obligations
of the parties hereto and all other aspects hereof shall be deemed to be made
under, shall be governed by, and shall be construed and enforced in accordance
with, the laws of the State of New York without regard to principles of
conflicts of laws.
15
<PAGE> 16
WITNESS the due execution hereof by the respective duly authorized officers of
the undersigned as of the date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
By: /s/ ?
--------------------------------
Title:
-----------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By: /s/ ?
--------------------------------
Title:
-----------------------------
Agent:
THE NIPPON CREDIT BANK LTD.,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:/s/ Bernardo E. Correa-Henschke
--------------------------------
Title: Vice President & Manager
-----------------------------
S-1
<PAGE> 17
Lenders:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:/s/ Bernardo E. Correa-Henschke
-------------------------------
Title:
----------------------------
TORONTO DOMINION (TEXAS), INC.,
as a Lender
By: /s/ Diane Bailey
-------------------------------
Title: Vice President
----------------------------
[Signatures Continued]
S-2
<PAGE> 18
The Subsidiary Guarantors:
--------------------------
Beverly Enterprises -
Alabama, Inc.
Beverly Enterprises -
Arkansas, Inc.
Beverly Enterprises -
Florida, Inc.
Beverly Enterprises -
Georgia, Inc.
Beverly Enterprises -
Maryland, Inc.
Beverly Enterprises -
Massachusetts, Inc.
Beverly Enterprises -
Minnesota, Inc.
Beverly Enterprises -
Mississippi, Inc.
Beverly Enterprises -
Missouri, Inc.
Beverly Enterprises -
Nebraska, Inc.
Beverly Enterprises -
North Carolina, Inc.
Beverly Enterprises -
Oregon
Beverly Enterprises -
Wisconsin, Inc.
S-3
<PAGE> 19
Commercial Management,
Inc.
Hallmark Convalescent
Homes, Inc.
Hospital Facilities
Corporation
Moderncare of Lumberton,
Inc.
Nebraska City S-C-H, Inc.
South Dakota - Beverly
Enterprises, Inc.
Vantage Healthcare
Corporation
AGI-Camelot, Inc.
AGI-McDonald County
Health Care, Inc.
Beverly Enterprises -
Arizona, Inc.
Beverly Enterprises -
California, Inc.
Beverly Enterprises -
Colorado, Inc.
Beverly Enterprises -
Connecticut, Inc.
Beverly Enterprises -
Garden Terrace, Inc.
Beverly Enterprises -
Hawaii, Inc.
Beverly Enterprises -
Idaho, Inc.
Beverly Enterprises -
Illinois, Inc.
Beverly Enterprises -
Indiana, Inc.
Beverly Enterprises -
Kansas, Inc.
S-4
<PAGE> 20
Beverly Enterprises -
Kentucky, Inc.
Beverly Enterprises -
Louisiana, Inc.
Beverly Enterprises -
Michigan, Inc.
Beverly Enterprises -
New Jersey, Inc.
Beverly Enterprises -
Ohio, Inc.
Beverly Enterprises -
Pennsylvania, Inc.
Beverly Enterprises -
South Carolina, Inc.
Beverly Enterprises -
Tennessee, Inc.
Beverly Enterprises -
Texas, Inc.
Beverly Enterprises -
Utah, Inc.
Beverly Enterprises -
Virginia, Inc.
Beverly Enterprises -
Washington, Inc.
Beverly Enterprises -
West Virginia, Inc.
Beverly Indemnity, Ltd.
Beverly Manor Inc. of
Hawaii
Beverly Savana Cay Manor,
Inc.
Columbia-Valley Nursing
Home, Inc.
Computran Systems, Inc.
S-5
<PAGE> 21
Continental Care Centers
of Council Bluffs, Inc.
Forest City Building Ltd.
Home Medical Systems, Inc.
Kenwood View Nursing Home, Inc.
Liberty Nursing Homes, Incorporated
Medical Arts Health
Facility of Lawrenceville, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of America
Salem No. 1, Inc.
South Alabama Nursing Home, Inc.
Taylor County Health
Facility, Incorporated
By: /s/ SCHUYLER HOLLINGSWORTH JR.
-------------------------------
Title:
----------------------------
S-6
<PAGE> 1
Exhibit 10.51
[EXECUTION COPY]
$375,000,000
CREDIT AGREEMENT
dated as of
November 1, 1994
among
Beverly California Corporation
Beverly Enterprises, Inc.
The Banks Listed Herein
Morgan Guaranty Trust Company of New York,
as Issuing Bank,
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.............................. 1
SECTION 1.02. Accounting Terms and Determinations...... 22
SECTION 1.03. Types and Classes of Loans and Borrowings 22
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend...................... 23
SECTION 2.02. Notice of Borrowing...................... 23
SECTION 2.03. Notice to Banks; Funding of Loans........ 24
SECTION 2.04. Notes.................................... 25
SECTION 2.05. Maturity of Loans; Mandatory Prepayments 26
SECTION 2.06. Interest Rates........................... 26
SECTION 2.07. Letters of Credit........................ 30
SECTION 2.08. Fees..................................... 36
SECTION 2.09. Optional Termination Reduction of
Commitments.............................. 37
SECTION 2.10. Mandatory Termination of Commitments..... 37
SECTION 2.11. Method of Electing Interest Rates........ 38
SECTION 2.12. Optional Prepayments..................... 39
SECTION 2.13. General Provisions as to Payments... 40
SECTION 2.14. Funding Losses........................... 41
SECTION 2.15. Computation of Interest, Fees and
Commissions.............................. 41
SECTION 2.16. Withholding Tax Exemption................ 41
SECTION 2.17. Maximum Interest Rate.................... 42
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness............................ 43
SECTION 3.02. Borrowings and Letter of Credit Issuances 45
SECTION 3.03. Borrowings of Term Loans................. 46
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................ 48
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention................................ 48
SECTION 4.03. Binding Effect; Liens of Pledge Agreement.... 48
SECTION 4.04. Financial Information; Valuations............ 49
SECTION 4.05. Litigation................................... 49
SECTION 4.06. Compliance with ERISA........................ 50
SECTION 4.07. Environmental Matters........................ 50
SECTION 4.08. Taxes........................................ 51
SECTION 4.09. Title to and Condition of Properties......... 51
SECTION 4.10. Not an Investment Company.................... 51
SECTION 4.11. Full Disclosure.............................. 51
SECTION 4.12. Representations in Subsidiary Guaranty and
Pledge Agreement............................. 52
SECTION 4.13. Existing Letters of Credit................... 52
ARTICLE V
COVENANTS
SECTION 5.01. Information.................................. 52
SECTION 5.02. Maintenance of Property; Insurance........... 55
SECTION 5.03. Compliance with Laws......................... 56
SECTION 5.04. Inspection of Property, Books and Records.... 56
SECTION 5.05. Minimum Consolidated Net Worth............... 57
SECTION 5.06. Fixed Charge Coverage Ratio.................. 57
SECTION 5.07. Adjusted Consolidated Debt Ratio............. 57
SECTION 5.08. Ownership of Stock of Wholly-Owned
Subsidiaries................................. 57
SECTION 5.09. Investments.................................. 58
SECTION 5.10. Restricted Payments on Stock................. 59
SECTION 5.11. Negative Pledge.............................. 60
SECTION 5.12. Consolidations, Mergers and Sales of Assets.. 64
SECTION 5.13. Incurrence of Debt........................... 64
SECTION 5.14. Use of Proceeds and Letters of Credit........ 66
SECTION 5.15. Additional Subsidiary Guarantors............. 67
SECTION 5.16. Lease Conversions............................ 67
SECTION 5.17. Transactions with Affiliates................. 68
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default............................. 68
SECTION 6.02. Notice of Default............................. 73
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization................. 73
SECTION 7.02. Agent and Affiliates.......................... 73
SECTION 7.03. Action by Agent............................... 73
SECTION 7.04. Consultation with Experts..................... 73
SECTION 7.05. Liability of Agent............................ 73
SECTION 7.06. Indemnification............................... 74
SECTION 7.07. Credit Decision............................... 74
SECTION 7.08. Successor Agent............................... 74
SECTION 7.09. Agent's Fee................................... 75
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair..................................... 75
SECTION 8.02. Illegality.................................... 76
SECTION 8.03. Increased Cost and Reduced Return............. 76
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed
Rate Loans.................................... 79
SECTION 8.05. HLT Classification............................ 80
ARTICLE IX
GUARANTY
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 9.01. The Guaranty................................ 81
SECTION 9.02. Guaranty Unconditional...................... 81
SECTION 9.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances...... 82
SECTION 9.04. Waiver by the Guarantor..................... 83
SECTION 9.05. Subrogation................................. 83
SECTION 9.06. Stay of Acceleration........................ 83
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices..................................... 83
SECTION 10.02. No Waivers.................................. 84
SECTION 10.03. Expenses; Documentary Taxes; Indemnification 84
SECTION 10.04. Sharing of Set-offs......................... 85
SECTION 10.05. Amendments and Waivers...................... 86
SECTION 10.06. Successors and Assigns...................... 86
SECTION 10.07. Margin Stock................................ 88
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION... 89
SECTION 10.09. Pledge Agreement............................ 89
SECTION 10.10. Counterparts; Integration................... 89
SECTION 10.11. Confidentiality............................. 89
SECTION 10.13. WAIVER OF JURY TRIAL........................ 90
</TABLE>
iv
<PAGE> 6
Schedule I - Pricing Schedule
Schedule II - Commitment Schedule
Schedule III - Term Loan Amortization Schedule
Schedule IV - Existing Debt
Schedule V - Subsidiaries of the Guarantor
Schedule VI - Existing Letters of Credit
Schedule VII - Guarantor's 1992 Disposition Plan
Exhibit A Note
Exhibit B Form of Pledge and Security Agreement
Exhibit C Form of Subsidiary Guaranty
Exhibit D Opinion of Special New York Counsel to the Borrower and the Guarantor
Exhibit E Opinion of Senior Vice President and General Counsel of the Borrower
and the Guarantor
Exhibit F Opinion of Special Counsel to the Agent
Exhibit G Opinion of Special New York Counsel to the Borrower and the
Guarantor for Term Loans
Exhibit H Opinion of Senior Vice President and General Counsel of the
Borrower and the Guarantor for Term Loans
Exhibit I Assignment and Assumption Agreement
v
<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of November 1, 1994 among BEVERLY CALIFORNIA
CORPORATION, a California corporation, BEVERLY ENTERPRISES, INC., a Delaware
corporation, the BANKS listed on the signature pages hereof, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Issuing Bank, and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Acquired Company" means a Tranche A Acquired Company or the Tranche
B Acquired Company.
"Adjusted CD Rate" has the meaning set forth in Section 2.06(b).
"Adjusted Consolidated Debt" means at any date the sum, without
duplication, of (i) all liabilities of the Guarantor and its Subsidiaries at
such date of the types classified as "current liabilities: short-term
borrowings", "current liabilities: current portion of long-term obligations"
and "long-term obligations" on the consolidated balance sheet included in the
Base Financials (other than any Subordinated Notes), (ii) all guarantees at
such date of obligations of other issuers of the type listed in Schedule VII to
the Guarantor's Base Financials (other than guarantees outstanding on the date
hereof of obligations outstanding on the date hereof, in amounts not in excess
of the amounts set forth in Schedule VII to the Guarantor's Base Financials)
and (iii) an amount equal to the product of (A) Consolidated Rental Expense for
the four fiscal quarters of the Guarantor most recently completed on or prior
to such date multiplied by (B) 8.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form
<PAGE> 8
prepared by the Agent and submitted to the Agent (with a copy to the Borrower)
duly completed by such Bank.
"Affiliate" means any Person (other than the Guarantor, any
Subsidiary of the Guarantor or any Bank) (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Guarantor or (b) which is the Beneficial Owner of 10%
or more of any class of the Voting Stock of the Guarantor. As used herein, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting stock, by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Appraised Value" means, with respect to any asset subjected to or
released from any Lien securing any Designated Obligation or any Pooled
Mortgage Debt, the value of such asset as determined by an independent
appraisal performed within 90 days of, and as of a date not less than 90 days
prior to, the date upon which such asset is subjected to or released from such
Lien.
"Assessment Rate" has the meaning set forth in Section 2.06(b).
"Assignee" has the meaning set forth in Section 10.06(c).
"Authorized Financial Officer" of any Person means the Chief
Financial Officer, Treasurer or Controller of such Person.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.06(c), and their
respective successors.
"Base Financials" means the consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of December 31, 1993 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended, together with the notes thereto, included
2
<PAGE> 9
in the Guarantor's 1993 Form 10-K and reported on without qualification by
Ernst & Young.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Loan which bears interest at the Base
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Article VIII or (ii) an overdue amount that was a
Base Rate Loan immediately before it became overdue.
"Base Rate Margin" has the meaning set forth in Section 2.06 (a).
"Beneficial Owner" means a Person who is deemed to be the "Beneficial
Owner" of securities pursuant to Rule 13d-3 or 13d-5 of the Securities Exchange
Act of 1934 (as in effect on the date hereof).
"Borrower" means Beverly California Corporation, a California
corporation, and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Cash Coverage Ratio" has the meaning set forth in the Pricing
Schedule.
"CD Base Rate" has the meaning set forth in Section 2.06(b).
"CD Loan" means (i) a Loan which bears interest at a CD Rate pursuant
to the applicable Notice of Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount that was a CD Loan immediately before it became overdue.
"CD Margin" has the meaning set forth in Section 2.06(b).
"CD Rate" means a rate of interest determined pursuant to Section
2.06(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means PNC Bank, National Association,
NationsBank of North Carolina, N.A. and Morgan Guaranty Trust Company of New
York.
"Class" has the meaning set forth in Section 1.03.
3
<PAGE> 10
"Collateral" means the property in which the Agent is granted, or is
purported to be granted, a lien or security interest from time to time under
the Pledge Agreement, which lien or security interest has not been released in
accordance with the terms hereof or thereof.
"Commitment" means a Term Commitment or a Revolving Commitment, and
"Commitments" means both of the foregoing.
"Commitment Schedule" means Schedule II attached hereto.
"Consolidated Capital" has the meaning set forth in the Pricing
Schedule.
"Consolidated EBIDA" means, for any period, Consolidated Net Income
of the Guarantor and its Consolidated Subsidiaries for such period plus,
without duplication, any amounts deducted in determining such Consolidated Net
Income in respect of (a) Consolidated Interest Charges for such period and (b)
expenses for such period of the types classified as "depreciation and
amortization" on the consolidated statement of operations included in the Base
Financials.
"Consolidated Interest Charges" means, for any period, all items for
such period of the types classified as "interest" on the consolidated statement
of operations included in the Base Financials.
"Consolidated Net Capital Expenditures" means, for any period, the
sum, without duplication, of (i) the total amount of additions to property and
equipment of the Guarantor and its Consolidated Subsidiaries during such period
of the types classified as "Capital expenditures" or "Payments for
acquisitions, net of cash acquired" on the consolidated statement of cash flows
included in the Base Financials and (ii) all Investments made by the Guarantor
or any of its Subsidiaries during such period in Beverly Japan Corporation;
provided that "Consolidated Net Capital Expenditures" shall exclude (A) the
application of insurance or condemnation proceeds to rebuilding facilities, (B)
any acquisition by the Guarantor or any of its Subsidiaries of any assets in
connection with and as part of a Workout Transaction, (C) any acquisition by
the Guarantor or any of its Subsidiaries of any assets as part of a Lease
Conversion and (D) the amount of any Debt incurred or assumed for the purpose
of financing all or any part of the cost of constructing any asset to the
extent that such amount does
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<PAGE> 11
not exceed 75% of the cost of acquiring or constructing such asset.
"Consolidated Net Income" means, for any period, the net income
(loss) (calculated (a) before preferred and common stock dividends and (b)
exclusive of the effect of any extraordinary or other material non-recurring
gain or loss outside the ordinary course of business) of the Guarantor and its
Consolidated Subsidiaries, determined on a consolidated basis for such period.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated Subsidiaries at such
date.
"Consolidated Rental Expense" means, for any period, the rental
expense (net of sublease income) of the Guarantor and its Consolidated
Subsidiaries with respect to leases of real property and improvements of real
property less, with respect to any facility identified in the Guarantor's 1992
Disposition Plan, the amount of such rental expense with respect to such
facility for such period to the extent, but only to the extent, that such
expense is charged against the reserves established in respect of such facility
as part of the Guarantor's 1992 Disposition Plan prior to the date of this
Agreement, determined on a consolidated basis for such period.
"Consolidated Subsidiary" means, with respect to any Person and at
any date, any of its Subsidiaries or any other entity the accounts of which
would be consolidated with those of such Person in its consolidated financial
statements if such statements were prepared as of such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all obligations of such Person with respect to letters of credit and similar
instruments, including, without limitation, obligations under reimbursement
agreements, (vi) all mandatorily redeemable preferred stock of such Person,
(vii) all Debt of others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person, and (viii) all Debt of others
Guaranteed by such Person.
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<PAGE> 12
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Designated Obligations" has the meaning set forth in clause (iv) of
Section 5.11(a).
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.06(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water or
6
<PAGE> 13
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Guarantor and all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Guarantor, are
treated as a single employer under Section 414(b) or 414(c) of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means (i) a Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount that was a Euro-Dollar Loan
immediately before it became overdue.
"Euro-Dollar Margin" has the meaning set forth in Section 2.06(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.06(c) on the basis of an Adjusted London Interbank offered Rate.
"Euro-Dollar Reference Banks" means the principal Nassau office of
PNC Bank, National Association and the principal London offices of NationsBank
of North Carolina, N.A. and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.06(c).
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<PAGE> 14
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Bank" means a Bank (as defined in the Existing Credit
Agreement).
"Existing Credit Agreement" means the Credit Agreement dated as of
March 1, 1993 among the Borrower, the Guarantor, the banks listed on the
signature pages thereof, and Morgan Guaranty Trust Company of New York, as
issuing bank and as agent, as the same has been amended on or prior to the
Effective Date.
"Existing Letter of Credit" means a Letter of Credit (as defined in
the Existing Credit Agreement).
"Existing Loan" means a Loan (as defined in the Existing Credit
Agreement).
"Existing Security Documents" means the Security Documents (as
defined in the Existing Credit Agreement).
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day; provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions, as determined by the Agent.
"Financing Documents" means this Agreement, the Notes, the Subsidiary
Guaranty and the Pledge Agreement.
"Fixed Charge Coverage Ratio" means, on any date, the ratio of (i)
the sum of Consolidated EBIDA and Consolidated Rental Expense for the four
consecutive fiscal quarters most recently ended on or prior to such date to
(ii) the sum of Consolidated Interest Charges, Consolidated Rental Expense and
Consolidated Net Capital Expenditures for such four fiscal quarters.
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<PAGE> 15
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Loans of the same Class that are Base Rate Loans at such time or (ii) all
Loans of the same Class that are Fixed Rate Loans of the same type having the
same Interest Period at such time; provided that, if a Loan of any particular
Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or
8.04, such Loan shall be included in the same Group or Groups of Loans from
time to time as it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means Beverly Enterprises, Inc., a Delaware corporation,
and its successors.
"Guarantor's 1993 Form 10-K" means the Guarantor's annual report on
Form 10-K for 1993, as filed with the Securities and Exchange Commission
pursuant to the securities Exchange Act of 1934, as amended.
"Guarantor's 1992 Disposition Plan" means the disposition plan
announced by the Guarantor on November 9, 1992 relating to the proposed
disposition of certain facilities and the establishment of reserves therefor,
in each case, as summarized on Schedule VII.
"Hazardous Substance" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other
9
<PAGE> 16
hydrocarbons, or any substance having any constituent elements displaying any
of the foregoing characteristics.
"Incremental Pooled Mortgage Debt" means, at any time with respect to
any Pooled Mortgage Debt, the excess (but not less than zero) of (i) the
aggregate principal amount of such Pooled Mortgage Debt outstanding at such
time over (ii) the sum, without duplication, of (A) an amount equal to 80% of
the cost of acquisition or construction of any Initial Pooled Mortgage Assets
that have been acquired or constructed by the Guarantor or any of its
Subsidiaries within 90 days of the incurrence of such Pooled Mortgage Debt and
that are subject to a Lien securing such Pooled Mortgage Debt; (B) the
aggregate principal amount of all Debt that had been secured by a Lien
permitted under clauses (i), (v), (vi), (vii), (ix) or (x) of Section 5.11 (or
permitted under clause (xi) of Section 5.11 as it relates to any of the
foregoing clauses) on some or all of such Initial Pooled Mortgage Assets, which
Debt was either refinanced by such Pooled Mortgage Debt or repaid within 180
days prior to the incurrence of such Pooled Mortgage Debt; and (C) the value of
any Initial Cash Collateral (as defined in the definition of Initial Pooled
Mortgage Assets) at such time.
"Initial Pooled Mortgage Assets" means (i) assets from two or more
facilities on which Liens securing Debt are created within 90 days after the
incurrence of such Debt ("Initial Pooled Mortgage Facilities") and (ii) cash
proceeds of such Debt (and Temporary Cash Investments made with such proceeds)
that are held by a trustee to secure such Debt ("Initial Cash Collateral").
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice
of Borrowing or the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable Notice of Borrowing or Notice of Interest Rate
Election; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (c)(i) below) that would otherwise end
on a day that is not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business
Day;
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<PAGE> 17
(b) any Interest Period (other than an Interest Period
determined pursuant to clause (c) below) that begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Euro-Dollar
Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a
payment of principal of the Loans is required to be made under Section
2.05 but does not end on such date, then (i) the principal amount (if
any) of each Euro-Dollar Loan required to be repaid on such date shall
have an Interest Period ending on such date and (ii) the remainder (if
any) of each such Euro-Dollar Loan shall have an Interest Period
determined as set forth above; and
(2) with respect to each CD Loan, a period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable Notice
of Borrowing or Notice of Interest Rate Election; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b)(i) below) that would otherwise end
on a day that is not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a
payment of principal of the Loans is required to be made under Section
2.05 but does not end on such date, then (i) the principal amount (if
any) of each CD Loan required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the remainder (if any) of
each such CD Loan shall have an Interest Period determined as set
forth above.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"Issuing Bank" means Morgan Guaranty Trust Company of New York in its
capacity as issuer of the Letters of credit, and its successors in such
capacity.
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<PAGE> 18
"Lead Manager" means Chemical Bank in its capacity as lead manager
for the Banks hereunder.
"Lease Cancellation Payment" means any payment made to cancel or
terminate a lease of a facility and related property prior to the end of its
term.
"Lease Conversion" means any acquisition by the Guarantor or any of
its Subsidiaries of a facility and related property that had theretofore been
leased by the Guarantor or any such Subsidiary and that the Guarantor or any of
its Subsidiaries continues to operate.
"Letter of Credit" means a letter of credit issued, or deemed to have
been issued, by the Issuing Bank pursuant to Section 2.07(a).
"Letter of Credit Commission Rate" has the meaning set forth in
Section 2.07(f).
"Letter of Credit Commitment" means, with respect to any Bank at any
time, an amount equal to the lesser of (i) such Bank's Revolving Commitment at
such time and (ii) the product of $100,000,000 multiplied by a fraction, the
numerator of which is such Bank's Revolving Commitment at such time and the
denominator of which is the aggregate Revolving Commitments of all Banks at
such time.
"Letter of Credit Exposure" means, with respect to any Bank at any
time, the sum of (i) its participation in the undrawn amount which is then, or
may thereafter become, available for drawing under each outstanding Letter of
Credit and (ii) its participation in the amount of each unpaid Reimbursement
Obligation for drawings theretofore made under any Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Guarantor or any of its Subsidiaries shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a loan made by a Bank pursuant to Section 2.01; provided
that if any such loan or loans (or portions thereof) of the same Class are
combined or
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<PAGE> 19
subdivided pursuant to a Notice of Interest Rate Election, the term "Loan"
shall refer to the combined principal amount resulting from such combination or
to each of the separate principal amounts resulting from such subdivision, as
the case may be.
"London Interbank Offered Rate" has the meaning set forth in Section
2.06(c).
"LTCB Collateral" means the real property and related personal
property which constitute Collateral (as defined in the LTCB Credit Agreement)
as of the Effective Date.
"LTCB Credit Agreement" means that certain Credit Agreement, dated as
of March 24, 1992, among the Borrower, the Guarantor, the Lenders party thereto
(the "LTCB Lenders"), Bank of Montreal, as Co-Agent, and The Long-Term Credit
Bank of Japan, Ltd., Los Angeles Agency, as Agent, as amended, supplemented or
modified.
"LTCB Financing Documents" means the LTCB Credit Agreement, the LTCB
Notes and the LTCB Mortgages.
"LTCB Mortgages" means the Mortgages (as defined in the LTCB Credit
Agreement).
"LTCB Notes" means the Notes (as defined in the LTCB Credit
Agreement) in favor of the LTCB Lenders.
"Material Commitment" means an outstanding commitment by a financial
institution or a syndicate of financial institutions to provide financial
accommodations to the Guarantor and/or one or more of its Subsidiaries, arising
in one or more related transactions, in an amount equal to or exceeding in the
aggregate $50,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or (in the case of Section 6.01(f)) payment obligations in respect of,
or (in the case of Section 6.01(g)) mark-to-market value of, Derivatives
Obligations of the Guarantor and/or one or more of its subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$20,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Material Subsidiary" means, at any time, any Subsidiary of the
Guarantor that at such time constitutes a
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<PAGE> 20
"significant subsidiary" of the Guarantor within the meaning of Regulation S-X
promulgated by the Securities and Exchange commission; provided that for
purposes of this definition of the term "Material Subsidiary" each reference to
"10 percent" contained in the definition of "significant subsidiary" set forth
in Regulation S-X shall be replaced by "5 percent".
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions.
"Nippon" means The Nippon Credit Bank, Ltd. and its successors.
"Nippon Collateral" means the real property and related personal
property which constitute Collateral (as defined in the Nippon Credit
Agreement) as of the Effective Date.
"Nippon Credit Agreement" means that certain Credit Agreement, dated
as of March 2, 1993, among the Borrower, the Guarantor, the lenders party
thereto (the "Nippon Lenders") and Nippon, as Agent, as amended, supplemented
or modified.
"Nippon Financing Documents" means the Nippon Credit Agreement, the
Nippon Notes and the Nippon Mortgages.
"Nippon Mortgages" means the Mortgages (as defined in the Nippon
Credit Agreement).
"Nippon Notes" means the Notes (as defined in the Nippon Credit
Agreement) in favor of the Nippon Lenders.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.11(a).
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<PAGE> 21
"Notice of Issuance" has the meaning set forth in Section 2.07(b).
"Other Plan" means an employee pension benefit plan (other than a
Plan or a Multiemployer Plan) which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Internal Revenue
Code.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 10.06(b).
"FDGC" means the rension benefit guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Receivables Financing Securities" means debt securities or
preferred stock issued by a Special Purpose Receivables Financing Subsidiary
pursuant to a Receivables Financing Program and borrowings by a Special Purpose
Receivables Financing Subsidiary under a related Receivables Financing Backstop
Facility.
"Permitted Preferred Stock" means preferred stock of the Guarantor
that has no mandatory redemption or redemption at the option of the holder
thereof prior to the first anniversary of the Termination Date and no required
increase in the rate of dividends payable thereon prior to such first
anniversary other than increases arising from the resetting of the rate of
dividends on the basis of a reasonable market or other similar index or a
market interest rate.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Pharmacy" means Pharmacy Corporation of America, a California
corporation, and its successors.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group.
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<PAGE> 22
"Pledge Agreement" means the Pledge and Security Agreement dated as
of the date hereof among the Borrower, Pharmacy, any other Subsidiaries of the
Borrower as may be, from time to time, party thereto and the Agent,
substantially in the form of Exhibit B hereto, as the same may be amended from
time to time.
"Pledged Stock" has the meaning set forth in the Pledge Agreement.
"Pooled Mortgage Assets" means Initial Pooled Mortgage Assets or
Substitute Pooled Mortgage Assets.
"Pooled Mortgage Debt" means Debt secured by Pooled Mortgage Assets.
"Pricing Schedule" means Schedule I attached hereto.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Quarterly Date" means any March 31, June 30, September 30 or
December 31 or, in the case of any such date that is not a Euro-Dollar Business
Day, the next preceding Euro-Dollar Business Day.
"Receivables Financing Backstop Facility" means a credit facility
entered into by a Special Purpose Receivables Financing Subsidiary for the
purposes of providing liquidity with respect to securities issued by such
Special Purpose Receivables Financing Subsidiary and of financing transactions
of the type intended to be financed with the proceeds of such securities.
"Receivables Financing Program" means a program pursuant to which a
Special Purpose Receivables Financing Subsidiary issues debt securities or
preferred stock secured by (i) Medicaid, Medicare or other patient accounts
receivable or Permitted Receivables Financing Securities purchased from the
Guarantor and its Subsidiaries or (ii) security interests in Medicaid, Medicare
or other patient accounts receivable or Permitted Receivables Financing
Securities granted by the Guarantor and its Subsidiaries.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
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<PAGE> 23
"Refinanced Debt" has the meaning set forth in clause (v) of Section
5.13(a).
"Refinancing Debt" has the meaning set forth in clause (v) of Section
5.13(a).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Obligation" means an obligation of the Borrower to
reimburse the Issuing Bank pursuant to Section 2.07(d) for the amount of a
drawing under a Letter of Credit.
"Relevant Debt" has the meaning set forth in Section 10.04.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate Total Exposures of all Banks.
"Revolving Commitment" means, with respect to any Bank, the amount
set forth opposite the name of such Bank as such Bank's Revolving Commitment on
the Commitment Schedule, as such amount may be reduced from time to time
pursuant to Sections 2.09 and 2.10.
"Revolving Exposure" means, for any day and with respect to any Bank,
the sum on such day of the Letter of Credit Exposure of such Bank and the
aggregate outstanding principal amount of the Revolving Loans of such Bank.
"Revolving Loan" means a loan made by a Bank pursuant to Section
2.01(a).
"Secured Obligations" has the meaning set forth in the Pledge
Agreement.
"Secured Parties" has the meaning set forth in the Pledge Agreement.
"Segregated Collateral Account" has the meaning set forth in the
Pledge Agreement.
"Senior Secured Note Agreement" means that certain Indenture, dated as
of December 27, 1990, among the Borrower, the Guarantor, and State Street Bank
and Trust Company (as successor to Yasuda Bank and Trust Company (U.S.A.)), as
Trustee, as amended, modified or supplemented.
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<PAGE> 24
"Senior Secured Note Collateral" means the real property and related
personal property securing obligations under the Senior Secured Note Documents
as of the Effective Date.
"Senior Secured Note Documents" means the Senior Secured Notes, the
Senior Secured Note Agreement, the Trust Agreement (as defined in the Senior
Secured Note Agreement) and the Senior Secured Note Mortgages.
"Senior Secured Note Mortgages" means the mortgages related to the
Senior Secured Note Collateral.
"Senior Secured Notes" means the Notes (as such term is defined in
the Senior Secured Note Agreement).
"Special Purpose Receivables Financing Subsidiary" means a
Wholly-Owned Subsidiary of the Guarantor the sole purpose of which is to issue
debt securities and/or preferred stock and to purchase Medicare, Medicaid or
other patient accounts receivable of the Guarantor and its Subsidiaries and/or
Permitted Receivables Financing Securities and make advances to the Guarantor
and its Subsidiaries secured by security interests in such Medicare, Medicaid
or other patient accounts receivable and/or Permitted Receivables Financing
Securities, which accounts receivable, Permitted Receivables Financing
Securities and/or security interests therein may be pledged to secure such debt
securities and/or preferred stock and/or borrowings by such Special Purpose
Receivables Financing Subsidiary under a Receivables Financing Backstop
Facility.
"Stock Purchase Agreement" means (i) with respect to the Tranche A
Term Loans, the Stock Purchase Agreement dated as of August 9, 1994 between
Synetic, Inc. and Pharmacy and (ii) with respect to the Tranche B Term Loans,
the Stock Purchase Agreement dated as of September 12, 1994 between Eckerd
Corporation and Pharmacy.
"Subordinated Notes" means the Borrower's 5 1/2% Convertible
Subordinated Debentures issued from time to time in exchange for the Borrower's
$2.75 Cumulative Convertible Exchangeable Preferred Stock.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person; provided that, with respect to the Borrower and the Guarantor,
Subsidiary shall not
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<PAGE> 25
(except for financial reporting purposes, determination of compliance with
financial covenants and Article IX hereof) include any corporations or other
entities (i) which are inactive, (ii) each of which has neither assets nor
liabilities, calculated on a consolidated basis for each such corporation or
other entity, of $1,600,000 or more and (iii) which taken together have neither
aggregate assets nor aggregate liabilities, calculated on a consolidated basis,
of $3,000,000 or more.
"Subsidiary Guarantor" means, at any time, a Subsidiary of the
Guarantor party to the Subsidiary Guaranty at such time.
"Subsidiary Guaranty" means the Subsidiary Guaranty dated as of the
date hereof by the Borrower, the Guarantor and the Subsidiaries of the
Guarantor parties thereto in favor of the Banks, the Agent and the Issuing
Bank, substantially in the form of Exhibit C hereto, as the same may be amended
from time to time.
"Substitute Pooled Mortgage Assets" means assets on which Liens are
created in substitution for, or in addition to, any Initial Pooled Mortgage
Assets to secure Debt that is secured by such Initial Pooled Mortgage Assets.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
with maturities of not more than 180 days rated at least P-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poors Ratings Group, (iii) deposit
accounts in, and certificates of deposit, repurchase agreements and bankers'
acceptances of, United States branches of commercial banks whose unsecured
senior long-term debt is rated A or better by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group, in each case maturing within one year from
the date of acquisition thereof or (iv) in addition to the accounts and
instruments referred to in clause (iii), deposit accounts and certificates of
deposit in United States branches of banks insured by the Federal Deposit
Insurance Corporation which do not aggregate more than $100,000 in any one
bank.
"Term Commitment" means, with respect to any Bank, the Tranche A Term
Commitment of such Bank and the Tranche B Term Commitment of such Bank.
"Term Commitment Termination Date" means the Tranche A Term
Commitment Termination Date or the Tranche B Term Commitment Termination Date.
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"Termination Date" means October 31, 1999.
"Term Loan" means a loan made by a Bank pursuant to Section 2.01(b).
"Term Loan Amortization Schedule" means Schedule III attached hereto.
"Term Loan Availability Period" means, with respect to any Term Loan,
the period from and including the Effective Date to and including the
applicable Term Commitment Termination Date.
"Total Exposure" means, for any day and with respect to any Bank, the
sum on such day of (a) the greater of (x) the Revolving Commitment of such Bank
and (y) the Revolving Exposure of such Bank and (b) the greater of the Term
Commitment of such Bank and the aggregate outstanding principal amount of the
Term Loans of such Bank.
"Tranche A Acquired Companies" means Dunnington Drug, Inc., a
Delaware corporation, Healthcare Prescription Services, Inc., an Indiana
corporation, and Alliance Health Services, Inc., a Delaware corporation.
"Tranche A Term Commitment" means, with respect to any Bank, the
amount set forth under the caption "Tranche A Term Commitment" opposite the
name of such Bank on the Commitment Schedule, as such amount may be reduced
from time to time pursuant to Sections 2.09 and 2.10.
"Tranche A Term Commitment Termination Date" means the earlier of (i)
the date upon which the Borrower makes a Borrowing of Tranche A Term Loans
hereunder and (ii) February 15, 1995.
"Tranche A Term Loan" means a Term Loan made in connection with the
acquisition of the Tranche A Acquired Companies.
"Tranche B Acquired Company" means Insta-Care Holdings, Inc., a
Florida corporation.
"Tranche B Term Commitment" means, with respect to any Bank, the
amount set forth under the caption "Tranche B Term Commitment" opposite the
name of such Bank on the Commitment Schedule, as such amount may be reduced
from time to time pursuant to Sections 2.09 and 2.10.
"Tranche B Term Commitment Termination Date" means the earlier of (i)
the date upon which the Borrower makes a
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Borrowing of Tranche B Term Loans hereunder and (ii) February 15, 1995.
"Tranche B Term Loan" means a Term Loan made in connection with the
acquisition of the Tranche B Acquired Company.
"Unfunded Liabilities" means, with respect to any employee pension
benefit plan which is covered by Title IV of ERISA, or subject to the minimum
funding standards under Section 412 of the Internal Revenue Code, at any time,
the amount (if any) by which (i) the present value of all benefit liabilities
(within the meaning of Section 4001(a)(16) of ERISA) under such plan exceeds
(ii) the fair market value of all plan assets allocable to such benefit
liabilities (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such plan in accordance with the
relevant provisions of Title IV of ERISA and regulations promulgated
thereunder, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"Voting Stock" means capital stock of any class or classes (however
designated) having ordinary voting power for the election of directors of the
Guarantor, other than stock having such power only by reason of the happening
of a contingency.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the shares of Voting Stock or other ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by such Person.
"Workout Transaction" means any adjustment, renegotiation, exchange,
subordination, amendment, sale or other disposition of any note receivable,
Investment or other similar asset of the Guarantor or any of its Subsidiaries,
any release, subordination, renegotiation or other adjustment or any Lien
securing any Debt or other obligation of any Person held by or owed to the
Guarantor or any of its Subsidiaries, any acquisition of any asset by the
Guarantor or any of its Subsidiaries or the making of any Investment by the
Guarantor or any of its Subsidiaries, in each case in connection with (i) the
foreclosure, enforcement or realization by the Guarantor or any such Subsidiary
on any Lien securing any Debt or other obligation of any Person held by or owed
to the Guarantor or any such Subsidiary or (ii) any renegotiation, composition,
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adjustment, amendment or restructuring of, or any other similar arrangement
with respect to, any such Debt or obligation, in each case in connection with
the bankruptcy, insolvency, financial distress or other similar condition of
such Person; provided that any such adjustment, renegotiation, exchange,
subordination, amendment, sale, disposition, release or acquisition or the
making of any such Investment (A) will, in the reasonable opinion of an
Authorized Financial Officer of the Guarantor, in light of the circumstances
affecting the relevant obligor, be likely to maximize the amount to be realized
by the Guarantor and its Subsidiaries with respect to such Debt or other
obligation or (B) is imposed on the Guarantor or any of its Subsidiaries
pursuant to voting arrangements mandated by any law or contract arrangements
binding upon the Guarantor or such Subsidiary.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Guarantor's independent public accountants) with the Base Financials; provided
that if any change in generally accepted accounting principles after December
31, 1993 in itself materially affects the calculation of any financial covenant
in Article V, the Guarantor may by notice to the Agent, or the Agent (at the
request of the Required Banks) may by notice to the Guarantor, require that
such covenant thereafter be calculated in accordance with generally accepted
accounting principles as in effect, and applied by the Guarantor, immediately
before such change in generally accepted accounting principles occurs. If such
notice is given, the compliance certificates delivered pursuant to Section
5.01(d) after such change occurs shall be accompanied by reconciliations of the
difference between the calculation set forth therein and a calculation made in
accordance with generally accepted accounting principles as in effect from time
to time after such change occurs.
SECTION 1.03. TYPES AND CLASSES OF LOANS AND BORROWINGS. The term
"Borrowing" denotes the aggregation of Loans of the same Class made to the
Borrower pursuant to Article II on a single date and, in the case of a
Borrowing consisting of Fixed Rate Loans, for a single Interest Period.
Commitments, Loans and Borrowings are distinguished by "Class" and Loans and
Borrowings are distinguished by "type". The "Class" of a Loan (or a Commitment
to make such
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<PAGE> 29
a Loan or a Borrowing consisting of such Loans) refers to whether such Loan is
a Term Loan or a Revolving Loan, each of which constitutes a class. The "type"
of a Loan (or a Borrowing consisting of such Loans) refers to whether such Loan
is a Euro-Dollar Loan, a CD Loan or a Base Rate Loan, each of which constitutes
a type. A Loan or Borrowing may be identified by both Class and type (e.g.,
"Term EuroDollar Loan" indicates that such Loan is both a Term Loan and a
Euro-Dollar Loan).
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. (a) REVOLVING LOANS. Each Bank
severally agrees, on the terms and conditions set forth in this Agreement, to
make loans to the Borrower pursuant to this Section 2.01(a) from time to time
from and including the date hereof to but excluding the Termination Date in
amounts such that such Bank's Revolving Exposure shall not exceed such Bank's
Revolving Commitment. Each Borrowing under this Section 2.01(a) shall be in an
aggregate principal amount of $1,000,000 or any larger multiple of $1,000,000
(except that any such Borrowing may be in the aggregate amount available under
Section 3.02(b)) and shall be made from the several Banks ratably in proportion
to their respective Revolving Commitments. Within the foregoing limits, the
Borrower may borrow under this Section 2.01(a), prepay loans to the extent
permitted by Section 2.12, and reborrow pursuant to this Section 2.01(a).
(b) TERM LOANS. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make a Tranche A Term Loan and a
Tranche B Term Loan to the Borrower pursuant to this Section 2.01(b) on a day
or days selected by the Borrower during the applicable Term Loan Availability
Period in an aggregate amount not to exceed such Bank's Tranche A Term
Commitment or Tranche B Term Commitment, respectively. A Borrowing under this
Section 2.01(b) shall be made from the several Banks ratably in proportion to
their respective Tranche A Term Commitments or Tranche B Term Commitments, as
applicable. Loans made pursuant to this Section 2.01(b) are not revolving in
nature and amounts of such loans repaid or prepaid may not be reborrowed.
SECTION 2.02. NOTICE OF BORROWING. The Borrower shall give the Agent
notice (a "Notice of Borrowing") not later than (x) 11:00 A.M. (New York City
time) on the date
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of each Base Rate Borrowing, (y) 12:00 Noon (New York City time) on the second
Domestic Business Day before each CD Borrowing and (z) 12:00 Noon (New York
City time) on the third Euro-Dollar Business Day before each Euro-Dollar
Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear
interest initially calculated on the basis of the Base Rate, a CD Rate
or a Euro-Dollar Rate,
(d) whether the Loans comprising such Borrowing are to be
Tranche A Term Loans, Tranche B Term Loans or Revolving Loans, and
(e) in the case of a Borrowing consisting of Fixed Rate Loans,
the duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
SECTION 2.03. NOTICE TO BANKS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(b) Not later than 3:00 P.M. (New York City time) on the date of
each Borrowing, each Bank shall (except as provided in subsection (c) below)
make available its ratable share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its address specified
in or pursuant to Section 10.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will promptly make the funds so received from the Banks available to the
Borrower at the Agent's aforesaid address.
(c) If any Bank that makes any Loan on the Effective Date is the
holder, on the Effective Date, of any Existing Loan that is to be repaid on the
Effective Date, such Bank shall apply the proceeds of its Loan to make such
repayment and only an amount equal to the difference (if any) between the
amount of the Loan being borrowed and the
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amount of such Existing Loan to be so repaid shall be made available by the
Bank to the Agent as provided in subsection (b) or remitted by the Borrower to
such Bank as provided in the Existing Credit Agreement.
(d) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such Bank
has made such share available to the Agent on the date of such Borrowing in
accordance with subsection (b) of this Section 2.03 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date such amount
is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate then
applicable to the Loans contained in such Borrowing pursuant to Section 2.06
and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall
repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.04. NOTES.
(a) The Loans of each Bank shall be evidenced by a single Note
payable to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to the aggregate unpaid principal amount of such
Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent,
request that its Loans of a particular type be evidenced by a separate Note in
an amount equal to the aggregate unpaid principal amount of its Loans of such
type. Each such Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it evidences solely
Loans of the relevant type. Each reference in this Agreement to the "Note" of
such Bank shall be deemed to refer to and include any or all of such Notes, as
the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b),
the Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount and type of
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each Loan made by it and the date and amount of each payment of principal made
by the Borrower with respect thereto, and prior to any transfer of its Note may
endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower or the
Guarantor hereunder or of the Borrower under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.05. MATURITY OF LOANS; MANDATORY PREPAYMENTS. (a) Each Loan
shall mature, and the principal amount thereof shall be due and payable in
full, on the Termination Date.
(b) The Borrower shall prepay, on each Quarterly Date occurring
after December 31, 1994, an aggregate principal amount (as such amount may have
been reduced pursuant to Section 2.12(d)) of the Term Loans equal to the
product of the fraction set forth on the Term Loan Amortization Schedule
opposite the month in which such Quarterly Date occurs multiplied by the
aggregate principal amount of Term Loans made by the Banks hereunder; provided
that in any event the outstanding Term Loans shall be repaid in full not later
than the Termination Date.
(c) Each repayment or prepayment pursuant to this Section 2.05
shall be made together with accrued interest to the date of payment, and shall
be applied ratably to payment of the Loans of the several Banks in proportion
to the aggregate outstanding principal amounts of their Loans of the applicable
Class. Within the foregoing limits of this Section 2.05, each required
prepayment shall be made with respect to such outstanding Group or Groups of
Loans as the Borrower may designate to the Agent not less than three
Euro-Dollar Business Days prior to the date required for such prepayment or,
failing such designation by the Borrower, as the Agent may specify by notice to
the Borrower and the Banks.
SECTION 2.06. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Loan is made to but excluding the date it becomes due,
at a rate per annum equal to the sum of the Base Rate Margin for such day plus
the Base Rate for such day. Such interest shall be payable quarterly in
arrears on each Quarterly Date and, with respect to the principal amount of any
Base Rate
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Loan converted to a Fixed Rate Loan, on each day a Base Rate Loan is so
converted. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day from and including the date upon
which it becomes due to but excluding the date upon which it is paid, at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
"Base Rate Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan or any portion thereof shall, as a result of clause (2)(b)(i) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, at intervals of 90 days after the first day
thereof. Any overdue principal of or interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus (i) for each day during such Interest Period, the sum of
the CD Margin for such day plus the Adjusted CD Rate applicable to such Loan,
and (ii) for each day after the end of such Interest Period, the rate
applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
_____________
* The amount in brackets being rounded upward, if
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necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such
Interest Period. Such interest shall be payable for each Interest Period on
the last day thereof
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and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
The "Adjusted London Interbank Offered Rate'' applicable to any
Interest Period means the rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i)
the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date upon which it becomes due to but excluding the date upon which it is paid,
at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of
the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered
Rate applicable to such Loan at the date such payment was due and (ii) the
Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective
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rates per annum at which one day (or, if such amount due remains unpaid more
than three Euro-Dollar Business Days, then for such other period of time not
longer than six months as the Agent may select) deposits in dollars in an
amount approximately equal to such overdue payment due to each of the
Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in
the London interbank market for the applicable period determined as provided
above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a
rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day).
(e) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt notice to the Borrower and
the Banks by telex, cable or facsimile transmission of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Reference Banks, or if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.07. LETTERS OF CREDIT.
(a) COMMITMENT TO ISSUE LETTERS OF CREDIT.
(i) The Borrower may from time to time request that the
Issuing Bank issue a letter of credit pursuant to which the Issuing Bank shall
be obligated to the beneficiary to pay any drawings made thereunder and the
Banks shall be obligated to the Issuing Bank to participate ratably in such
drawings in proportion to their respective Revolving Commitments as hereinafter
provided.
(ii) Subject to subsection (iv) below, and in accordance with its
customary procedures (to the extent such procedures are not inconsistent with
the terms of this Agreement), the Issuing Bank agrees, on the terms and
conditions set forth in this Agreement and at the request of the Borrower, to
issue Letters of Credit for the account of the Borrower or any of its
Subsidiaries from time to time prior to the Termination Date. Each Bank agrees
to participate ratably in proportion to its Revolving Commitment in any
drawings made under each Letter of Credit.
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(iii) Notwithstanding any reference in any Existing Letter of
Credit to the Existing Credit Agreement, on and as of the Effective Date, each
Existing Letter of Credit shall be deemed to be a Letter of Credit and to have
been issued pursuant to clause (ii) above on the Effective Date.
(iv) In addition to the conditions precedent set forth in
Article III, the obligations of the Issuing Bank to issue Letters of Credit
pursuant to clause (ii) above are subject to the additional conditions that:
(A) no Letter of Credit shall have an expiry date
later than one Domestic Business Day prior to the Termination
Date; provided that with respect to a Letter of Credit issued
for the purpose of providing credit support for obligations of
the Guarantor or any of its Subsidiaries in connection with
self-insurance provided by or insurance procured on behalf of
the Guarantor and its Subsidiaries, it shall not be a
violation of the condition set forth in this clause (iv) if
such Letter of Credit (1) is certified by an Authorized
Officer of the Borrower to be required by applicable insurance
law or regulation to provide, and does provide, that if there
shall occur with respect to the Issuing Bank one of the events
described in Article 17 of the 1993 revision of the Uniform
Customs and Practice for Documentary Credits of the
International Chamber of Commerce (Publication No. 500), as
the same may be revised, amended, supplemented or superseded,
the expiry date shall be extended until not later than a
specified number of days (the "Extension Period") after the
resumption of business of the Issuing Bank following such
event and (2) provides for an expiry date prior to the
Termination Date by at least 30 days more than the number of
days included in the Extension Period; and
(B) the fact that, immediately after the issuance
of such Letter of Credit, no Bank's Letter of Credit Exposure
will exceed such Bank's Letter of Credit Commitment.
(b) NOTICE OF ISSUANCE. Except in the case of Letters of
Credit deemed, pursuant to clause (iii) of subsection (a) above, to be issued
on the Effective Date, the Borrower shall give the Agent and the Issuing Bank
notice (a "Notice of Issuance") at least three Domestic Business Days before
each Letter of Credit is to be issued, specifying: (i) the date of issuance and
expiry date of
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such Letter of Credit, (ii) the proposed terms of such Letter of Credit,
including the face amount thereof and (iii) the transaction that is to be
supported or financed by such Letter of Credit. Upon receipt of a Notice of
Issuance, the Issuing Bank shall promptly notify each Bank and the Agent of the
contents thereof and of the amount of such Bank's participation in such Letter
of Credit and such Notice of Issuance shall not thereafter be revocable by the
Borrower.
(c) DRAWINGS UNDER LETTERS OF CREDIT.
(i) Upon receipt from the beneficiary of any Letter of
Credit of demand for payment under such Letter of Credit, the Issuing Bank
shall determine in accordance with the terms of such Letter of Credit whether
such demand for payment should be honored.
(ii) If the Issuing Bank determines that a demand for payment by
the beneficiary of a Letter of Credit should be honored, the Issuing Bank shall
make available to the beneficiary in accordance with the terms of such Letter
of Credit the amount of the drawing under such Letter of Credit. The Issuing
Bank shall thereupon notify the Borrower, the Agent and each Bank of the amount
of such drawing paid by it and the amount of each Bank's participation therein.
(d) REIMBURSEMENT AND OTHER PAYMENTS BY THE BORROWER.
(i) If any amount is drawn under any Letter of Credit, the
Borrower irrevocably and unconditionally agrees to reimburse the Issuing Bank
for all amounts paid by the Issuing Bank upon such drawing, together with any
and all reasonable charges and expenses which any Bank or the Issuing Bank may
pay or incur relative to such drawing and interest on the amount drawn at the
average rate charged to the Issuing Bank on overnight Federal funds
transactions for each day from and including the date such amount is drawn to
but excluding the date such reimbursement payment is due and payable. Such
reimbursement payment shall be due and payable (x) not later than 12:00 Noon
(New York City time) on the date the Issuing Bank notifies the Borrower of such
drawing, if such notice is given at or before 10:00 A.M. (New York City time)
on such date, or (y) not later than 12:00 Noon (New York City time) on the
first Domestic Business Day succeeding the date such notice is given, if such
notice is given after 10:00 A.M. (New York City time); provided that no payment
otherwise required by this sentence to be made by the Borrower not later than
12:00 Noon (New
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York City time) on any day shall be overdue hereunder if arrangements for such
payment satisfactory to the Issuing Bank, in its sole discretion, shall have
been made by the Borrower not later than 12:00 Noon (New York City time) on
such day and such payment is actually made not later than 3:00 P.M. (New York
City time) on such day. The Issuing Bank shall provide a copy of any such
notice to the Agent.
(ii) In addition, the Borrower agrees to pay to the Issuing Bank
(A) interest on any and all amounts unpaid by the Borrower when due hereunder
with respect to a Letter of Credit, for each day from and including the date
when such amount becomes due to but excluding the date such amount is paid in
full, whether before or after judgment, payable on demand, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day, and (B) upon each transfer of any Letter of Credit in accordance with its
terms, a sum equal to such amount as shall be necessary to cover the reasonable
costs and expenses of the Issuing Bank incurred in connection with such
transfer.
(iii) Each payment to be made by the Borrower pursuant to this
Section 2.07(d) shall be made, in Federal or other funds immediately available
in New York City, to the Issuing Bank at its address referred to in or pursuant
to Section 10.01.
(e) PAYMENTS BY BANKS WITH RESPECT TO LETTERS OF CREDIT.
(i) Each Bank shall make available an amount equal to its ratable
share of any drawing under a Letter of Credit, in Federal or other funds
immediately available in New York City, to the Issuing Bank by 3:00 P.M. (New
York City time) on the Domestic Business Day following such drawing, together
with interest on such amount at the average rate charged to the Issuing Bank on
overnight Federal funds transactions on the date of such drawing as determined
by the Issuing Bank, at the Issuing Bank's address specified in or pursuant to
Section 10.01; provided that each Bank's obligation shall be reduced by its pro
rata share of any reimbursement theretofore paid by the Borrower in respect of
such drawing pursuant to Section 2.07(d)(i). The Issuing Bank shall notify each
Bank and the Agent of the amount of such Bank's obligation in respect of any
drawing under a Letter of Credit not later than 1:00 P.M. (New York City time)
on the day such payment by such Bank is due. Each Bank shall be subrogated to
the rights of the Issuing Bank against the Borrower to the extent of all
amounts due from such Bank to the Issuing Bank, plus interest thereon,
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for each day from and including the day such amount is due from such Bank to
the Issuing Bank to but excluding the day the Borrower makes payment to the
Issuing Bank pursuant to subsection (d) above, whether before or after
judgment, at a rate per annum equal to the sum of 2% plus the rate applicable
to Base Rate Loans for such day.
(ii) If any Bank fails to pay any amount required pursuant to
clause (i) of this subsection on the date on which such payment is due,
interest shall accrue on such Bank's obligation to make such payment, for each
day from and including the date such payment becomes due to but excluding the
date such Bank makes such payment, whether before or after judgment, at a rate
per annum equal to (A) in the case of each day from and including the day such
payment is due through and including the first succeeding Domestic Business Day
(and any intervening days), the average rate charged to the Issuing Bank on
overnight Federal funds transactions for each such day as determined by the
Issuing Bank and (B) thereafter, the sum of 2% plus the rate applicable to Base
Rate Loans for such day. Any payment made by any Bank after 3:00 P.M., New
York City time, on any Domestic Business Day shall be deemed for purposes of
the preceding sentence to have been made on the next succeeding Domestic
Business Day.
(iii) If the Borrower shall reimburse the Issuing Bank for any
drawing under a Letter of Credit after the Banks shall have made funds
available to the Issuing Bank with respect to such drawing in accordance with
clause (i) of this subsection, the Issuing Bank shall promptly upon receipt of
such reimbursement distribute to each Bank its pro rata share thereof,
including interest, to the extent received by the Issuing Bank.
(f) LETTER OF CREDIT COMMISSION; FRONTING FEE.
(i) The Borrower shall pay to the Agent for the account of the
Banks, ratably in proportion to their Revolving Commitments or, if all
Revolving Commitments have been terminated, in proportion to their Revolving
Commitments immediately before such termination, a letter of credit commission
at a rate per annum (the "Letter of Credit Commission Rate") determined daily
in accordance with the Pricing Schedule on the daily average amount available
for drawing (whether or not any conditions to drawing can then be met) on all
outstanding Letters of Credit. Such letter of credit commission shall accrue
from and including the Effective Date to but excluding the Termination Date (or
later date of expiration or termination of the last Letter of Credit to expire
or be terminated) and shall be payable
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quarterly in arrears on each Quarterly Date, on the date of termination of the
Revolving Commitments in their entirety and, if later, on the date of
expiration or termination of the last Letter of Credit to expire or be
terminated.
(ii) The Borrower agrees to pay to the Agent for the account of the
Issuing Bank a fronting fee in the amounts and at the times previously agreed
between the Borrower and the Issuing Bank.
(g) PAYMENT UPON ACCELERATION. If the Revolving Commitments shall
be terminated or the principal of the Notes shall become immediately due and
payable pursuant to Section 6.01, the Borrower shall pay to the Agent for
deposit in the Segregated Collateral Account an amount equal to the aggregate
amount which is then, or may thereafter become, available for drawing under all
outstanding Letters of Credit.
(h) LIMITED LIABILITY OF THE ISSUING BANK. The Borrower assumes
all risks of the acts or omissions of any beneficiary and any transferee of any
Letter of Credit with respect to its use of such Letter of Credit. The Banks,
the Issuing Bank and their respective officers, directors, employees and agents
shall not be liable or responsible for, and the obligations of each Bank to
make payments (other than obligations of such Bank resulting solely from the
gross negligence or willful misconduct of the Issuing Bank), and of the
Borrower to reimburse the Issuing Bank for payments, pursuant to this Section
shall not be excused by, any action or inaction of any Bank or the Issuing Bank
related to (i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (ii) the
validity, sufficiency or genuineness of documents presented under any Letter of
Credit, or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
or (iii) payment by the Issuing Bank against presentation of documents to the
Issuing Bank which do not comply with the terms of any Letter of credit,
including failure of any documents to bear any reference or adequate reference
to the Letter of Credit. Notwithstanding the foregoing, the Borrower shall
have a claim against the Issuing Bank, and the Issuing Bank shall be liable to
the Borrower, to the extent, but only to the extent, of any direct, as opposed
to consequential, damages suffered by the Borrower which were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms thereof or
(ii) the Issuing Bank's willful failure to pay under any
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Letter of Credit after the presentation to the Issuing Bank by any beneficiary
(or a successor beneficiary to whom such Letter of Credit has been transferred
in accordance with its terms) of documents strictly complying with the terms
and conditions of such Letter of Credit. Subject to the preceding sentence,
the Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary unless any beneficiary (or a successor beneficiary
to whom such Letter of Credit has been transferred in accordance with its
terms) and the Borrower shall have notified the Issuing Bank that such
documents do not comply with the terms and conditions of such Letter of Credit.
Each Bank shall, ratably in accordance with its Revolving Commitment, indemnify
the Issuing Bank (to the extent not reimbursed by the Borrower) against any
cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from the Issuing Bank's gross
negligence or willful misconduct) that the Issuing Bank may suffer or incur in
connection with this Agreement or any action taken or omitted by the Issuing
Bank hereunder.
SECTION 2.08. FEES.
(a) The Borrower shall pay to the Agent for the account of the
Banks, ratably in proportion to their Revolving Commitments, a revolving
commitment fee at the Commitment Fee Rate (determined daily in accordance with
the Pricing Schedule) on the daily average amount by which the aggregate amount
of the Revolving Commitments exceeds the Revolving Exposure. Such revolving
commitment fee shall accrue from and including the Effective Date to but
excluding the Termination Date (or earlier date of termination of the Revolving
Commitments in their entirety).
(b) The Borrower shall pay to the Agent for the account of the
Banks, ratably in proportion to their Term Commitments, a term commitment fee
at the Commitment Fee Rate (determined daily in accordance with the Pricing
Schedule) on the daily average amount by which the aggregate amount of the Term
Commitments exceeds the aggregate principal amount of the Term Loans
theretofore borrowed. Such term commitment fee shall accrue from and including
the Effective Date to but excluding the last to occur of the Term Commitment
Termination Dates (or earlier date of termination of the Term Commitments in
their entirety).
(c) On the Effective Date, the Borrower shall pay to the Agent a
fee in the amount previously agreed between the Borrower and the Agent.
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(d) On the Effective Date and on the date of each borrowing of
Tranche A Term Loans and Tranche B Term Loans, the Borrower shall pay to the
Agent for the account of the Banks participation fees in the amounts previously
agreed among the Borrower, the Agent and the Banks.
(e) Accrued fees under subsections (a) and (b) above shall be
payable quarterly in arrears on each Quarterly Date and, with respect to
commitment fees relating to Commitments of any Class, upon the date of
termination of the Commitments of such Class in their entirety.
SECTION 2.09. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower may, upon at least three Domestic Business Days'
notice to the Agent, (i) terminate the Revolving Commitments at any time, if
the aggregate Revolving Exposures of all Banks shall be zero at the time of
such termination, or (ii) ratably reduce from time to time by an aggregate
amount of $5,000,000 or any larger multiple of $1,000,000, the aggregate amount
of the Revolving Commitments in excess of the aggregate Revolving Exposures of
all Banks.
(b) The Borrower may, upon at least three Domestic Business Days'
notice to the Agent, terminate either or both of the Tranche A Term Commitments
or the Tranche B Term Commitments at any time, or ratably reduce the aggregate
amount of the Tranche A Term Commitments or the Tranche B Term Commitments from
time to time by an aggregate amount of $5,000,000 or any larger multiple of
$1,000,000.
(c) Each reduction of the Revolving Commitments, the Tranche A
Term Commitments or the Tranche B Term Commitments pursuant to this Section
2.09 shall be applied ratably to the respective Commitments of all Banks.
SECTION 2.10. MANDATORY TERMINATION OF COMMITMENTS. (a) All Tranche
A Term Commitments shall terminate in their entirety on the Tranche A Term
Commitment Termination Date.
(b) All Tranche B Term Commitments shall terminate in their
entirety on the Tranche B Term Commitment Termination Date.
(c) All Revolving Commitments shall terminate in their entirety
on the Termination Date.
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SECTION 2.11. METHOD OF ELECTING INTEREST RATES. (a) The Loans
included in each Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject in each case to the
provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period, in
each case effective on the last day of the then current Interest
Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, in each case effective on the last day of the then current
Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent not later than 12:00 Noon (New York City time) (x)
if the relevant Loans are to be converted to Domestic Loans or continued as
Domestic Loans for an additional Interest Period, the second Domestic Business
Day before such conversion or continuation is to be effective and (y) if the
relevant Loans are to be converted to Euro-Dollar Loans or continued as
Euro-Dollar Loans for an additional Interest Period, the third Euro-Dollar
Business Day before such conversion or continuation is to be effective. A
Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans comprising
such Group of Loans and (ii) the portion to which such Notice of Interest Rate
Election applies, and the remaining portion to which it does not apply, are
each at least $1,000,000 and not more than one of such portions is other than a
multiple of $1,000,000.
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(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be
converted, the new type of Loans and, if such new Loans are Fixed Rate
Loans, the duration of the initial Interest Period applicable thereto;
and
(iv) if such Loans are to be continued as Fixed Rate Loans
for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Borrower. If the Borrower fails to deliver a timely Notice of Interest
Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall
be converted into Base Rate Loans on the last day of the then current Interest
Period applicable thereto.
SECTION 2.12. OPTIONAL PREPAYMENTS.
(a) The Borrower may, upon notice to the Agent not later than
11:00 A.M. (New York City time) on the date of such prepayment, prepay a Group
of Base Rate Loans in whole at any time, or from time to time in part in
amounts aggregating $1,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment.
(b) The Borrower may, upon at least three Domestic Business
Days' notice to the Agent, in the case of a Group of CD Loans, or upon at least
three Euro-Dollar Business Days' notice to the Agent, in the case of a Group of
Euro-Dollar Loans, prepay the Loans comprising such Group in whole at any time,
or from time to time in part in amounts aggregating $1,000,000 or any larger
multiple of
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$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment; provided that the Borrower shall
reimburse each Bank for any loss or expense incurred by it as a result of any
such prepayment in accordance with Section 2.14.
(c) Each prepayment of all or part of a Group of Loans pursuant
to this Section 2.12 shall be applied to prepay ratably the Loans of the
several Banks included in such Group.
(d) Each optional prepayment of Term Loans pursuant to this
Section 2.12 shall be applied to the remaining scheduled prepayments thereof
pursuant to Section 2.05(b) pro rata in proportion to the amount of each such
scheduled prepayment.
(e) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS.
(a) The Borrower shall make each payment of principal of, and
interest on, the Loans and of commissions and fees hereunder, not later than
12:00 Noon (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Agent at its address referred to
in or pursuant to Section 10.01. The Agent will promptly distribute to each
Bank its ratable share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of commissions or fees shall be due on a day which is not
a Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of,
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make
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such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in reliance upon
such assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent that the
Borrower shall not have so made such payment, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from and including the date such amount is
distributed to such Bank to but excluding the date such Bank repays such amount
to the Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant
to Article II, VI or VIII or otherwise) on any day other than the last day of
an Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.06(d), or if the Borrower fails to borrow or prepay
any Fixed Rate Loans after notice has been given to any Bank in accordance with
Section 2.03(a) or 2.12(e), the Borrower shall reimburse each Bank within 15
days after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties or terminating, covering, reversing or closing out interest
rate swap agreements with third parties, but excluding loss of margin for the
period after any such payment or conversion or failure to borrow or prepay;
provided that such Bank shall have promptly delivered to the Borrower a
certificate as to the amount of such loss or expense (setting forth in
reasonable detail, if the Borrower so requests, the calculation thereof), which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. COMPUTATION OF INTEREST, FEES AND COMMISSIONS. Interest
based on the Prime Rate hereunder shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest, fees and commissions shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day
but excluding the last day).
SECTION 2.16. WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest, fees or commissions
are payable hereunder for the account of any Bank, each Bank that is not
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incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Agent (and, in the
case of any Bank with any Letter of Credit Exposure, the Issuing Bank) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Bank is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Bank which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent (and, in
the case of any Bank with any Letter of Credit Exposure, the Issuing Bank) two
additional copies of such form (or a successor form) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent (or, in the case of any Bank with any
Letter of Credit Exposure, the Issuing Bank), in each case certifying that such
Bank is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including, without limitation, any change in any treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank advises the Borrower and the Agent (and, in the
case of any Bank with any Letter of Credit Exposure, the Issuing Bank) that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
SECTION 2.17. MAXIMUM INTEREST RATE. (a) Nothing contained in this
Agreement or the Notes shall require the Borrower or the Guarantor to pay
interest at a rate exceeding the maximum rate permitted by applicable law.
Neither this Section nor Section 10.08 is intended to limit the rate of
interest payable for the account of any Bank or the Issuing Bank, as the case
may be, to the maximum rate permitted by the laws of the State of New York if a
higher rate is permitted with respect to such Bank or the Issuing Bank, as the
case may be, by supervening provisions of United States federal law.
(b) If the amount of interest payable for the account of any Bank
or the Issuing Bank, as the case may be, on any date in respect of the
immediately preceding interest computation period, computed pursuant to Section
2.06 or, in the case of interest on Reimbursement Obligations or other
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amounts payable in respect of Letters of Credit, Section 2.07, would exceed the
maximum amount permitted by applicable law to be charged by such Bank or the
Issuing Bank, as the case may be, the amount of interest payable for its
account on such date shall be automatically reduced to such maximum permissible
amount.
(c) If the amount of interest payable for the account of any Bank
or the Issuing Bank, as the case may be, in respect of any interest computation
period is reduced pursuant to clause (b) of this Section and the amount of
interest payable for its account in respect of any subsequent interest
computation period, computed pursuant to Section 2.06 or, in the case of
interest on Reimbursement Obligations or other amounts payable in respect of
Letters of Credit, Section 2.07, would be less than the maximum permissible
amount permitted by applicable law to be charged by such Bank or the Issuing
Bank, as the case may be, then the amount of interest payable for its account
in respect of such subsequent interest computation period shall be
automatically increased to such maximum permissible amount; provided that at no
time shall the aggregate amount by which interest paid for the account of any
Bank or the Issuing Bank, as the case may be, has been increased pursuant to
this clause (c) exceed the aggregate amount by which interest paid for its
account has theretofore been reduced pursuant to clause (b) of this Section.
ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective
on the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 10.05):
(a) receipt by the Agent of counterparts hereof signed by
each of the parties hereto (or, in the case of any such party as to
which an executed counterpart shall not have been received, receipt by
the Agent in form satisfactory to it of telegraphic, telex, facsimile
transmission or other written confirmation from such party of
execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of
a duly executed Note dated on or before the Effective Date complying
with the provisions of Section 2.04;
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(c) receipt by the Agent, with sufficient copies for each
Bank, of opinions of Weil, Gotshal & Manges, special New York counsel
to the Borrower and the Guarantor, and the senior Vice President and
General Counsel of the Borrower and the Guarantor, substantially in
the forms of Exhibits D and E hereto, respectively, and in each case
covering such additional matters relating to the transactions
contemplated hereby as the Agent or the Required Banks may reasonably
request;
(d) receipt by the Agent, with sufficient copies for
each Bank, of an opinion of Davis Polk & Wardwell, special counsel to
the Agent, substantially in the form of Exhibit F hereto and covering
such additional matters relating to the transactions contemplated
hereby as the Agent or the Required Banks may reasonably request;
(e) receipt by the Agent of a certificate signed by the
chief financial officer or treasurer of the Guarantor to the effect
set forth in subsections (c) and (d) of Section 3.02;
(f) receipt by the Agent of duly executed counterparts
of the Pledge Agreement, together with the securities required to be
delivered to the Agent pursuant thereto;
(g) receipt by the Agent of duly executed counterparts
of the subsidiary Guaranty;
(h) receipt by the Agent of evidence satisfactory to it
that such action (including, without limitation, the filing of
appropriately completed and duly executed Uniform Commercial Code
financing statements) as may be necessary or as the Agent shall have
reasonably requested to perfect the Liens created pursuant to the
Pledge Agreement shall have been taken;
(i) receipt by the Agent of evidence satisfactory to it
of the fact that all amounts payable by the Borrower or the Guarantor
to the Agent or the Banks on or before such date shall have been paid
or arrangements satisfactory to the Agent shall have been made for
such payment;
(j) the Agent shall have received evidence
satisfactory to it that arrangements satisfactory to it shall have
been made for the release of all Liens created under the Existing
Security Documents;
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(k) receipt by the Agent and the Issuing Bank of evidence
satisfactory to the Agent and the Issuing Bank that each Existing
Letter of Credit shall have been amended to the extent, if any,
necessary to reflect the fact that on and after the Effective Date
such Letter of Credit shall be deemed to have been issued hereunder;
(1) receipt by the Agent of evidence satisfactory to the
Agent that all amendments, waivers and consents under the LTCB
Financing Documents, the Nippon Financing Documents and the Senior
Secured Note Documents necessary or advisable to permit the execution,
delivery and performance by the Guarantor and each of its Subsidiaries
party thereto of each Financing Document to which it is a party have
been obtained;
(m) receipt by the Agent of evidence satisfactory to it
that the Agent, as agent under the Existing Credit Agreement, shall
have received evidence of the termination of the commitments under the
Existing Credit Agreement and payment in full of all outstanding loans
(together with interest thereon) under the Existing Credit Agreement
and all other amounts payable to the Existing Banks under the Existing
Credit Agreement as of the Effective Date; and
(n) receipt by the Agent of all documents it may
reasonably request relating to the existence of the Borrower, the
Guarantor and each of their Subsidiaries party to any Financing
Document, the corporate authority for and the validity of the
Financing Documents, and any other matters relevant hereto or thereto,
all in form and substance satisfactory to the Agent;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than November 15, 1994. The Agent shall promptly notify the Borrower, the
Issuing Bank and the Banks of the Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
SECTION 3.02. BORROWINGS AND LETTER OF CREDIT ISSUANCES. The
obligation of any Bank to make a Loan on the occasion of any Borrowing, and the
obligation of the Issuing Bank to issue any Letter of Credit (including the
deemed issuance of the initial Letters of Credit pursuant to Section
2.07(a)(iii)), are subject to the satisfaction of the following conditions:
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(a) except in the case of the deemed issuance of the
initial Letters of Credit pursuant to Section 2.07(a)(iii), receipt by
the Agent of a Notice of Borrowing or Notice of Issuance as required
by Section 2.02 or 2.07(b), as the case may be;
(b) in the case of any Revolving Borrowing or the
issuance of a Letter of Credit, the fact that, immediately after such
Borrowing or the issuance of such Letter of Credit, as the case may
be, the aggregate Revolving Exposures of all Banks does not exceed the
aggregate Revolving Commitments of all Banks;
(c) the fact that, immediately before and after such
Borrowing, or the issuance of such Letter of Credit, as the case may
be, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of
the Guarantor or any of its Subsidiaries contained in the Financing
Documents shall be true in all material respects on and as of the date
of such Borrowing or issuance, as the case may be.
Each Borrowing and each issuance of a Letter of Credit hereunder shall be
deemed to be a representation and warranty by each of the Borrower and the
Guarantor to the Agent, each of the Banks and, in the case of an issuance of a
Letter of Credit, the Issuing Bank on the date of such Borrowing or issuance,
as the case may be, as to the facts specified in clauses (b), (c) and (d) of
this Section.
SECTION 3.03. BORROWINGS OF TERM LOANS. The obligation of any
Bank to make either a Tranche A Term Loan or a Tranche B Term Loan is subject
to the satisfaction (or waiver in accordance with Section 10.05) of each of the
following conditions:
(a) receipt by the Agent, with copies for all of the
Banks, of true, correct and complete copies of (i) the related Stock
Purchase Agreement and (ii) in the case of a Tranche A Term Loan, to
the extent requested by any Bank of the Borrower, each of the
Acquisition Agreements (as defined in the related Stock Purchase
Agreement);
(b) the fact that, and receipt by the Agent of evidence
satisfactory to the Agent that, after giving effect to the borrowing
of Tranche A Term Loans or Tranche B Term Loans, as applicable, and
the
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<PAGE> 53
application of the proceeds thereof, the acquisition by Pharmacy of the
Shares (as defined in the related Stock Purchase Agreement) of the
Tranche A Acquired Companies or Tranche B Acquired Company,
respectively, shall have been consummated and Pharmacy shall be the
owner of all of such Shares, free and clear of any Liens other than
Liens created under the Pledge Agreement;
(c) the fact that after giving effect to the borrowing of
Tranche A Term Loans or Tranche B Term Loans, as applicable, (i) the
aggregate principal amount of all Tranche A Term Loans made hereunder
shall not exceed $115,000,000, (ii) the aggregate principal amount of
all Tranche B Term Loans made hereunder shall not exceed $115,000,000
and (iii) the aggregate principal amount of all Term Loans made
hereunder shall not exceed $225,000,000;
(d) the Agent shall have received certificates representing
all of the Shares (as defined in the related Stock Purchase Agreement)
in such form, and together with such instruments and other documents as
are required, under the Pledge Agreement (including Section 4 thereof);
(e) the fact that no order or injunction prohibiting or
restricting in any manner the acquisition by Pharmacy of the Shares
(as defined in the related Stock Purchase Agreement) pursuant to and
in accordance with the related Stock Purchase Agreement or the
financing thereof of any court or governmental body shall have been
issued or be in effect, and that no legal proceeding shall be pending
which in any manner draws into question the validity of any of the
Financing Documents, the related Stock Purchase Agreement or, in the
case of a Tranche A Term Loan, the Acquisition Agreements (as defined
in the related Stock Purchase Agreement);
(f) receipt by the Agent of counterparts of the Subsidiary
Guaranty duly executed by each of the Tranche A Acquired Companies or
the Tranche B Acquired Company, as applicable; and
(g) receipt by the Agent of opinions of Weil, Gotshal &
Manges, special New York counsel to the Borrower and the Guarantor, and
the Senior Vice President and General Counsel of the Borrower and the
Guarantor, substantially in the form of Exhibits G and H hereto,
respectively, and in each case covering such additional matters
relating to the transactions
47
<PAGE> 54
contemplated hereby as the Agent or the Required Banks may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and the Guarantor hereby make the following
representations and warranties:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Each of the Guarantor and
its Subsidiaries party to any Financing Document is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted except where the failure to obtain such
governmental licenses, authorizations, consents and approvals would not
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Guarantor and its Consolidated
Subsidiaries and would not in any manner draw into question the validity of any
Financing Document. The Guarantor has no Subsidiaries on the Effective Date
other than those listed on Schedule V hereto.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by each of the
Guarantor and its Subsidiaries of each Financing Document to which it is a
party are within the Guarantor's and each such Subsidiary's corporate powers,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Guarantor or any such Subsidiary or of any agreement, judgment,
injunction, order, decree or other instrument that is material, individually or
in the aggregate, and that is binding upon the Guarantor or any such Subsidiary
or result in the creation or imposition of any Lien on any asset of the
Guarantor or any of its Subsidiaries (except the Liens created pursuant to the
Pledge Agreement).
SECTION 4.03. BINDING EFFECT; LIENS OF PLEDGE AGREEMENT. (a) Each
Financing Document other than the Notes constitutes a valid and binding
agreement of each of the Guarantor and its Subsidiaries party thereto,
48
<PAGE> 55
enforceable against them in accordance with its terms, and the Notes, when
executed and delivered in accordance with this Agreement, will constitute valid
and binding obligations of the Borrower, enforceable against it in accordance
with their terms.
(b) The Pledge Agreement creates valid security interests in the
Collateral purported to be covered thereby, which security interests are and
will remain perfected security interests, prior to all Liens, subject, in the
case of the Pledged Stock, to the Agent's maintaining possession thereof.
SECTION 4.04. FINANCIAL INFORMATION; VALUATIONS. (a) The Base
Financials, copies of which have been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Guarantor and its Consolidated
Subsidiaries as of December 31, 1993 and their consolidated results of
operations and cash flows for the fiscal year of the Guarantor then ended.
(b) The unaudited condensed consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of June 30, 1994 and the related
unaudited condensed consolidated statements of income and cash flows for the
six months then ended, set forth in the Guarantor's quarterly report for the
fiscal quarter ended June 30, 1994 as filed with the Securities and Exchange
Commission on Form 10-Q, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the Base Financials, the
consolidated financial position of the Guarantor and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such six month period (subject to normal year-end adjustments,
the absence of footnote disclosure and condensation pursuant to the rules of
the Securities and Exchange Commission).
(c) Since June 30, 1994, there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Guarantor and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. LITIGATION. Except as disclosed in the Guarantor's
1993 Form 10-K or the Guarantor's quarterly report for the fiscal quarter ended
June 30, 1994 as filed with the Securities and Exchange Commission on Form
10-Q, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower or the Guarantor threatened
49
<PAGE> 56
against or affecting, the Guarantor or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Guarantor and its Consolidated Subsidiaries or which in any
manner draws into question the validity of any Financing Document.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group
has complied with its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standards under Section 412 of
the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could reasonably be expected to
result, prior to the first anniversary of the Termination Date, in the
imposition of a Lien or the posting of a bond or other security under Section
302(f) of ERISA or Section 401(a)(29) or 412(n) of the Internal Revenue Code,
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA or (iv) within the preceding
five plan years, with respect to any Other Plan, engaged in any transaction
described in Section 4069 or Section 4212(c) of ERISA.
SECTION 4.07. ENVIRONMENTAL MATTERS. (a) In the ordinary course of
their business, the Borrower and the Guarantor conduct an ongoing review of the
effect of Environmental Laws on the business, operations and properties of the
Guarantor and its Subsidiaries, in the course of which they identify and
evaluate associated liabilities and costs. On the basis of this review, the
Borrower and the Guarantor have reasonably concluded that Environmental Laws
are unlikely to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Guarantor and its
Consolidated Subsidiaries, considered as a whole.
(b) As of the Effective Date, to the knowledge of the Guarantor
and its Subsidiaries no material claim, investigation or written inquiry has
been made, and the Guarantor is not aware of any circumstance which would
warrant or give rise to such a claim, investigation or inquiry, with regard to
the Guarantor or any of its
50
<PAGE> 57
Subsidiaries, in respect of any facility owned, or to the knowledge of the
Guarantor and its Subsidiaries, leased or operated, either now or in the past,
by the Guarantor or any of its Subsidiaries, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended and
in effect, or pursuant to any other Environmental Law, or by the Environmental
Protection Agency or by any state, local, municipal or foreign enforcement
agency having jurisdiction over the protection of the environment, or by any
other Person in respect of or under any Environmental Law.
SECTION 4.08. TAXES. United States federal income tax returns of the
Guarantor and its Subsidiaries have been examined and closed through the fiscal
year ended December 31, 1986. The Guarantor and its Subsidiaries have filed
all United States federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Guarantor or any of
its Subsidiaries other than any such taxes the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with generally accepted accounting
principles have been established. The charges, accruals and reserves on the
books of the Guarantor and its Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower and the Guarantor,
adequate.
SECTION 4.09. TITLE TO AND CONDITION OF PROPERTIES. As of
the Effective Date, (a) the Guarantor and its Subsidiaries have good and
marketable title to all of the properties and other assets (real or personal,
tangible, intangible or mixed) they own or purport to own and (b) all leases to
which the Guarantor or any of its Subsidiaries is a party as lessee or
sublessee are in full force and effect, except for such defects in title and
such invalidity or unenforceability of leases as, in the aggregate, could not
materially adversely affect the condition (financial or otherwise), earnings,
business affairs or business prospects of the Guarantor and its Subsidiaries
taken as a whole.
SECTION 4.10. NOT AN INVESTMENT COMPANY. Neither the Guarantor nor
any of its Subsidiaries is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.11. FULL DISCLOSURE. All information heretofore furnished
in writing by the Borrower or the Guarantor to the Agent, the Issuing Bank or
any Bank or
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otherwise to the Banks generally for purposes of or in connection with this
Agreement or any transaction contemplated hereby was true and accurate in all
material respects on the date as of which such information was stated or
certified. The Borrower and the Guarantor have disclosed to the Agent, the
Issuing Bank and the Banks in writing any and all facts which materially and
adversely affect, or may so affect (to the extent the Borrower or the Guarantor
can now reasonably foresee), the business, operations or financial condition of
the Guarantor and its Consolidated Subsidiaries, taken as a whole, or the
ability of the Guarantor or any of its Subsidiaries party to any of the
Financing Documents to perform its obligations under any Financing Document to
which it is a party.
SECTION 4.12. REPRESENTATIONS IN SUBSIDIARY GUARANTY AND PLEDGE
AGREEMENT. Each representation and warranty contained in the Subsidiary
Guaranty or the Pledge Agreement is true and correct.
SECTION 4.13. EXISTING LETTERS OF CREDIT. Schedule VI hereto
identifies each Existing Letter of Credit outstanding as of the date hereof and
as of the Effective Date.
ARTICLE V
COVENANTS
The Borrower and the Guarantor agree that, so long as any Bank has
any Commitment or Letter of Credit Exposure hereunder or any amount payable
under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Guarantor will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days
after the end of each fiscal year of the Guarantor, consolidated
balance sheets of the Guarantor and its Consolidated Subsidiaries as
of the end of such fiscal year and the related consolidated statements
of operations, stockholders' equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner acceptable to
the securities and Exchange Commission by Ernst & Young or other
independent public accountants of nationally recognized standing and
certified as to consistency in
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compliance with Section 1.02 by an Authorized Financial Officer of the
Guarantor;
(b) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of the Guarantor, condensed consolidated balance sheets of the
Guarantor and its Consolidated Subsidiaries as of the end of such
quarter and the related condensed consolidated statements of income
and cash flows for such quarter and for the portion of the Guarantor's
fiscal year ended at the end of such quarter, setting forth in each
case in comparative form the figures for the corresponding quarter and
the corresponding portion of the Guarantor's previous fiscal year, all
certified (subject to normal year-end adjustments and condensation
pursuant to the rules of the Securities and Exchange Commission) as to
fairness of presentation and consistency in compliance with Section
1.02 by an Authorized Financial Officer of the Guarantor;
(c) as soon as available and in any event within 30 days
after the end of each calendar month, consolidated balance sheets of
the Guarantor and its Consolidated Subsidiaries as of the end of such
month and the related consolidated statements of operations,
stockholders' equity and cash flows for such month and for the portion
of the Guarantor's fiscal year ending at the end of such month,
setting forth in each case in comparative form the figures for the
corresponding month and the corresponding portion of the Guarantor's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency in
compliance with Section 1.02 by an Authorized Financial Officer of the
Guarantor;
(d) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, a
certificate of an Authorized Financial Officer of the Guarantor (i)
setting forth in reasonable detail the calculations required to
establish whether the Guarantor was in compliance with the
requirements of Sections 5.05, 5.06, 5.07, 5.09, 5.10, 5.11 and 5.13
on the date of such financial statements, (ii) setting forth in
reasonable detail calculations of the ratio of Adjusted Consolidated
Debt to Consolidated Capital and the Cash Coverage Ratio as at the
date of the balance sheet contained therein and for the period of four
fiscal quarters ending on such date and (iii) stating whether any
Default exists on the date of such certificate and, if any Default
then
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<PAGE> 60
exists, setting forth the details thereof and the action which the
Guarantor or the Borrower, as the case may be, is taking or proposes
to take with respect thereto;
(e) promptly upon the occurrence of any Default, a
certificate of an Authorized Financial Officer of the Guarantor
setting forth the details thereof and the action which the Guarantor
or the Borrower, as the case may be, is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders
of the Guarantor generally, copies of all financial statements,
reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor
shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i)
provides or is required to provide notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has provided or is required to provide notice of any such
reportable event, a copy of the notice of such reportable event
provided or required to be provided to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate,
impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding
standards under Section 412 of the Internal Revenue Code with respect
to any Plan, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and such other information as is filed with the PBGC in
connection therewith; (vi) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; (vii)
receives notice from the PBGC or
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<PAGE> 61
any plan administrator of an intent to impose liability on any member
of the ERISA Group with respect to any Other Plan on account of a
transaction described in Section 4069 or 4212(c) of ERISA, a copy of
such notice; (viii) receives notice from the PBGC or any plan
administrator of an intent to impose liability on any member of the
ERISA Group with respect to any Other Plan on the basis that such
member of the ERISA Group is a member of the "controlled group" with
respect to such Other Plan under Section 412(c)(11) of the Internal
Revenue Code or Section 4001(a)(14) of ERISA, a copy of such notice;
or (ix) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has
resulted or could result in the imposition of a Lien or the posting of
a bond or other security under Section 302(f) of ERISA or Section
401(a)(29) or 412(n) of the Internal Revenue Code, a certificate of an
Authorized Financial Officer of the Guarantor setting forth all
material and relevant details as to such occurrence or event and the
action, if any, which the Guarantor, the Borrower or the applicable
member of the ERISA Group proposes or, after consultation with
counsel, believes that it is required to take; and
(i) from time to time such additional information
regarding the financial position or business of the Guarantor or any
of its Subsidiaries as any Bank may reasonably request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Guarantor
will keep, and will cause each of its Subsidiaries to keep, all property
necessary in its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Guarantor will, and will cause each of its subsidiaries
to, maintain (either in the name of the Guarantor, the Borrower or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such
amounts and against at least such risks (and with such risk retention and self
insurance) as are usually insured against in the same general area by companies
of established repute engaged in the same or a similar business at a
substantial number of different facilities. The Guarantor will furnish to the
Banks, upon request from the Agent, information presented in reasonable detail
as to the insurance so carried.
55
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SECTION 5.03. COMPLIANCE WITH LAWS. The Guarantor will comply, and
will cause each of its Subsidiaries to comply, with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) (except (i) where the failure to so comply would not
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Guarantor and its Subsidiaries and
would not in any manner draw into question the validity of any Financing
Document or (ii) where the necessity of compliance therewith is contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles) and
will maintain and cause each of its Subsidiaries to maintain all governmental
licenses, approvals, authorizations and consents necessary for the conduct of
the business of the Guarantor and its Subsidiaries (except where the failure to
maintain such governmental licenses, approvals, authorizations and consents
would not materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Guarantor and its
Subsidiaries and would not in any manner draw into question the validity of any
Financing Document).
SECTION 5.04. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Guarantor will keep, and will cause each of its Subsidiaries to keep, proper
books of record and account in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities and will permit, and will cause each such Subsidiary to permit,
representatives of any Bank to visit and inspect any of its properties, to
examine and make abstracts from any of its books and records and to discuss its
affairs, finances and accounts with its officers, employees and independent
public accountants, all at such reasonable times and upon reasonable notice to
the Guarantor and as often as may reasonably be desired; provided that (i)
subject to the provisions of Section 10.03(a), neither the Borrower nor the
Guarantor shall be obligated to pay the expenses of the Banks' respective
representatives and (ii) the Guarantor will have an opportunity to participate
in any discussions that take place between representatives of any Bank and the
Guarantor's independent public accountants.
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SECTION 5.05. MINIMUM CONSOLIDATED NET WORTH. Consolidated Net Worth
shall be at least (i) $675,000,000 at all times during the period from and
including the Effective Date through December 31, 1994 and (ii) $700,000,000
plus 50% of the aggregate positive Consolidated Net Income (excluding any
consolidated net loss) of the Guarantor and its Consolidated Subsidiaries for
each fiscal quarter ending after December 31, 1994 at all times thereafter.
SECTION 5.06. FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage
Ratio at any date shall not be less than the ratio set forth below opposite the
period in which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date through December 30, 1995 1.10 to 1.0
December 31, 1995 through December 30, 1997 1.15 to 1.0
December 31, 1997 and thereafter 1.20 to 1.0
</TABLE>
SECTION 5.07. ADJUSTED CONSOLIDATED DEBT RATIO. The ratio at any date
of (a) Adjusted Consolidated Debt to (b) Consolidated Net Worth shall not be
more than the ratio set forth below opposite the period in which such date
falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date through December 31, 1994 2.60
January 1, 1995 through December 31, 1995 2.50
January 1, 1996 through December 31, 1996 2.40
January 1, 1997 through December 31, 1997 2.20
January 1, 1998 through December 31, 1998 2.00
January 1, 1999 and thereafter 1.90
</TABLE>
SECTION 5.08. OWNERSHIP OF STOCK OF WHOLLY-OWNED SUBSIDIARIES. The
Guarantor will at all times maintain, or cause a Wholly-Owned Subsidiary of the
Guarantor to maintain, ownership of 100% of each class of voting securities of,
and all other equity securities (except for directors, qualifying shares) in,
each of its Subsidiaries that shall be a Wholly-Owned Subsidiary of the
Guarantor on the date hereof and each Person that shall become a Wholly-Owned
Subsidiary of the Guarantor after the date hereof, except in each case (i) any
such Wholly-Owned Subsidiary (other than Pharmacy or any of its Subsidiaries)
that shall hereafter be disposed of in its entirety, consolidated or merged
with or into the Guarantor or another such Wholly-Owned Subsidiary or
liquidated or (ii) any Subsidiary of Pharmacy that shall hereafter be
consolidated or merged with or into Pharmacy or any Wholly-Owned
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Subsidiary of Pharmacy or liquidated, in each case in accordance with the
provisions hereof.
SECTION 5.09. INVESTMENTS. Neither the Guarantor nor any of its
Subsidiaries will make or acquire after the date hereof any Investment in any
Person other than:
(a) Investments in the Guarantor or in Persons that are
Subsidiaries of the Guarantor on the date hereof;
(b) Investments in Persons that are (i) primarily engaged
in the health-care business and (ii) after the making of such
Investment, are Subsidiaries of the Guarantor;
(c) Temporary Cash Investments;
(d) extensions of credit or Guarantees of obligations of
one or more other Persons (other than Encore Nursing Center Partners,
Ltd.-85 and Encore Retirement Partners, Ltd.-85) as an integral part
of the financing of the acquisition, construction, equipping or
improving of facilities from which the Guarantor or its subsidiaries
will provide medical or related services;
(e) other miscellaneous Investments related to the
acquisition and financing (in the ordinary course of the Guarantor's
business) of health-care facilities through industrial development
revenue bonds issued for the benefit of the Guarantor and its
Subsidiaries;
(f) capital contributions required to be made by the
Borrower to Beverly Indemnity, Ltd. in accordance with applicable law
and insurance regulations;
(g) stock, obligations or securities received from
nursing home patients in the ordinary course of business of the
Borrower and its Subsidiaries;
(h) negotiable instruments endorsed for deposit or
collection or similar instruments in the ordinary course of business;
(i) promissory notes and other Investments received as
consideration for facilities sold, provided that the aggregate net
book value of all outstanding Investments permitted by this clause (i)
shall not, at any time, exceed $25,000,000;
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(j) Guarantees permitted by Section 5.13;
(k) any Investment made by the Guarantor or any of its
Subsidiaries in connection with and as part of a Workout Transaction;
(l) Investments made by the Guarantor or any of its
Subsidiaries in one or more Special Purpose Receivables Financing
Subsidiaries by means of the sale of, or the granting of security
interests in, Medicare, Medicaid or other patient accounts receivable
owing to the Guarantor or such Subsidiary, in either case to such
Special Purpose Receivables Financing Subsidiaries pursuant to a
Receivables Financing Program, provided that the net amount of all
uncollected accounts receivable owing to the Guarantor or any of its
Subsidiaries that have been so sold or in which a security interest
has been so granted shall not exceed 200% of the aggregate principal
or redemption amount of all Permitted Receivables Financing Securities
then outstanding;
(m) Investments made after the date hereof in Beverly
Japan Corporation in an aggregate amount outstanding at any time not
to exceed $10,000,000;
(n) Investments made in Persons that are primarily
engaged in the health-care business, the consideration for which
consists exclusively of common stock of the Guarantor or Permitted
Preferred Stock; and
(o) any Investment not otherwise permitted by the
foregoing clauses of this Section (other than promissory notes and
other Investments received as consideration for facilities sold) in
any Person engaged primarily in the health-care business if,
immediately after such Investment is made or acquired, the aggregate
net book value of all such Investments then held by the Guarantor or
its Subsidiaries and permitted by this clause (o) does not exceed
$50,000,000.
SECTION 5.10. RESTRICTED PAYMENTS ON STOCK. Neither the Guarantor
nor any of its Subsidiaries shall (x) declare or make any dividend payment or
other distribution on any capital stock of the Guarantor (other than dividends
payable solely in shares of the Guarantor's capital stock) or (y) declare or
make any payment on account of the purchase, redemption, retirement or
acquisition of the Guarantor's capital stock; provided that, so long as at
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the time of and after giving effect to any such payment no Event of Default
shall have occurred and be continuing,
(i) the Guarantor may make any such payment or
distribution from the proceeds of the sale by the Guarantor (other
than a sale to a Subsidiary of the Guarantor) after the date hereof of
its common stock,
(ii) the Guarantor may make dividend payments with respect
to its preferred stock (A) from any source in an amount not to exceed
$2,500,000 in any fiscal quarter and (B) from proceeds of the sale by
the Guarantor (other than a sale to a Subsidiary of the Guarantor)
after the date hereof of Permitted Preferred Stock in any amount,
(iii) the Guarantor may make payments on account of the
purchase, redemption, retirement or acquisition of its preferred stock
from the proceeds of the sale by the Guarantor (other than a sale to a
Subsidiary of the Guarantor) after the date hereof of any Permitted
Preferred Stock,
(iv) the Guarantor may make odd-lot repurchases of its
common stock for an aggregate consideration not exceeding $10,000 in
any calendar year, and
(v) the Guarantor may make any such payment or
distribution if, after giving effect thereto, the aggregate amount of
all such payments or distributions made after the date hereof
(including, without limitation, any such payments or distributions
permitted under subclause (ii)(A) or clause (iv) above) does not
exceed 50% of Consolidated Net Income for the period from and
including October 1, 1994 through the date of such declaration,
payment or distribution.
Nothing in this Section shall prohibit the payment of any dividend or
distribution within 45 days after the declaration thereof if such declaration
was not prohibited by this Section.
SECTION 5.11. NEGATIVE PLEDGE. (a) Neither the Guarantor nor any of
its Subsidiaries will create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it, except:
(i) Liens existing on the Effective Date securing Debt
and other obligations outstanding on the Effective Date;
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(ii) Liens created by the Pledge Agreement;
(iii) Liens on the Nippon Collateral securing the obligations
("Nippon Obligations") of the Guarantor and its Subsidiaries under the
Nippon Financing Documents and Liens on the LTCB Collateral securing
obligations ("LTCB Obligations") of the Guarantor and its Subsidiaries
under the LTCB Financing Documents; provided that, in each case, the
amount of Debt secured thereby does not exceed the amount that has or
may be borrowed thereunder as of the Effective Date;
(iv) Liens on the Senior Secured Note Collateral securing the
obligations ("Senior Secured Note Obligations" and, together with the
Nippon obligations and the LTCB Obligations, the "Designated
Obligations") of the Guarantor and its Subsidiaries outstanding on the
Effective Date under the Senior Secured Note Documents;
(v) any Lien on any asset of any corporation that becomes a
Consolidated Subsidiary of the Guarantor after the Effective Date that
exists at the time such corporation becomes such a Consolidated
Subsidiary and (other than in a Workout Transaction) not created in
contemplation thereof;
(vi) any Lien existing on any asset prior to the
acquisition thereof, acquired after the Effective Date by the
Guarantor or a Subsidiary of the Guarantor and (other than in a
Workout Transaction) not created in contemplation thereof;
(vii) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring or constructing such asset or reconstructing substantially
all of such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(viii) any Lien on any asset securing Debt incurred or
assumed for the purpose of improving or making any addition to such
asset, provided that (A) such Lien attaches to such asset concurrently
with or within 180 days after the completion of the improvement
thereof or addition thereto and (B) the aggregate outstanding
principal amount of all such Debt incurred after the date hereof
secured by such Liens shall not, at any time, exceed $30,000,000;
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(ix) Liens securing Debt incurred in connection with
Lease Cancellation Payments, provided that the aggregate amount of
all such Debt incurred after the date hereof secured by such Liens
shall not, at any time, exceed $20,000,000;
(x) Liens securing industrial development revenue bonds
(or securing contingent obligations to issuers of letters of credit
issued to support industrial development revenue bonds) arising in
connection with the conversion of the interest rate on such bonds from
floating to long-term fixed rates or from fixed rates to other
long-term fixed rates;
(xi) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses of this Section, provided
that the principal amount of such Debt is not increased and such Debt
is not secured by any additional assets other than assets that relate
directly to the facility subject to the original financing;
(xii) Liens on Medicare, Medicaid or other patient
accounts receivable of the Guarantor or any of its subsidiaries, or on
Permitted Receivables Financing Securities, granted to secure
Permitted Receivables Financing Securities, provided that the net
amount of all uncollected accounts receivable owing to the Guarantor
or any of its Subsidiaries over which such a Lien is granted,
together, without duplication, with the net amount of all uncollected
accounts receivable owing to the Guarantor or any of its Subsidiaries
that are assigned to secure such Permitted Receivables Financing
Securities, shall not exceed, at any time, 200% of the aggregate
principal or redemption amount of all Permitted Receivables Financing
Securities then outstanding;
(xiii) Liens incidental to the conduct of its business or
the ownership of its assets which (A) do not secure Debt or
Derivatives Obligations and (B) do not in the aggregate materially
detract from the value of its assets or materially impair the use
thereof in the operation of its business;
(xiv) Liens on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate amount of cash
and cash equivalents subject to such Liens may at no time exceed
$10,000,000;
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(xv) Liens on assets (other than Nippon Collateral)
securing Nippon Obligations, Liens on assets (other than LTCB
Collateral) securing LTCB Obligations or Liens on assets (other than
Senior Secured Note Collateral) securing Senior Secured Note
obligations (such assets collectively, "New Assets"), provided that
the sum of (A) the excess of the Appraised Value of all New Assets
over the Appraised Value of all Nippon Collateral, LTCB Collateral and
Senior Secured Note Collateral no longer subject to any Lien securing
any Designated Obligations, (B) the amount set forth in subclause (A)
of clause (xvii) and (C) the aggregate principal amount of all
Incremental Pooled Mortgage Debt and all Debt incurred after the date
hereof and secured by Liens permitted under clause (xviii) below shall
not at any time exceed $50,000,000;
(xvi) Liens on Initial Pooled Mortgage Assets, provided
that the sum of the amounts set forth in subclause (A) of clauses (xv)
and (xvii) and the aggregate principal amount of all Incremental
Pooled Mortgage Debt and all Debt incurred after the date hereof and
secured by Liens permitted under clause (xviii) shall not at any time
exceed $50,000,000;
(xvii) Liens on Substitute Pooled Mortgage Assets,
provided that the sum of (A) the excess of the Appraised Value of all
Substitute Pooled Mortgage Assets over the Appraised Value of all
Initial Pooled Mortgage Facilities no longer subject to any Lien
securing any Pooled Mortgage Debt, (B) the amounts set forth in
subclause (A) of clause (xv) above, (C) the aggregate principal amount
of all Incremental Pooled Mortgage Debt and (D) all Debt incurred
after the date hereof and secured by Liens permitted under clause
(xviii) shall not at any time exceed $50,000,000; and
(xviii) Liens not otherwise permitted under clauses (i) through
(xvii) of this Section, provided that the sum of the amounts set
forth in subclause (A) of clause (xv) and (xvii) above and the
aggregate principal amount of all Incremental Pooled Mortgage Debt and
all Debt incurred after the date hereof and secured by Liens permitted
under this clause (xviii) shall not at any time exceed $50,000,000.
(b) The Guarantor will not permit Pharmacy or any of its
Subsidiaries to create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except (i) Liens permitted by clauses (i),
(ii), (v), (vi), (to the extent that it relates to the extension, renewal or
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refunding of Debt secured by any such Liens), (xi) and (xiii) of subsection (a)
above and (ii) Liens not otherwise permitted under this subsection, provided
that the aggregate principal amount of all Debt secured by Liens permitted
under this clause (ii) shall not at any time exceed $5,000,000.
SECTION 5.12. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. (a)
Neither the Guarantor nor any of its Subsidiaries will (i) consolidate or merge
with or into any other Person, unless the Guarantor, the Borrower or, except in
the case of a merger or consolidation to which the Borrower or the Guarantor is
a party, a Wholly-Owned Subsidiary of the Guarantor is the surviving
corporation, (ii) sell, lease or otherwise transfer all or any substantial part
of the assets of the Guarantor and its Subsidiaries, taken as a whole, to any
other Person or (c) sell, lease, transfer or otherwise dispose of any Pledged
Stock, provided that (A) this Section shall not apply to mergers, dissolutions,
reorganizations or liquidations of Subsidiaries of the Borrower that have
disposed of all or substantially all of their assets and (B) the Guarantor and
its Subsidiaries (other than Pharmacy or any of its Subsidiaries) may assign or
grant security interests in their Medicare, Medicaid or other patient accounts
receivable to a Special Purpose Receivables Financing Subsidiary to secure
Permitted Receivables Financing Securities (provided that the net amount at any
time of all uncollected accounts receivable owing to the Guarantor or any of
its Subsidiaries that are so assigned or in which a security interest is so
granted shall not exceed 200% of the aggregate principal or redemption amount
of all Permitted Receivables Financing Securities then outstanding).
(b) The Guarantor will not permit Pharmacy or any of its
Subsidiaries to (i) consolidate or merge with or into any other Person, unless
Pharmacy or, except in the case of a merger or consolidation to which Pharmacy
is a party, a Wholly-Owned Subsidiary of Pharmacy is the surviving corporation
or (ii) sell, lease or otherwise transfer all or any substantial part of its
assets to any Person other than Pharmacy or any of its Wholly-Owned
Subsidiaries that is an Issuer (as defined in the Pledge Agreement).
SECTION 5.13. INCURRENCE OF DEBT. (a) The Guarantor will not permit
any of its Subsidiaries (other than the Borrower) to incur, assume or suffer to
exist any Debt, except:
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(i) Debt outstanding on the date hereof and included
in the Base Financials or listed in Schedule IV hereto;
(ii) Debt incurred after the date hereof in connection
with Lease Cancellation Payments, provided that the aggregate
principal amount of all such Debt outstanding at any time shall not
exceed $20,000,000;
(iii) Debt secured by a Lien permitted pursuant to clause
(vi) of Section 5.11(a);
(iv) Debt of any corporation that becomes a
Consolidated Subsidiary of the Guarantor after the Effective Date that
exists at the time such corporation becomes such a Consolidated
Subsidiary and (other than in a Workout Transaction) not created in
contemplation thereof;
(v) Debt ("Refinancing Debt") incurred to refinance
Debt ("Refinanced Debt") permitted under clauses (i) through (iv)
above, provided that (A) the principal amount of such Refinancing Debt
shall not exceed the principal amount of such Refinanced Debt and (B)
such Refinancing Debt shall have a weighted average life of not less
than the remaining weighted average life of such Refinanced Debt or
such Refinancing Debt shall not have any required payments of
principal prior to the first anniversary of the Termination Date;
(vi) Permitted Receivables Financing Securities,
provided that the aggregate principal and redemption amount of all
Permitted Receivables Financing Securities outstanding at any time
shall not exceed $100,000,000;
(vii) Debt incurred under the Financing Documents;
(viii) Debt incurred under the LTCB Financing Documents,
the Nippon Financing Documents or the Senior Secured Note Documents
not in excess of the amounts specified in clauses (iii) and (iv) of
Section 5.11(a);
(ix) Guarantees by any Subsidiary of the Guarantor of
any obligation of the Guarantor or any of its other Subsidiaries that
such guaranteeing Subsidiary would have been permitted to incur
hereunder as a primary obligation;
(x) Debt consisting of advances from the Guarantor or
any of its Subsidiaries in connection with
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the normal operation of the business of the Guarantor and its
Subsidiaries;
(xi) Debt incurred in connection with and as part of a
Workout Transaction;
(xii) Debt incurred or assumed for the purpose of financing
the cost of acquiring, constructing or improving an asset of the
Guarantor or any of its Subsidiaries;
(xiii) Debt secured by Pooled Mortgage Assets, provided
that the aggregate principal amount of all Incremental Pooled Mortgage
Debt and all Debt permitted under clause (xv) and incurred after the
date hereof shall not at any time exceed $50,000,000;
(xiv) Permitted Preferred Stock; and
(xv) Debt not otherwise permitted under clauses (i)
through (xiv) of this Section, provided that the aggregate principal
amount of all Incremental Pooled Mortgage Debt and all such Debt
permitted under this clause (xv) shall not at any time exceed
$50,000,000.
(b) The Guarantor will not permit Pharmacy or any of its
Subsidiaries to incur, assume or suffer to exist Debt, except (i) Debt
permitted under clauses (i), (iii), (iv), (v) (to the extent the Refinanced
Debt referred to therein is Debt referred to in clauses (i), (iii) and (iv)),
(vii) and (x) of subsection (a) above, (ii) Guarantees by Pharmacy or any of
its Subsidiaries of any obligation of the Guarantor or any of its Subsidiaries
that Pharmacy or such guaranteeing Subsidiary would have been permitted to
incur as a primary obligation under clause (i) of this subsection (b) and (iii)
Debt not otherwise permitted under this subsection (b), provided that the
aggregate outstanding principal amount of all Debt permitted under this clause
(iii) shall not at any time exceed $5,000,000.
SECTION 5.14. USE OF PROCEEDS AND LETTERS OF CREDIT. The Letters of
Credit issued (or deemed issued), and the proceeds of the Loans made, under
this Agreement will be used for (i) in the case of the proceeds of the Tranche
A Term Loans, the acquisition by Pharmacy of the capital stock of the Tranche A
Acquired Companies pursuant to the related Stock Purchase Agreement and the
payment of fees and expenses with respect thereto, (ii) in the case of the
proceeds of the Tranche B Term Loans, the acquisition by Pharmacy of the
capital stock of the Tranche B Acquired Company pursuant to the related Stock
Purchase Agreement and
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the payment of fees and expenses with respect thereto, and (iii) in all other
cases, (A) the repayment or prepayment of loans made under the Existing Credit
Agreement and (B) general corporate purposes. None of such proceeds will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
SECTION 5.15. ADDITIONAL SUBSIDIARY GUARANTORS. The Guarantor agrees
to cause each Person, other than a Special Purpose Receivables Financing
subsidiary, that shall, at any time after the date hereof, become a
Wholly-Owned Subsidiary of the Guarantor to enter into the Subsidiary Guaranty
and, in the case of any Acquired Company, to cause the stock of such Person to
be pledged pursuant to the Pledge Agreement not later than 20 days after (or,
in the case of any Acquired Company, on) the date on which such Person shall
have become such a Wholly-Owned Subsidiary.
SECTION 5.16. LEASE CONVERSIONS. The Guarantor will not, and will
not permit any of its Subsidiaries to, make any Lease Conversion in any
calendar year unless:
(i) the aggregate consideration paid or to be paid by the
Guarantor and its Subsidiaries in connection with the termination of
leases or the acquisition of facilities and related property pursuant
to such Lease Conversion and all other Lease Conversions made during
such calendar year would not exceed $100,000,000;
(ii) to the extent such Lease Conversion is financed or
will be financed with Debt of the Guarantor or any of its
Subsidiaries, such Debt (A) is incurred within 180 days of such Lease
Conversion and (B) has a weighted average life of at least five years;
and
(iii) as of the end of such calendar year, the aggregate
original principal amount of Debt incurred or to be incurred by the
Guarantor and its Subsidiaries in connection with all Lease
Conversions made from and including the first day of such calendar
year (or, in the case of the calendar year 1994, the Effective Date)
equals or exceeds 70% of the aggregate consideration paid or to be
paid by the Guarantor and its Subsidiaries in connection with the
termination of leases or the acquisition of facilities and related
property for all such Lease Conversions.
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SECTION 5.17. TRANSACTIONS WITH AFFILIATES. The Guarantor will not,
after the date hereof, and will not permit any of its Subsidiaries to, after
the date hereof, enter into any transaction or arrangement with any Affiliate
(including, without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of
the Guarantor's or such Subsidiary's (as the case may be) business and upon
fair and reasonable terms no less favorable to the Guarantor or such Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
other than an Affiliate.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) on the date when
due any principal of any Loan or any Reimbursement Obligation or (ii)
within five Domestic Business Days after the date when due any
interest on any Loan or Reimbursement Obligation or any fees,
commissions or other amounts payable hereunder;
(b) the Borrower or the Guarantor shall fail to observe
or perform any covenant contained in Section 5.05, 5.06, 5.07, 5.10,
5.12, 5.13, 5.14, 5.15 (to the extent such Section relates to any of
the Tranche A Acquired Companies or the Tranche B Acquired Company) or
5.16;
(c) the Borrower or the Guarantor shall fail to observe
or perform any covenant contained in Section 5.08, 5.09, 5.11 or 5.15
(to the extent such Section relates to any Person other than a Tranche
A Acquired Company or the Tranche B Acquired Company) for 10 days
after the Borrower or the Guarantor shall have obtained actual
knowledge of such failure or after written notice thereof has been
given to the Borrower by the Agent at the request of any Bank;
(d) the Borrower, the Guarantor or any subsidiary
Guarantor shall fail to observe or perform any covenant or agreement
contained herein or in the Subsidiary Guaranty (other than those
covered by clause (a), (b)
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or (c) above) for 30 days after written notice thereof has been
given to the Borrower by the Agent at the request of any Bank;
(e) any representation, warranty, certification or
statement made by the Guarantor or any of its Subsidiaries in any
Financing Document or in any certificate, financial statement or other
document delivered pursuant to any Financing Document shall prove to
have been incorrect in any material respect when made (or deemed
made);
(f) the Guarantor or any of its Subsidiaries shall fail
to make any payment in respect of any Material Financial Obligation
when due or, if later, within any applicable grace period;
(g) (i) any event or condition shall occur which
results in the acceleration of the maturity, or requires the early
redemption or prepayment, of any Material Financial Obligation or any
event or condition shall occur and be continuing which enables (or,
with the giving of notice or lapse of time or both, would enable) the
holder of any Material Financial obligation or any Person acting on
such holder's behalf to accelerate the maturity, or require the early
redemption or prepayment, of such Material Financial Obligation
(unless such event or condition shall have been waived and any
acceleration or required redemption or prepayment rescinded), provided
that the fact that the interest paid on any industrial development
revenue bonds ceases to be exempt from federal income taxation shall
not constitute an Event of Default under this subsection (g) unless
such industrial development revenue bonds are accelerated, redeemed or
prepaid or the aggregate principal amount of industrial development
revenue bonds subject to acceleration or early redemption or
prepayment as a result of such event or condition shall be at least
$15,000,000 or (ii) any event or condition constituting a default or
event of default under the agreement, instrument or other document
relating thereto shall occur which results in the termination of any
Material Commitment or any such event or condition shall occur and be
continuing which enables (or with the giving of notice or lapse of
time or both, would enable) the provider of any Material Commitment or
any Person acting on such provider's behalf to require the early
termination of such Material Commitment (unless such event or
condition shall have been waived and any termination rescinded);
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(h) the Borrower, the Guarantor or any Material
Subsidiary (or any combination of Subsidiaries that, if treated as a
single Subsidiary, would at such time constitute a Material
Subsidiary) shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be
commenced against the Borrower, the Guarantor or any Material
Subsidiary (or any combination of Subsidiaries that, if treated as a
single Subsidiary, would at such time constitute a Material
Subsidiary) seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of 60 days; or an order for relief shall be entered against the
Borrower, the Guarantor or any Material Subsidiary (or any combination
of Subsidiaries that, if treated as a single Subsidiary, would at such
time constitute a Material Subsidiary) under the federal bankruptcy
laws as now or hereafter in effect;
(j) (i) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of $1,000,000
which it shall have become liable to pay under Title IV of ERISA; or
(ii) notice of intent to terminate a Material Plan shall be filed
under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or (iii) any member
of the ERISA Group has been notified in writing that the PBGC has
instituted proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to
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be appointed to administer any Material Plan; or (iv) a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or (v)
any of the events described in clause (iii) above shall occur with
respect to any Other Plan or Other Plans (other than a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA) (A) that have
aggregate Unfunded Liabilities in excess of $1,000,000 and (B) with
respect to which either (1) one or more members of the ERISA Group
have engaged in a transaction or transactions described in Section
4069 of ERISA or (2) one or more members of the ERISA Group is a
member of the "controlled group" under Section 412(c)(11) of the
Internal Revenue Code or Section 4001(a)(14) of ERISA; or (vi) there
shall occur a complete or partial withdrawal from, or a default,
within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more (A) multiemployer plans, within the meaning of Section
4001(a)(3) of ERISA (which plans are not Multiemployer Plans), with
respect to which a member of the ERISA Group shall have engaged,
within the previous five plan years, in a transaction described in
Section 4212(c) of ERISA, or (B) Multiemployer Plans, which could
reasonably be expected to result in the incurrence by one or more
members of the ERISA Group of a current payment obligation in excess
of $1,000,000; provided that no Event of Default shall occur under
clause (v) or (vi) if (A) the Unfunded Liabilities of the Other Plans
in respect of which events described in clause (v) have occurred,
together with the current payment obligations that could reasonably be
expected to result from complete or partial withdrawals or defaults
described in clause (vi), shall not exceed $2,500,000 and (B) each
member of the ERISA Group that could reasonably be expected to be
liable for such Unfunded Liabilities or current payment obligations is
diligently contesting, in good faith, by appropriate proceedings,
the imposition of such liabilities of obligations;
(k) the Borrower or any of the Guarantor's other
subsidiaries party thereto shall fail to observe or perform any of its
obligations under the Pledge Agreement;
(l) (i) one or more judgments or orders for the
payment, in the aggregate, of money in excess of $20,000,000 shall be
rendered against the Guarantor or any of its Subsidiaries and such
judgments or orders shall continue unsatisfied and unstayed for a
period of
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30 days or (ii) one or more judgments or orders shall be rendered
against the Guarantor or any of its Subsidiaries, which judgments or
orders shall be stayed on condition that a bond or collateral equal to
or greater than, in the aggregate, $250,000,000 be posted or provided,
and such judgments or orders shall not be overturned or lifted within
a period of 10 days;
(m) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 25% or more of the outstanding shares of common stock of the
Guarantor; or
(n) the Pledge Agreement shall at any time after the
Effective Date, for any reason (other than solely due to actions taken
by the Agent or any Bank) fail to create perfected Liens in favor of
the Secured Parties on the Collateral, securing all of the Secured
Obligations purported to be secured thereby, subject to no other Liens
other than Liens permitted under Section 5.11(xiii) as to which the
Liens created under the Pledge Agreement have priority;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 66 2/3% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, and (ii)
if requested by Banks holding more than 66 2/3% of the sum of (A) the aggregate
principal amount of the Loans and (B) the aggregate Letter of Credit Exposures,
by notice to the Borrower declare the Notes and any Reimbursement Obligations
(together with accrued interest thereon and all fees, commissions and other
amounts payable by the Borrower hereunder) to be, and the same shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of Default specified in clause
(h) or (i) above with respect to the Borrower or the Guarantor, without any
notice to the Borrower or the Guarantor or any other act by the Agent or the
Banks, the Commitments shall thereupon terminate and the Notes and any
Reimbursement Obligations (together with accrued interest thereon and all fees,
commissions and other amounts payable by the Borrower hereunder) shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower and the
Guarantor.
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SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give
notice to the Borrower under Section 6.01(c) or 6.01(d) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks and the
Issuing Bank thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Financing Documents as are delegated to
the Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under the Financing Documents as
any other Bank and may exercise or refrain from exercising the same as though
it were not the Agent or the Issuing Bank, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Guarantor or any Subsidiary
or affiliate of the Guarantor as if it were not the Agent or the Issuing Bank
hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with
legal counsel (who may be counsel for the Borrower or the Guarantor),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or not taken by it in connection herewith (a) with the consent or at the
request of the Required Banks or (b) in the absence of its own gross negligence
or willful misconduct. Neither the Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to
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ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with the Financing Documents or any borrowing or letter of
credit hereunder, (ii) the performance or observance of any of the covenants or
agreements of the Guarantor or any of its Subsidiaries party to any Financing
Document, (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to the Agent, or (iv) the
validity, effectiveness or genuineness of any Financing Document or any other
instrument or writing furnished in connection therewith. The Agent shall not
incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in
accordance with its Total Exposure, indemnify the Agent (to the extent not
reimbursed by the Borrower or the Guarantor) against any cost, expense
(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from the Agent's gross negligence or willful
misconduct) that the Agent may suffer or incur in connection with any Financing
Document or any action taken or omitted by the Agent hereunder or thereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent, the Issuing Bank or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent, the Issuing Bank or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time,
effective upon the appointment of a successor Agent and such successor Agent's
acceptance of such appointment, by giving written notice thereof to the Banks,
the Issuing Bank and the Borrower. Upon the giving of any such notice of
resignation, the Required Banks (with, unless an Event of Default shall have
occurred and be continuing, the written consent of the Borrower (which shall
not be unreasonably withheld)) shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring
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Agent gives notice of resignation, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a commercial bank
organized or licensed under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$1,000,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After the
effectiveness of any retiring Agent's resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Loan:
(a) the Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered
to the Reference Banks in the relevant market for such Interest
Period, or
(b) Banks having 50% or more of the aggregate principal
amount of the affected Loans advise the Agent that the Adjusted CD
Rate or the Adjusted London Interbank Offered Rate, as the case may
be, as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their CD Loans or Euro-Dollar Loans,
as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to convert
outstanding Loans into CD Loans or Euro-Dollar Loans shall be suspended and
(ii) each outstanding CD Loan
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or Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of
the then current Interest Period applicable thereto. Unless the Borrower
notifies the Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.
SECTION 8.02. ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank (or its
Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank notifies the Borrower
and the Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert
outstanding Domestic Loans into Euro-Dollar Loans, shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such notice is given, each
Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base
Rate Loan either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Bank may lawfully continue to
maintain and fund such Loan to such day or (b) immediately if such Bank shall
determine that it may not lawfully continue to maintain and fund such Loan to
such day.
SECTION 8.03. INCREASED COST AND REDUCED RETURN.
(a) If on or after the date hereof the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request
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or directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its Fixed
Rate Loans, its Note or its obligation to make Fixed Rate Loans, or
shall change the basis of taxation of payments to any Bank (or its
Applicable Lending Office) of the principal of or interest on its
Fixed Rate Loans or any other amounts due under this Agreement in
respect of its Fixed Rate Loans or its obligation to make Fixed Rate
Loans (except for changes in the rate of tax on the overall net income
of such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding (A) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage or
Assessment Rate and (B) with respect to any Euro-Dollar Loan any such
requirement included in a Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Note or its obligation
to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If, after the date hereof, the adoption of any applicable law,
rule or regulation, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority,
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central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Issuing Bank or any Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall either (i) impose, modify or
deem applicable any reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System) against letters of credit issued by the Issuing
Bank or participations in letters of credit by any Bank or (ii) impose on the
Issuing Bank or any Bank any other condition (including, without limitation,
any assessment for federal deposit insurance) regarding any Letter of Credit,
the Issuing Bank's obligation to issue any Letter of Credit or any Bank's
obligation to pay the Issuing Bank its ratable share of any drawing under any
Letter of Credit, and the result of any event referred to in clause (i) or (ii)
of this subsection is to increase the cost to the Issuing Bank or such Bank of
issuing or maintaining any Letter of Credit or participating therein or making
any payment under any Letter of Credit (which increase in cost shall be
determined on the basis of the Issuing Bank's or such Bank's reasonable
allocation of the aggregate of such cost increases resulting from such events),
then, within 15 days after demand by the Issuing Bank or such Bank (with a copy
to the Agent), the Borrower shall pay to the Issuing Bank or such Bank such
additional amount or amounts as will compensate the Issuing Bank or such Bank
for such increased cost.
(c) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on capital of such Bank
(or its Parent) as a consequence of such Bank's obligations hereunder or under
or with respect to the Letters of Credit (including any participation therein)
to a level below that which such Bank (or its Parent) could have achieved but
for such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank
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such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(d) Each of the Issuing Bank and the Banks will promptly notify
the Borrower and the Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation pursuant to
this Section. Each Bank will designate a different Applicable Lending Office
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in its judgment, be otherwise disadvantageous to it.
A certificate of the Issuing Bank or any Bank claiming compensation under this
Section and setting forth in reasonable detail an explanation of the basis for
requesting such compensation and stating the additional amount or amounts to be
paid to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, the Issuing Bank or such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03(a) with respect to its CD Loans or Euro-Dollar
Loans or its obligation to make CD Loans or Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
through the Agent, have elected that the provisions of this Section shall apply
to such Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) all Loans which would otherwise be made by such Bank
as (or continued as or converted to) CD Loans or Euro-Dollar Loans,
as the case may be, shall instead be made as (or continued as or,
effective (i) on the last day of the then current Interest Period
applicable thereto unless clause (b) of the last sentence of Section
8.02 shall apply or (ii) immediately upon the giving of notice
referred to in such sentence if such clause (b) shall apply, converted
to) Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as
the case may be, has been repaid (or converted to a Base Rate Loan),
all payments of principal which would otherwise be applied to repay
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such Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or a Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.05. HLT CLASSIFICATION. If, after the date hereof, the
Agent determines that, or the Agent is advised by any Bank that such Bank has
received notice from any governmental authority, central bank or comparable
agency having jurisdiction over such Bank that, Loans hereunder are classified
as a "highly leveraged transaction" as defined under applicable law or
regulation on the date hereof (an "HLT Classification"), the Agent shall
promptly give notice of such HLT Classification to the Borrower and the other
Banks. The Agent, the Banks and the Borrower shall commence negotiations in
good faith to agree on the extent to which fees, commissions, interest rates
and/or margins hereunder should be increased so as to reflect such HLT
Classification. If the Borrower and Banks having more than 50% in aggregate
amount of the Commitments agree on the amount of such increase or increases,
this Agreement may be amended to give effect to such increase or increases as
provided in Section 10.05. If the Borrower and Banks having more than 50% in
aggregate amount of the Commitments fail to so agree within 45 days after
notice is given by the Agent as provided above, then the Agent shall, if
requested by Banks having 50% or more in aggregate amount of the Commitments,
by notice to the Borrower, increase the interest rate per annum otherwise
applicable to all loans and all unpaid amounts with respect to Letters of
Credit and the rate per annum applicable to commitment fees and letter of
credit commissions, in each case, by 1-3/4%, effective as of the date of
delivery of such notice. The Banks acknowledge that an HLT Classification is
not a Default or an Event of Default hereunder.
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ARTICLE IX
GUARANTY
SECTION 9.01. THE GUARANTY. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment
of all Reimbursement Obligations and all other amounts payable by the Borrower
or any other Subsidiary of the Guarantor under any Financing Document. The
obligations guaranteed hereby shall include, without limitation, any interest,
costs, fees and expenses which accrue on or with respect to any of the
foregoing, whether before or after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of any
one or more than one of the Guarantor or any of its Subsidiaries, and any such
interest, costs, fees and expenses that would have accrued thereon or with
respect thereto but for the commencement of such case, proceeding or other
action. Upon failure by the Borrower or any such Subsidiary to pay punctually
any such amount, the Guarantor shall forthwith on demand pay the amount not so
paid at the place and in the manner specified in the applicable Financing
Document.
SECTION 9.02. GUARANTY UNCONDITIONAL. The obligations of the
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by, and the Guarantor, to the extent permitted by applicable law,
hereby waives any defense to any of its obligations hereunder that might
otherwise be available to it on account of:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Borrower or any
other Subsidiary of the Guarantor under any Financing Document, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to
any Financing Document;
(iii) any modification, amendment, waiver, release,
non-perfection or invalidity of any direct or indirect security, or of
any guarantee or any liability of any third party, for any obligation
of the Borrower or any other Subsidiary of the Guarantor under any
Financing Document;
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(iv) any change in the corporate existence, structure or
ownership of the Borrower or any other Subsidiary of the Guarantor, or
any insolvency, bankruptcy, reorganization or other similar proceeding
affecting the Borrower or any such Subsidiary or any of their
respective assets or any release or discharge of any obligation of the
Borrower or any such Subsidiary contained in any Financing Document;
(v) the existence of any claim, set-off or other rights
which the Guarantor may have at any time against the Borrower or any
other Subsidiary of the Guarantor, the Agent, the Issuing Bank, any
Bank or any other Person, whether or not arising in connection
herewith or with any Financing Document; provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Borrower or any other Subsidiary of the Guarantor for any
reason of any Financing Document, or any provision of applicable law
or regulation purporting to prohibit the payment by the Borrower or
any such Subsidiary of the principal of or interest on any Note or any
Reimbursement Obligation or other amount payable by the Borrower or
any such Subsidiary under any Financing Document; or
(vii) any other act or omission to act or delay of any kind
by the Borrower, any other Subsidiary of the Guarantor, the Agent, the
Issuing Bank, any Bank or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Guarantor's
obligations hereunder.
SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT
IN CERTAIN CIRCUMSTANCES. The Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated, the
principal of and interest on the Notes and all Reimbursement Obligations and
other amounts payable by the Borrower or any other Subsidiary of the Guarantor
under any Financing Document shall have been paid in full and the Letter of
Credit Exposures of all Banks shall have been reduced to zero. If at any time
any payment of the principal of or interest on any Note or any Reimbursement
Obligation or any other amount payable by the Borrower or any such Subsidiary
under any Financing Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Borrower or
any such
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Subsidiary or otherwise, the Guarantor's obligations hereunder with respect to
such payment shall be reinstated as though such payment had been due but not
made at such time.
SECTION 9.04. WAIVER BY THE GUARANTOR. The Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Borrower, any other Subsidiary of the Guarantor
or any other Person or any property subject to any Lien securing any
obligations of the Borrower, the Guarantor or any of its Subsidiaries.
SECTION 9.05. SUBROGATION. Upon making any payment with respect to
the Borrower or any other Subsidiary of the Guarantor hereunder, the Guarantor
shall be subrogated to the rights of the payee against the Borrower or such
Subsidiary with respect to such payment; provided that the Guarantor shall not
enforce against the Borrower or any other Subsidiary of the Guarantor any
payment by way of subrogation or contribution until all amounts of principal of
and interest on the Notes, all Reimbursement Obligations and all other amounts
payable by the Borrower under this Agreement have been paid in full and the
Letter of Credit Exposures of all Banks have been reduced to zero.
SECTION 9.06. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower or any Subsidiary of the
Guarantor under any Financing Document is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower or such Subsidiaries, all such
amounts otherwise subject to acceleration under the terms of the Financing
Documents shall nonetheless be payable by the Guarantor hereunder forthwith on
demand by the Agent made at the request of the requisite proportion of the
Banks specified in Article VI of this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower, the Guarantor, the Issuing Bank or the
Agent, at its address or telex or facsimile transmission number set forth on
the signature pages hereof,
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(y) in the case of any Bank, at its address or telex or facsimile
transmission number set forth in its Administrative Questionnaire or (z) in the
case of any party, at such other address or telex or facsimile transmission
number as such party may hereafter specify for the purpose by notice to the
Agent and the Borrower. Each such notice, request or other communication shall
be effective (i) if given by telex, when such telex is transmitted to the telex
number specified in or pursuant to this Section and the appropriate answerback
is received, (ii) if given by facsimile transmission, when such facsimile is
transmitted to the facsimile transmission number specified in or pursuant to
this Section and telephonic confirmation of receipt thereof is received, (iii)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iv) if given by
any other means, when delivered at the address specified in or pursuant to this
Section; provided that notices to the Agent or the Issuing Bank under Article
II or Article VIII shall not be effective until received.
SECTION 10.02. NO WAIVERS. No failure or delay by the Agent, the
Issuing Bank or any Bank in exercising any right, power or privilege under any
Financing Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) The
Borrower shall pay (i) all out-of-pocket expenses of the Agent and the Issuing
Bank, including reasonable fees and disbursements of any special counsel to the
Agent, in connection with the preparation of the Financing Documents, any
waiver or consent thereunder or any amendment thereof or any Default or alleged
Default thereunder and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by the Agent, the Issuing Bank or any Bank, including
reasonable fees and disbursements of counsel, including in-house counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom. The Borrower shall
indemnify each Bank, the Agent and the Issuing Bank against (A) any transfer
taxes, documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of the Financing Documents
and (B) all costs, expenses and taxes, assessments or other
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charges incurred in connection with any filing, registration, recording or
perfection of any Lien contemplated by any of the Financing Documents or any
document referred to therein or the filing or recording of any termination
statement with respect to the release of any Lien on any Collateral.
(b) The Borrower agrees to indemnify the Agent, each Bank and the
Issuing Bank and hold the Agent, each Bank and the Issuing Bank harmless from
and against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by the Agent, any Bank or the Issuing Bank in
connection with any investigative, administrative or judicial proceeding
(whether or not the Agent, such Bank or the Issuing Bank shall be designated a
party thereto) relating to or arising out of the Financing Documents or any
actual or proposed use of Letters of Credit or proceeds of Loans hereunder;
provided that neither the Agent nor the Issuing Bank or any Bank shall have the
right to be indemnified hereunder for its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 10.04. SHARING OF SET-OFFS. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it and its participation in any Reimbursement
obligation and interest (if any) thereon (collectively, its "Relevant Debt")
which is greater than the proportion received by any other Bank in respect of
the Relevant Debt of such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Relevant Debt of the
other Banks, and such other adjustments shall be made, as may be required so
that all such payments with respect to the Relevant Debt of the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its Relevant Debt. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note or Reimbursement Obligation,
whether or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
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SECTION 10.05. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower, the Guarantor and the
Required Banks (and, if the rights or duties of the Issuing Bank or the Agent
are affected thereby, by the Agent or the Issuing Bank, as the case may be);
provided that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease any Commitment of any Bank (except for a
ratable decrease in the Commitments of the applicable Class of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
the rate of interest on any Loan or Reimbursement Obligation or any commissions
or fees hereunder, except as provided below, (iii) postpone the date fixed
pursuant to Section 2.05, 2.06, 2.07, 2.08 or 2.10 for any payment of principal
of or interest on any Loan or Reimbursement Obligation or any commissions or
fees hereunder or for the termination of any Commitment, (iv) agree to release
all or substantially all of the Collateral, (v) release the Guarantor or any
Material Subsidiary from its obligations under Article IX or the Subsidiary
Guaranty (other than pursuant to the terms thereof) or (vi) change the
percentage of the Commitments, the aggregate unpaid principal amount of the
Notes or the Loans or of the aggregate Letter of Credit Exposures, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement; and
provided, further, that this Agreement may be amended to give effect to any
increased fees, commissions, interest rates and/or margins agreed upon pursuant
to Section 8.05 or to reduce or rescind any such increases previously agreed
upon pursuant to Section 8.05, if such amendment is in writing and is signed by
the Borrower and Banks having more than 50% in aggregate amount of the
Commitments.
SECTION 10.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither the Borrower
nor the Guarantor may assign or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of all
Banks.
(b) Any Bank may, without the consent of the Borrower, the
Guarantor, the Agent or the Issuing Bank, upon notice to the Borrower, the
Agent and, if any participating interest in any Letter of Credit or Revolving
Commitment is to be so granted, the Issuing Bank, grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitments or any or all of
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its Loans or its participations in Letters of Credit; provided that each
participating interest shall represent an aggregate interest therein of at
least $1,000,000. In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower, the
Agent and the Issuing Bank, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the Agent and the
Issuing Bank shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii) or (iii) of Section 10.05
without the consent of the Participant. The Borrower and the Guarantor agree
that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Article VIII with respect to its
participating interest. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit I hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower or the Guarantor, which shall not be unreasonably
withheld, the Agent and, if any participation in any Letter of Credit or
Revolving Commitment is to be assigned, the Issuing Bank; provided that if an
Assignee is, prior to such assignment, a Bank or an affiliate of a Bank, no
such consent shall be required; and provided further that, (i) unless the
Loans, Commitments and participations in Letters of Credit assigned shall
constitute all Loans, Commitments and participations in Letters of Credit of
such assignor Bank, the aggregate principal amount of the Loans, Commitments
and participations in Letters of Credit assigned shall not be less than
$10,000,000 and (ii) any such assignment shall include a pro rata portion of
the assigning
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Bank's Revolving Commitment, Revolving Loans and participations in Letters of
Credit, on the one hand, and Term Loans and Term Commitments, on the other
hand. Upon the execution and delivery of such instrument, payment by such
Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee and delivery of notice to
the Borrower, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with Commitments as set forth in
such instrument of assumption, and the transferor Bank shall be released from
its obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note
is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500; provided that no such fee shall be
required if the Assignee is, prior to any such assignment, an affiliate of such
Bank. If the Assignee is not incorporated under the laws of the United States
of America or a state thereof, it shall, prior to the first date on which
interest, fees or commissions are payable hereunder for its account, deliver to
the Borrower and the Agent (and, in the case of any such Assignee to whom any
Letter of Credit Exposure or Revolving Commitment has been assigned, the
Issuing Bank) certification as to exemption from deduction or withholding of
any United States federal income taxes in accordance with Section 2.16.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02 or 8.03 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 10.07. MARGIN STOCK. Each of the Banks represents to the
Agent, the Issuing Bank and each of the other Banks that it in good faith is
not relying upon any
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"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. THE BORROWER AND THE GUARANTOR HEREBY
SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THE
BORROWER AND THE GUARANTOR IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH EITHER OF THEM MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 10.09. PLEDGE AGREEMENT. The Issuing Bank, the Agent and the
Banks each consents and agrees to the terms of the Pledge Agreement.
SECTION 10.10. COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the Subsidiary Guaranty and the Pledge Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof.
SECTION 10.11. CONFIDENTIALITY. Each Bank agrees not to disclose to
any Person other than the Agent or another Bank any information delivered or
made available by the Guarantor or any of its Subsidiaries to it and indicated
in writing as confidential; provided that nothing herein shall prevent any Bank
from disclosing such information (a) to any other Person who is a director,
officer or employee of such Bank or any of its affiliates if reasonably
incidental to the administration of the Loans, (b) upon the order of any court
or administrative agency, (c) upon the request or demand of, or pursuant to any
regulation of, any regulatory agency or authority, (d) which had been publicly
disclosed other than as a result of a disclosure by the Agent or any Bank
prohibited by this Agreement, (e) in connection with any litigation related to
the transactions contemplated by the Financing Documents to which the Agent,
any Bank or its subsidiaries or parent may be a party, (f)
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to the extent reasonably required in connection with the exercise of any remedy
hereunder, (g) to such Bank's or Agent's legal counsel or independent auditors
and (h) to any actual or proposed Assignee or Participant of all or part of its
rights hereunder provided that such actual or proposed Assignee or Participant
agrees in writing to be bound by the provisions of this Section.
SECTION 10.12. RELEASE OF EXISTING LIENS. Each Bank that is an
Existing Bank hereby agrees, in its capacity as an Existing Bank, and the Agent
hereby agrees, in its capacity as agent under the Existing Credit Agreement, in
each case effective on the Effective Date, to the release of all Liens under
the Existing Security Documents.
SECTION 10.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
GUARANTOR, THE AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
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<PAGE> 1
EXHIBIT 10.52
[EXECUTION COPY]
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of December 30, 1994 among BEVERLY CALIFORNIA
CORPORATION, a California corporation (the "Borrower"), BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Guarantor"), the BANKS listed on the
signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent and Issuing Bank.
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered
into a Credit Agreement dated as of November 1, 1994 (the "Credit Agreement");
and
WHEREAS, the parties hereto desire to amend the Credit
Agreement as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to "this
Agreement" and each other similar reference contained in the Credit Agreement
shall from and after the date hereof refer to the Credit Agreement as amended
hereby.
SECTION 2. Amendment of Section 1.01 of the Credit
Agreement. The definition of "Consolidated Net Capital Expenditures" in
Section 1.01 of the Credit Agreement is hereby amended to read as follows:
"Consolidated Net Capital Expenditures" means, for any period,
the sum, without duplication, of (i) the total amount of additions
to property and equipment of the Guarantor and its Consolidated
Subsidiaries during such period of the types classified as "Capital
expenditures" on the consolidated statement of cash flows included in
the Base Financials and (ii) all Investments made by the Guarantor or
any of its Subsidiaries during such period in Beverly Japan
Corporation; provided that "Consolidated Net Capital Expenditures"
shall exclude (A) the application of insurance or condemnation
proceeds to rebuilding facilities and (B) the amount of any Debt
incurred or
<PAGE> 2
assumed for the purpose of financing all or any part of the cost of
constructing any asset to the extent that such amount does not
exceed 75% of the cost of acquiring or constructing such asset.
SECTION 3. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts; Effectiveness. This
Amendment may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Amendment shall become effective as of the
date hereof when the Agent shall have received duly executed counterparts
hereof signed by the Borrower, the Guarantor and the Required Banks (or, in
the case of any party as to which an executed counterpart shall not have been
received, the Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party).
2
<PAGE> 1
IRREVOCABLE TRUST AGREEMENT
FOR THE BEVERLY ENTERPRISES, INC.
EXECUTIVE BENEFIT PLANS
This Agreement made and executed this ___ day of January, 1995, by and
between Beverly Enterprises, Inc., a Delaware corporation ("Company") and
Chemical Bank, a New York banking corporation ("Trustee").
WHEREAS, Company has adopted the Beverly Enterprises, Inc. Executive
Life Insurance Plan, the Beverly Enterprises, Inc. Change in Control Severance
Agreement/Beverly Enterprises, Inc. Severance Program for Executives, and
entered into one (1) or more employment agreements (including, without
limitation, an Employment Contract with David R. Banks) (collectively, the
"Plans"); and
WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plans with respect to the individuals participating in such
Plans; and
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plans; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purpose of providing deferred compensation
for a select group of the Company's management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"); and
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) Company hereby deposits with Trustee, IN TRUST, $_________,
which shall become the initial principal of the Trust to be held, administered
and disposed of by Trustee as provided in this Trust Agreement.
<PAGE> 2
(b) The Trust hereby established is revocable by the Company, but
shall become irrevocable upon a Change of Control, as defined herein.
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly. All income, deductions and credits attributable to the
Trust belong to Company as owner for income tax purposes, will be included on
Company's income tax returns and taxes attributable to the Trust shall be paid
by Company. The parties hereto agree that any federal, state or local tax
returns required to be filed with respect to the Trust shall be prepared and
filed by Company and submitted to Trustee for signature and such review as
Trustee deems appropriate, in a timely manner.
(d) The principal of the Trust, together with additional Company
contributions, investments made therewith, reinvestment of proceeds thereof,
and any earnings thereon, less any expenses, taxes, and distributions payable
hereunder, shall be held, IN TRUST, separate and apart from other funds of
Company and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan participants and
their beneficiaries shall have no preferred claim on, or any legal or
beneficial ownership interest in, any assets of the Trust. Any rights created
under the Plans and this Trust Agreement shall be mere unsecured contractual
rights of Plan participants and their beneficiaries against Company. Any
assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein. In addition, nothing in this Trust shall be deemed to
create a fiduciary relationship between the Plan participants and
beneficiaries, on the one hand, and the Trustee or Company, on the other hand.
(e) Company, in its sole discretion, may at any time, or from time
to time, make additional deposits with Trustee of cash or other property
acceptable to Trustee, IN TRUST, to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
Trustee shall have no right to compel any such additional deposits. In
addition, except as provided in Section 1(f) below, neither any Plan
participant nor any beneficiary shall have any right to compel such additional
deposits.
(f) Immediately prior to a Change of Control, as defined in
Section 13(e) herein, to the extent that the Trust has not previously been
funded sufficiently to pay all Plan benefits, Company shall make an irrevocable
contribution to the Trust in an amount that is sufficient to pay or provide for
each Plan participant or beneficiary all the benefits to which Plan
participants or their beneficiaries would be entitled pursuant to
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<PAGE> 3
the terms of the Plans (whether or not immediately payable) if each such
participant's employment were involuntarily terminated (other than for Cause)
immediately after such Change of Control.
(g) Trustee's responsibilities, obligations and duties with
respect to the Trust shall be solely those set forth in this Trust Agreement.
Trustee shall have no responsibility to (i) require any deposits to be made to
the Trust pursuant to the terms of the Plan(s), (ii) compute the required
amount of deposits, if any, required to be made to the Trust pursuant to the
terms of the Plan(s), (iii) determine whether amounts received by Trustee
comply with the terms of the Plan(s), or (iv) administer the Plans. In the
event of any conflict between this Trust Agreement and any provision of the
Plan(s) relating to any of Trustee's responsibilities, obligations or duties
with respect to the Trust, the provisions of this Trust Agreement shall
control.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Within six (6) months of the effective date hereof, Company
shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plans), and the time of
commencement for payment of such amounts. Company shall update such Payment
Schedule at least once each year; provided, however, that upon a Change of
Control, the amounts listed on such Payment Schedule cannot be decreased and
the timing set forth therein cannot be extended or delayed, as compared to the
Payment Schedule in force immediately prior to such Change of Control. Except
as otherwise provided herein, Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with the current Payment
Schedule (or, if greater, the Payment Schedule in effect immediately prior to
Change of Control). Company shall provide Trustee on a timely basis with
written directions setting forth the amount of federal, state or local taxes to
be withheld, paid and reported to the appropriate taxing authorities in respect
of any such payments. Trustee shall make provision for the reporting and
withholding of any such taxes that may be required to be withheld and Trustee
shall either pay amounts so directed to be withheld to the appropriate taxing
authorities or to Company to be forwarded to such authorities.
(b) Subject to Section 2(c) below, the entitlement of a Plan
participant or his or her beneficiaries to benefits under the Plans shall be
determined by Company or such party as it shall designate under the Plans, and
any claim for such benefits shall be considered and reviewed under the
procedures set out in the Plans. Subject to Section 2(d) below, Company agrees
that if
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<PAGE> 4
a benefit is due and owing to a participant or beneficiary under the Plans, the
participant's or beneficiary's right to payment of whatever assets are
available in this Trust for his benefit at that time shall not be contested by
Company. Notwithstanding the above, the Trustee may make payments before they
would otherwise be due if, based on a change in the federal tax or revenue
laws, a published ruling or similar announcement issued by the Internal Revenue
Service, a regulation issued by the Secretary of the Treasury, a decision by a
court of competent jurisdiction involving a Plan participant or his
beneficiary, or a closing agreement made under section 7121 of the Internal
Revenue Code that is approved by the Internal Revenue Service and involves a
Plan participant, it determines that a Plan participant has or will recognize
income for federal income tax purposes with respect to amounts that are or will
be payable under the Plans before they are to be paid.
(c) In the event that the Company shall fail or refuse to direct
the Trustee to pay to a Plan participant or his beneficiary any amount due and
payable to such Plan participant or his beneficiary under the terms of the
Plans, the Trustee, provided this Trust has not then terminated or ceased or
suspended payments pursuant to Section 3 hereof, shall promptly pay such amount
to the Plan participant or his beneficiary, as appropriate, upon satisfaction
of all of the following conditions:
(1) the Plan participant or his beneficiary presents a
sworn written statement subject to penalty of perjury (substantially
in the form of Exhibit A hereto) to the Trustee and the Company
simultaneously that such amount is due and payable;
(2) upon receipt of notice, Trustee confirms the
Company's receipt of notice of such demand by sending a copy of such
notice (by registered or certified mail) to the Company within ten
(10) business days after Trustee's receipt of such notice; and
(3) the Company confirms the Plan participant's or
beneficiary's right to payment, or fails to provide a controverting
affidavit to Trustee denying the Plan participant's or beneficiary's
right to payment under the terms of the Plans and this Trust within
fifteen (15) days after the Company's initial receipt of notice of
demand for payment under paragraph (c)(1).
In the event that the Company provides a controverting affidavit to the Trustee
disputing the Plan participant's or beneficiary's right to payment under the
terms of the Plans and this Trust, the Trustee shall pay the disputed amount
into court pending a judicial resolution of such Plan participant's or
beneficiary's right to payment.
(d) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plans. Company shall notify Trustee in writing, prior to the time amounts are
payable to participants or their beneficiaries, of its decision to make such
benefit payments directly, and, after such payments are made, shall certify to
Trustee in writing the payment thereof. In addition, if the
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<PAGE> 5
principal of the Trust, and any earnings thereon, are not sufficient to make
payments of benefits in accordance with the terms of the Plans, Company shall
make the balance of each such payment as it falls due. Trustee shall notify
Company where principal and earnings are not sufficient under the Payment
Schedule.
(e) Company shall maintain any accounts required to be maintained
for each Participant under the Plans. Trustee shall not maintain any separate
accounts under this Trust Agreement with respect to any Plan or Participant.
All distributions payable on or as of a certain distribution date on a Payment
Schedule shall be paid out of the Trust Fund on a pro rata basis if the Trust
has insufficient assets from which to make all distributions called for under
any Payment Schedule as of that date. For purposes of the foregoing sentence;
(i) any payments not made as of an earlier distribution date for any reason
(including Section 3(b)(3)) shall be paid on the next distribution date without
priority, and (ii) amounts payable to or on account of a Participant under any
Payment Schedule as of the same distribution date shall be aggregated.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company under federal and state law as set
forth below.
(1) The Chairman of the Board of Directors and the Chief
Executive Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company has
become Insolvent, Trustee shall determine by written inquiry of the
Chairman of the Board of Directors and the Chief Executive Officer of
Company whether Company is Insolvent, and, pending such determination,
Trustee shall discontinue payment of benefits to Plan participants or
their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received written notice or confirmation from
Company of Company's Insolvency as provided in Section 3(b)(1) above,
Trustee shall have no duty to inquire whether Company is Insolvent and
shall administer the Trust as though Company were solvent. Trustee
may in all events rely on such evidence concerning Company's solvency
as may be furnished to Trustee in writing and that provides Trustee
with a reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent as hereinabove provided, Trustee shall discontinue payments
to Plan participants or their
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<PAGE> 6
beneficiaries and shall hold the assets of the Trust for the benefit
of Company's general creditors until it receives a court order
directing the disposition of the Trust Fund, or, if Company becomes
solvent without the entering of any such order, the Chairman of the
Board of Directors or Chief Executive Officer of Company informs
Trustee in writing that Company is no longer Insolvent. Nothing in
this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plans or
otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of
this Trust Agreement only after Trustee has determined that Company is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance, as certified to Trustee
in writing by Company.
(d) Notwithstanding anything herein to the contrary, during the
period of Company Insolvency, Trustee may deduct or continue to deduct its fees
and expenses, pending such court order or a notification of solvency.
SECTION 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return
to Company or to divert to others any of
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<PAGE> 7
the Trust assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the Plans, as
certified to Trustee in writing by the Company.
SECTION 5. INVESTMENT AUTHORITY.
(a) General. In administering this Trust and investing the assets
held hereunder, except as expressly limited herein, but subject to any
investment guidelines agreed to from time to time in writing by Company and
Trustee (and any designated affiliate of Trustee), the Trustee or its
designated affiliate (provided such affiliate qualifies as an "Investment
Manager" under Section 3(38) of ERISA), shall have all the powers, rights and
duties provided for hereunder to acquire, dispose of, or otherwise manage the
assets, including specifically the right to retain any non cash property
transferred to the Trustee by the Company, without any duty to sell, exchange,
invest or reinvest any such property, and without liability for any
depreciation or loss occasioned by such retention. The Trustee (or its
designated affiliate) shall have the authority to invest and reinvest the Trust
assets, without distinction between principal and income, in bonds, debentures,
convertible debentures, stocks, and other securities, promissory notes, common
or preferred stocks with or without par value, certificates of deposit or
demand or time deposits (including any such deposits with Trustee or an
affiliate thereof), commercial paper, money market instruments, government
bonds, bills or notes, mutual funds, common funds, collective and group trusts,
shares or units of investment companies (notwithstanding that Trustee or any
affiliate acts as investment advisor, custodian, transfer agent, registrar,
sponsor, distributor or manager), and bank depositary contracts. The Trustee
(or its designated affiliate) shall have the right, power and authority to do
on behalf of this Trust all things which, in its sole judgment, are necessary,
proper or desirable to carry out the above-described duties and
responsibilities; provided, however, that the Trustee (or its designated
affiliate) is expressly prohibited from exercising any of its powers primarily
for the benefit of the Company rather than for the benefit of the Plan
participants and their beneficiaries (and, as provided in Section 3 hereof, for
the creditors of the Company). Prior to a Change of Control, the Company may
direct the Trustee (or its designated affiliate) as to the investment of Trust
assets and exercise of rights associated therewith, but in no event shall the
Plan participants or beneficiaries have any investment authority hereunder or
other rights associated with the Trust assets. After a Change of Control, the
Company shall have no right to direct investments or have any other rights
associated with the assets of the Trust.
(b) Employer Securities. Trustee may, and, upon written direction
of the Company prior to a Change of Control, shall, invest in securities
(including stock or rights to acquire stock) or obligations issued by Company,
and may reinvest any dividends thereon in Company securities. Trustee shall
have full voting rights with respect to any Company securities held by it after
a Change of Control. Prior to a Change of Control, the Company shall have full
voting rights with respect to any Company securities held hereunder.
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<PAGE> 8
(c) Substitution of Trust Assets. Prior to a Change in Control,
Company shall have the right at any time, and from time to time in its sole
discretion, to substitute assets of equal fair market value for any asset held
by the Trust. This right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary capacity.
(d) Short Term Investments. Unless otherwise directed in writing
by Company, at the end of each business day of Trustee, any then uninvested
cash held by Trustee as part of the Trust Fund shall be invested by Trustee in
securities of any management type investment company or trust registered
pursuant to the Investment Company Act of 1940, as amended, and designed to
invest primarily in short term securities, notwithstanding that Trustee or an
affiliate acts as investment advisor, custodian, transfer agent, registrar,
sponsor, distributor or manager or provides other services to the investment
company or trust. Trustee and/or its affiliates shall be entitled to fees for
services to such investment company in addition to any compensation payable to
Trustee hereunder.
(e) Nominees. Trustee shall have the power to register any
property of the Trust in its own name or in the name of one or more nominees,
with or without the addition of words indicating that such securities are held
in a fiduciary capacity, and to hold any securities in bearer form, and to
combine certificates representing such securities with certificates of the same
issue held by Trustee in other fiduciary or representative capacities or as
agent for customers, or to deposit or to arrange for the deposit of such
securities in any qualified central depository even though, when so deposited,
such securities may be merged and held in bulk in the name of the nominee of
such depository with other securities deposited therein by other depositors, or
to deposit or arrange for the deposit of any securities issued by the United
States Government, of any agency or instrumentality thereof, with a Federal
Reserve Bank, but the books and records of Trustee shall at all times show that
all such investments are assets of the Trust.
(f) Facilitation of Transactions. When Trustee delivers property
against payment, delivery of the property and receipt of payment may not be
simultaneous. The risk of non-receipt of payment shall be the Trust's and
Trustee shall have no liability therefor. All credits to the Trust of the
anticipated proceeds of sales and redemptions of property and of anticipated
income from property shall be conditional upon receipt by Trustee of final
payment and may be reversed to the extent final payment is not received. At
the discretion of Trustee, the Trust may make use of such conditional credits.
To the extent such credits do not become unconditional by receipt of final
payment, the Trust shall reimburse Trustee upon demand for the amount of such
conditional credits so used. When Trustee is to receive property, it is
authorized to accept documents in lieu of such property as long as such
documents contain the agreement of the issuer thereof to hold such property
subject to Trustee's sole order. Trustee may, in its discretion, advance funds
to the Trust to facilitate the settlement of any trade. In the event of such
an advance, the Trust shall immediately reimburse Trustee for the amount
thereof.
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SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
(a) Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing
between Company and Trustee. Within 90 days following the close of each
calendar year and within 90 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
(b) The account referred to in Section 7(a) shall be deemed to be
approved by Company unless protested by written notice to Trustee on or before
the due date (with extensions) of the IRS Form 5500 for the underlying Plan(s)
for the Plan Year in question, or, if no such Form 5500 is filed, the last day
of the 18th month following receipt thereof by Company.
(c) Trustee shall have the right to apply at any time to a court
of competent jurisdiction for judicial settlement of any account of Trustee not
previously settled as herein provided or for the determination of any question
of construction or for instructions. In any such action or proceeding it shall
be necessary to join as parties solely Trustee and Company (although Trustee
may also join such other parties as it may deem appropriate), and any judgment
or decree entered therein shall be conclusive and binding on all persons at any
time interested in the Trust.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act in good faith and in accordance with the
terms of this Agreement. In addition, to the extent, if any, required by
ERISA, Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is in conformity with the terms of this
Trust and is given in writing by Company. In the event of a dispute between
Company and a party, Trustee may apply to a court of competent jurisdiction to
resolve the dispute. Under no circumstances shall Trustee incur liability to
any person for any consequential, special, or punitive damages with respect
hereto.
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<PAGE> 10
(b) Trustee shall have no obligation to undertake or defend any
litigation arising in connection with this Trust, unless and until Company
agrees in writing to indemnify Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and expenses)
relating thereto and to be primarily liable for such payments. If Company does
not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust.
(c) Unless otherwise prohibited by ERISA, Company shall indemnify
and hold harmless Trustee and Trustee's affiliates, employees and directors for
any liability or expense (including, without limitation, advances for or prompt
reimbursement of reasonable fees and expenses of counsel and other agents)
imposed thereon or incurred thereby as a result of any good faith action taken
by Trustee or any failure to act by Trustee in either case pursuant to the
terms of this Trust Agreement or pursuant to the written directions of Company,
unless due to Trustee's gross negligence, willful or reckless misconduct, or
breach of this Agreement. This Section 8(c) shall survive the termination of
this Trust Agreement.
(d) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder, and, on or after a Change of Control of Company, if not paid by the
Company, the Trustee may compensate such counsel with assets of the Trust.
Prior to a Change of Control, such payments shall be as agreed to from time to
time by the Trustee and Company.
(e) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder, and, on and after a
Change of Control of Company, if not paid by the Company, the Trustee may
compensate them with assets of the Trust. Prior to a Change of Control, such
payments shall be as agreed to from time to time by the Trustee and Company.
(f) Trustee shall have, without exclusion, all powers and
obligations conferred on Trustees by ERISA and applicable New York law, unless
expressly provided otherwise herein, provided, however, that if an insurance
policy is held as an asset of the Trust, Trustee shall have no power to name a
beneficiary of the policy other than the Trust, to assign the policy (as
distinct from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(g) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or applicable law, Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
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<PAGE> 11
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay all administrative and Trustee's fees and reasonable
expenses agreed upon by Company and Trustee from time to time. Subject to the
provisions of Section 8 above, if not so paid, such fees and expenses shall be
paid from the Trust. Trustee's entitlement to reimbursement hereunder shall
not be affected by the resignation or removal of Trustee or the termination of
the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company,
which shall be effective 60 days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Except as provided below, Trustee may be removed by Company on
30 days written notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not
be removed by Company for two (2) years.
(d) If Trustee resigns or is removed within two (2) years of a
Change of Control, as defined herein, Trustee shall select a successor Trustee
in accordance with the provisions of Section 11(b) hereof prior to the
effective date of Trustee's resignation or removal.
(e) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 30 days after
receipt of notice of resignation, removal or transfer, unless Company extends
the time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal.
However, the Trustee cannot be a Plan participant or beneficiary, and at all
times must be independent
11
<PAGE> 12
of any Plan participant or beneficiary. The appointment shall be effective
when accepted in writing by the new Trustee, who shall have all of the rights
and powers of the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to evidence the
transfer.
(b) If Trustee resigns or is removed pursuant to the provisions of
Section 10(d) hereof and selects a successor Trustee, Trustee may appoint any
third party such as a bank trust department or other party that may be granted
corporate trustee powers under state law. However, the Trustee cannot be a
Plan participant or beneficiary, and at all times must be independent of any
Plan participant or beneficiary. The appointment of a successor Trustee shall
be effective when accepted in writing by the new Trustee. The new Trustee
shall have all the rights and powers of the former Trustee, including ownership
rights in Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by the successor Trustee to evidence the
transfer.
(c) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject
to Sections 5, 7 and 8 hereof. The successor Trustee shall not be responsible
for and Company shall indemnify and defend the successor Trustee from any claim
or liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes
successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plans, permit a reversion of
Trust assets to the Company (or, except as provided in Section 3 above,
diversion to any other parties) prior to termination of the Trust, or, after a
Change in Control, make the Trust revocable. In addition, neither the Change
of Control provisions nor the Plans and Trust payment provisions hereof may be
amended without the prior written consent of all affected Plan participants
(and any beneficiaries entitled to payment under the Plans).
(b) Except as provided below, after a Change of Control, the Trust
shall not terminate until the earliest of (a) the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans, as acknowledged by the Plan participants
and beneficiaries by their submission to the Trustee of a written statement
substantially in the form of Exhibit B hereto, (b) the complete liquidation of
all Trust Fund assets, (c) the completion of all payments under the Payment
Schedule, or (d) 21 years after the death of the last survivor of all Plan
participants and beneficiaries who are in being on the date of execution of
this Trust Agreement. Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company.
(c) Upon written approval of all participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plans, Company may
terminate this Trust prior to the time all benefit payments under the Plans
have been made. All assets in the Trust at termination shall be returned to
Company.
(d) Without the prior written consent of all affected Plan
participants (and any beneficiaries entitled to payment under the Plans), this
Trust Agreement may not be amended by Company for two (2) years following a
Change of Control, as defined herein.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated,
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<PAGE> 13
assigned (either at law or in equity), transferred, alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process. Any attempt, voluntarily or involuntarily, to
effect any action specified in the immediately preceding sentence shall, to the
full extent permitted by law, be null, void, and of no effect.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(d) Except as otherwise provided herein, any dispute hereunder or
relating to the Trust or Plans shall be settled by binding arbitration pursuant
to the Labor Arbitration Rules of the American Arbitration Association, using a
single arbitrator jointly agreed upon by the disputing parties (or, if
agreement cannot be reached, appointed by a court of competent jurisdiction),
and judgment upon the award rendered by the arbitrator may be entered in any
Court having jurisdiction thereover. The arbitration shall be held in a
location agreed by the parties thereto. The arbitrator shall have the power to
issue mandatory orders and restraining orders in connection with such
arbitration.
(e) For purposes of this Trust, a "Change of Control" shall be
deemed to have taken plan if: (i) any person, corporation, or other entity or
group, including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than any employee benefit plan of the Company,
becomes the beneficial owner of shares of the Company having 30 percent or more
of the total number of votes that may be cast for the election of Directors of
the Company; (ii) as the result of, or in connection with, any contested
election for the Board of Directors of the Company, or any tender or exchange
offer, merger or other business combination, or sale of assets, or any
combination of the foregoing (a "Transaction"), the persons who were Directors
of the Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company or its
assets, or (iii) at any time (a) the Company shall consolidate with, or merge
with, any other Person and the Company shall not be the continuing or surviving
corporation, (b) any Person shall consolidate with, or merge with, the Company,
and the Company shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding Company stock shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, (c) the Company shall be a party to a statutory
share exchange with any other Person after which the Company is subsidiary of
any other Person, or (d) the Company shall sell or otherwise transfer 50% or
more of the assets or earning power of the Company and its subsidiaries (taken
as a whole) to any Person or Persons. The Trustee shall have no obligation to
determine whether a Change of Control has occurred unless notified in writing
by either the Company or any Plan participant or beneficiary as specified in
Paragraph 2(c).
(f) The Trustee is not required to post any bond or other security
hereunder.
(g) This Agreement shall be binding upon and inure to the benefit
of Company, Trustee, and the Plan participants and
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<PAGE> 14
beneficiaries, and the successors, assigns, purchasers, heirs, executors,
administrators, and legal representatives thereof.
(h) Nothing herein shall affect the employment relationship of
Plan participants and the Company, give any Plan participant a right of
employment, or prevent Company from terminating a Plan participant's
employment.
(i) Communications under this Trust Agreement shall be in writing
and shall be sent to the following addresses:
Trustee: Chemical Bank
Attention:Kevin Cahill
Assistant Vice President
4 New York Plaza, 4th Floor
New York, New York 10004
Telephone Number 212/623-1680
Facsimile Number 212/623-3300
Company: Beverly Enterprises, Inc.
Attention:Senior Vice President
and General Counsel
P.O. Box 3324
Fort Smith, Arkansas 72913
Telephone Number 800/666-9996
Facsimile Number 501/452-3760
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be January _______,
1995.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BEVERLY ENTERPRISES, INC.
Dated:________________ By: . . . . . . . . . . . . . . . . . .
Its: . . . . . . . . . . . . . . . . . .
14
<PAGE> 15
STATE OF ARKANSAS Section
COUNTY OF _________ Section
SUBSCRIBED AND SWORN TO BEFORE ME ON ___________, 19__, by
________________________.
SIGNED: . . . . . . . . . . . . . . . .
Notary Public
My Commission Expires: . . . . . . . . .
CHEMICAL BANK
Dated:________________ By: . . . . . . . . . . . . . . . . . .
Its: . . . . . . . . . . . . . . . . . .
STATE OF NEW YORK Section
COUNTY OF _________ Section
SUBSCRIBED AND SWORN TO BEFORE ME ON ___________, 19__, by
________________________.
SIGNED: . . . . . . . . . . . . . . . .
Notary Public
My Commission Expires: . . . . . . . . .
15
<PAGE> 16
EXHIBIT A
FORM OF WRITTEN AFFIDAVIT TO TRUSTEE
REGARDING DEFAULT BY COMPANY
_____________________, 19___
TO:
Chemical Bank
4 New York Plaza, 4th Floor
New York, New York 10004
Attn: Kevin Cahill
Assistant Vice President
I, ___________________________ [PLAN PARTICIPANT OR BENEFICIARY],
declare under penalty of perjury that the following is true and correct:
I am a beneficiary of that certain trust known as the Beverly
Enterprises, Inc. Executive Benefit Plans Trust created under an Irrevocable
Trust Agreement (the "Trust Agreement") dated as of January _____, 1995 by and
between Chemical Bank and Beverly Enterprises, Inc. ("Company").
Company owes to the undersigned $___________ under one or more of the
executive benefit plans funded through the Trust (including, without
limitation, the Beverly Enterprises, Inc. Executive Life Insurance Plan, and
the Beverly Enterprises, Inc. Change in Control Severance Agreement/Beverly
Enterprises, Inc. Severance Program for Executives) (collectively, the
"Plans"), and Company has failed to pay such amount to the undersigned
following the giving of all required notice to Company regarding such failure
to pay.
I hereby request Chemical Bank to pay over to me the amount of
$___________ pursuant to the Plans and Trust Agreement.
<PAGE> 17
Executed on _________________, 19__ at _______________,
________________.
SIGNED:____________________________
TYPED NAME:________________________
STATE OF __________ Section
COUNTY OF _________ Section
SUBSCRIBED AND SWORN TO BEFORE ME ON ___________, 19__, by
________________________.
SIGNED: . . . . . . . . . . .
Notary Public
My Commission Expires: . . . .
<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 the
Registration Statement (Form S-4) and related Prospectus of Beverly
Enterprises, Inc. for the registration of up to 14,959,209 shares of its common
stock and to the incorporation by reference therein of our report dated
February 4, 1994, with respect to the consolidated financial statements and
schedules of Beverly Enterprises, Inc. included in its Annual Report on Form
10-K, as amended, for the year ended December 31, 1993, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Little Rock, Arkansas
February 9,1995
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of Beverly
Enterprises, Inc. on Form S-4 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, which report is incorporated
by reference in the Annual Report on Form 10-K of Pharmacy Management Services,
Inc. We also consent to the reference to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Tampa, Florida
February 10, 1995
<PAGE> 1
PHARMACY MANAGEMENT SERVICES, INC.
3611 Queen Palm Drive
Tampa, Florida 33619
CONSENT OF COMMON SHAREHOLDER
THIS CONSENT IS SOLICITED BY THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL
The undersigned shareholder of Pharmacy Management Services, Inc. (the
"Company") votes by written consent, as designated below, all shares of common
stock of the Company that the undersigned is entitled to vote with respect to
the following proposal.
Approval of (a) the merger (the "Merger") of the Company with and into
Beverly Acquisition Corporation ("Acquisition"), a wholly-owned
subsidiary of Beverly Enterprises, Inc. ("Beverly"), pursuant to the
Agreement and Plan of Merger dated December 26, 1994, among the
Company, Beverly, and Acquisition (the "Merger Agreement"), (b) the
Merger Agreement, and (c) the transactions contemplated by the Merger
Agreement.
[ ] FOR [ ] WITHHOLD CONSENT [ ] ABSTAIN
THIS CONSENT, WHEN PROPERLY EXECUTED, WILL CONSTITUTE A VOTE AS DESIGNATED
ABOVE BY THE UNDERSIGNED SHAREHOLDER. IF NO DESIGNATION IS MADE, THIS CONSENT
WILL BE EQUIVALENT TO A VOTE AGAINST APPROVAL OF THE MERGER PROPOSAL SET FORTH
ABOVE. EVERY PRIOR CONSENT EXECUTED AND DELIVERED BY THE UNDERSIGNED
SHAREHOLDER IS REVOKED.
(Continued and to be signed and dated on reverse side)
<PAGE> 2
PHARMACY MANAGEMENT SERVICES, INC.
DATED: _______________, 1995
______________________________________
______________________________________
______________________________________
(Signature)
______________________________________
(Printed Name)
Please sign and print your name exactly
as it appears on your stock certificate
representing your shares of Common
Stock. All joint owners should sign.
Executors, administrators, trustees,
guardians, attorneys, and agents should
give their full titles and submit
evidence of appointment unless
previously furnished to the Company or
its transfer agent. If the shareholder
is a partnership or corporation, the
authorized agent should sign in the
full partnership or corporate name.
