<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
<TABLE>
<S> <C>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
</TABLE>
COMMISSION FILE NUMBER: 1-9550
BEVERLY ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4100309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5111 ROGERS AVENUE, SUITE 40-A
FORT SMITH, ARKANSAS 72919-0155
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (501) 452-6712
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------------------- -------------------------
<S> <C>
Common Stock, $.10 par value New York Stock Exchange
Pacific Stock Exchange
5 1/2% Convertible Subordinated
Debentures New York Stock Exchange
due August 1, 2018 Pacific Stock Exchange
7 5/8% Convertible Subordinated
Debentures New York Stock Exchange
due March 15, 2003
Zero Coupon Notes due July 16, 2003 New York Stock Exchange
9% Senior Notes due February 15, 2006 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
INDICATE BY CHECK MARK WHETHER 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 REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ No / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF
REGISTRANT WAS $1,200,566,005 AS OF FEBRUARY 29, 1996.
99,689,975
(NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, NET OF TREASURY SHARES, AS OF
FEBRUARY 29, 1996)
PART III IS INCORPORATED BY REFERENCE FROM THE PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 1996.
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
References herein to the Company include Beverly Enterprises, Inc. and its
wholly-owned subsidiaries.
The business of the Company consists principally of providing long-term
health care, including the operation of nursing facilities, subacute and acute
long-term transitional hospitals, institutional and mail service pharmacies and
rehabilitation therapy services. Additional operations include assisted living
centers, hospices and home health care centers.
The Company is the largest operator of nursing facilities in the United
States. At January 31, 1996, the Company operated 703 nursing facilities with
75,521 licensed beds. The facilities are located in 33 states and the District
of Columbia, and range in capacity from 20 to 355 beds. At January 31, 1996, the
Company also operated 53 institutional and mail service pharmacies, 30 assisted
living centers containing 877 units, 11 transitional hospitals containing 607
beds, six hospices and four home health care centers. The Company's facilities
had average occupancy of 88.1%, 88.5% and 88.5% during the years ended December
31, 1995, 1994 and 1993, respectively. See "Item 2. Properties."
Health care service providers, such as the Company, operate in an industry
that is currently subject to significant changes from business combinations, new
strategic alliances, legislative reform, aggressive marketing practices by
competitors and market pressures. In this environment, the Company is frequently
contacted by, and otherwise engages in discussions with, other health care
companies and financial advisors regarding possible strategic alliances, joint
ventures, business combinations and other financial alternatives.
OPERATIONS
The Company is organized into four operating units, which support the
Company's delivery of vertically integrated services to the long-term health
care market: (i) Beverly Health and Rehabilitation Services, Inc. ("BHRS") and
its subsidiaries provide long-term and subacute care through the operation of
nursing facilities, assisted living centers and hospices; (ii) Spectra Rehab
Alliance, Inc. ("Spectra") and its subsidiaries manage the Company's
rehabilitation services and cost containment businesses; (iii) American
Transitional Hospitals, Inc. ("ATH") and its subsidiaries operate the Company's
transitional hospitals; and (iv) Pharmacy Corporation of America ("PCA") and its
subsidiaries operate the Company's institutional and mail service pharmacy
businesses. Each operating unit is headed by a President who is also a senior
officer of the Company and reports directly to the President of the Company.
Each of the four operating units also has a separate Board of Directors
consisting of four senior executives of the Company and the President of the
unit.
Long-Term and Subacute Care. The Company's nursing facilities provide
residents with routine long-term care services, including daily dietary, social
and recreational services and a full range of pharmacy services and medical
supplies. The Company's highly skilled staff also offers complex and intensive
medical services to patients with higher acuity disorders (i.e., "subacute
care") outside the traditional acute care hospital setting.
Rehabilitation Therapies. The Company has developed and expanded its health
care expertise in rehabilitation and provides skilled rehabilitation
(occupational, physical, speech and respiratory) therapies in substantially all
of its nursing facilities. Through Spectra, the Company offers industrial
rehabilitation, outpatient therapy clinics, acute hospital therapy contracts and
management/consulting rehabilitation programs within the Company's network of
facilities and to other health care providers.
Transitional Care. The Company operates transitional hospitals which
address the needs of patients requiring intense therapy regimens, but not
necessarily the breadth of services provided within traditional acute care
hospitals. The typical ATH patient requires an average of six hours of nursing
care per day for 30 to 45 days.
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Pharmacy Services. PCA is the nation's largest institutional pharmacy
delivering drugs and related products and services, infusion therapy and other
health care products (enteral and urological) to nursing facilities, acute care
hospitals, home care providers, psychiatric facilities, correctional facilities,
assisted living centers, retirement homes and their patients. PCA also provides
consultant pharmacist services, which include evaluations of patient drug
therapy, and drug handling, distribution and administration within a nursing
facility as well as assistance with state and federal regulatory compliance.
PCA's mail service pharmacy delivers drugs and medical equipment to workers'
compensation payors, claimants and employers.
Other Services. The Company offers other health care related services to
payors and patients, including workers' compensation case management, assisted
living and home health care services, and information and referral systems that
link payors and employees to long-term care providers.
The Company has a Quality Management ("QM") program to help ensure that
high quality care is provided in each of its nursing, subacute, transitional and
outpatient facilities. The Company's QM program has been a key factor in helping
the Company to exceed the industry's nationwide average compliance statistics,
as determined by the Health Care Financing Administration of the Department of
Health and Human Services ("HCFA"). The Company's nationwide QM network of
health care professionals includes physician Medical Directors, registered
nurses, dieticians, social workers and other specialists who work in conjunction
with regional and facility based QM professionals. Facility based QM is
structured through the Company's Quality Assessment and Assurance committee.
With a philosophy of quality improvement, Company-wide clinical indicators are
utilized as a database to set goals and monitor thresholds in critical areas
directly related to the delivery of health care related services. These internal
evaluations, in conjunction with random audits of facility procedures by an
audit team headed by the Senior Vice President of QM, are used to identify and
correct possible problems. The Senior Vice President of QM reports directly to
the President of the Company and the QM Committee of the Company's Board of
Directors.
GOVERNMENTAL REGULATION AND REIMBURSEMENT
The Company's nursing facilities are subject to compliance with various
federal, state and local health care statutes and regulations. Compliance with
state licensing requirements imposed upon all health care facilities is a
prerequisite for the operation of the facilities and for participation in
government-sponsored health care funding programs, such as Medicaid and
Medicare. Medicaid is a medical assistance program for the indigent, operated by
individual states with the financial participation of the federal government.
Medicare is a health insurance program for the aged and certain other
chronically disabled individuals, operated by the federal government. Changes in
the reimbursement policies of such funding programs as a result of budget cuts
by federal and state governments or other legislative and regulatory actions
could have a material adverse effect on the Company's financial position,
results of operations and cash flows.
The Company receives payments for services rendered to patients from (a)
each of the states in which its nursing facilities are located under the
Medicaid program; (b) the federal government under the Medicare program; and (c)
private payors, including commercial insurers and managed care payors. The
following table sets forth: (i) patient days derived from the indicated sources
of payment as a percentage of total patient days, (ii) room and board revenues
derived from the indicated sources of payment as a percentage of net operating
revenues, and (iii) ancillary and other revenues derived from all sources of
payment as a percentage of net operating revenues, for the periods indicated:
<TABLE>
<CAPTION>
MEDICAID MEDICARE PRIVATE
------------------- ------------------- ------------------- ANCILLARY
ROOM AND ROOM AND ROOM AND AND
PATIENT BOARD PATIENT BOARD PATIENT BOARD OTHER
DAYS REVENUES DAYS REVENUES DAYS REVENUES REVENUES
------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended:
December 31, 1995..... 68% 43% 12% 11% 20% 15% 31%
December 31, 1994..... 68% 47% 12% 11% 20% 16% 26%
December 31, 1993..... 69% 50% 11% 11% 20% 16% 23%
</TABLE>
2
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Consistent with the long-term care industry in general, changes in the mix
of the Company's patient population among the Medicaid, Medicare and private
categories can significantly affect the revenue and profitability of the
Company's operations. Although the level of cost reimbursement for Medicare
patients typically generates the highest revenue per patient day, profitability
is not proportionally increased due to the additional costs associated with the
required higher level of nursing care and other services for such patients. In
most states, private patients constitute the most profitable category and
Medicaid patients constitute the least profitable category.
The Company has experienced significant growth in ancillary revenues over
the past several years. Ancillary revenues are derived from providing services
to residents beyond room, board and custodial care and include occupational,
physical, speech, respiratory and IV therapy, as well as sales of
pharmaceuticals and other services. Such services are currently provided
primarily to Medicare and private pay patients, consistent with the trend in
health care of providing a broader range of services in a lower cost setting,
such as the Company's nursing facilities. Although the Company is pursuing
further growth of ancillary revenues, through acquisitions as well as internal
expansion of specialty services such as rehabilitation and sales of
pharmaceuticals, there can be no assurance that such growth will continue.
Medicaid programs are currently in existence in all of the states in which
the Company operates nursing facilities. While these programs differ in certain
respects from state to state, they are all subject to federally-imposed
requirements, and at least 50% of the funds available under these programs is
provided by the federal government under a matching program.
Medicare and most state Medicaid programs utilize a cost-based
reimbursement system for nursing facilities which reimburses facilities for the
reasonable direct and indirect allowable costs incurred in providing routine
patient care services (as defined by the programs) plus, in certain states,
efficiency incentives or a return on equity, subject to certain cost ceilings.
These costs normally include allowances for administrative and general costs as
well as the costs of property and equipment (e.g. depreciation and interest,
fair rental allowance or rental expense). In some states, cost-based
reimbursement is subject to retrospective adjustment through cost report
settlement. In other states, payments made to a facility on an interim basis
that are subsequently determined to be less than or in excess of allowable costs
may be adjusted through future payments to the affected facility and to other
facilities owned by the same owner. State Medicaid reimbursement programs vary
as to methodology used to determine the level of allowable costs which are
reimbursed to operators.
Arkansas, California, Louisiana and Texas provide for reimbursement at a
flat daily rate, as determined by the responsible state agency. In all other
states with a Medicaid program in which the Company operated in 1995, payments
are based upon facility-specific cost reimbursement formulas established by the
applicable state. The Medicaid and Medicare programs each contain specific
requirements which must be adhered to by health care facilities in order to
qualify under the programs.
Governmental funding for health care programs is subject to statutory and
regulatory changes, administrative rulings, interpretations of policy,
intermediary determinations and governmental funding restrictions, all of which
may materially increase or decrease program reimbursement to health care
facilities. Health care system reform and concerns over rising Medicare and
Medicaid costs continue to be high priorities for the federal and certain state
governments. Although no comprehensive health care, Medicare or Medicaid reform
legislation has yet been implemented, pressures to contain costs and the active
discussion and issues raised by the Clinton Administration, Congress and various
other groups have impacted the health care delivery system. In November 1995,
Congress passed the Seven Year Balanced Budget Reconciliation Act of 1995 (the
"1995 Balanced Budget Act") providing for, among other things, the reshaping of
the Medicare and Medicaid programs. In December 1995, President Clinton vetoed
the 1995 Balanced Budget Act and proposed alternative Medicare and Medicaid
legislation. Each of the legislative proposals offered by the President and
Congress provide for significant reductions in the overall rate of Medicare and
Medicaid spending growth. There is active discussion concerning this proposed
legislation and the form of any final legislation signed into law could differ
significantly from current proposals. The impact of currently proposed
legislation on the
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<PAGE> 5
Company is not readily determinable. However, in their currently proposed form,
such legislation could have a material adverse effect on the Company's future
financial position, results of operations and cash flows.
In addition to the requirements to be met by the Company's facilities for
annual licensure renewal, the Company's health care facilities are subject to
annual surveys and inspections in order to be certified for participation in the
Medicare and Medicaid programs. In order to maintain their operator's licenses
and their certification for participation in Medicare and Medicaid programs, the
nursing facilities must meet certain statutory and administrative requirements.
These requirements relate to the condition of the facilities and the adequacy
and condition of the equipment used therein, the quality and adequacy of
personnel, and the quality of medical care. Such requirements are subject to
change. There can be no assurance that, in the future, the Company will be able
to maintain such licenses for its facilities or that the Company will not be
required to expend significant sums in order to do so.
HCFA has adopted new survey, certification and enforcement procedures by
regulations effective July 1, 1995 to implement the Medicare and Medicaid
provisions of the Omnibus Budget Reconciliation Act of 1987 ("OBRA 1987")
governing survey, certification and enforcement of the requirements for contract
participation by skilled nursing facilities under Medicare and nursing
facilities under Medicaid. Among the provisions that HCFA has adopted are
requirements (i) that surveys focus on residents' outcomes; (ii) that all
deviations from the participation requirements will be considered deficiencies,
but that all deficiencies will not constitute noncompliance; and (iii) that
certain types of deficiencies must result in the imposition of a sanction. The
regulations also identify alternative remedies and specify the categories of
deficiencies for which they will be applied. These remedies include: temporary
management; denial of payment for new admissions; denial of payment for all
residents; civil money penalties of $50 to $10,000 per day of violation; closure
of facility and/or transfer of residents in emergencies; directed plans of
correction; and directed inservice training. The regulations also specify under
what circumstances alternative enforcement remedies or termination, or both,
will be imposed on facilities which are not in compliance with the participation
requirements. The Company is currently undertaking an analysis of the procedures
in respect of its programs and facilities covered by the revised HCFA
regulations and is unable to predict at this time the degree to which its
programs and facilities will be determined to be in compliance with regulations.
Preliminary results of HCFA surveys for a significant number of the Company's
facilities indicate that approximately 91% of such facilities surveyed have been
determined to be in compliance with the HCFA criteria. HCFA has reported that of
all facilities surveyed nationally (Company and non-Company), approximately 86%
of such facilities were determined to be similarly in compliance. Although the
Company could be adversely affected if a substantial portion of its programs or
facilities were eventually determined not to be in compliance with the revised
HCFA regulations, the Company believes its programs and facilities generally
exceed industry standards.
The Company believes that its facilities are in substantial compliance with
the various Medicaid and Medicare regulatory requirements currently applicable
to them. In the ordinary course of its business, however, the Company receives
notices of deficiencies for failure to comply with various regulatory
requirements. The Company reviews such notices and takes appropriate corrective
action. In most cases, the Company and the reviewing agency will agree upon the
steps to be taken to bring the facility into compliance with regulatory
requirements. In some cases or upon repeat violations, the reviewing agency may
take a number of adverse actions against a facility. These adverse actions can
include the imposition of fines, temporary suspension of admission of new
patients to the facility, decertification from participation in the Medicaid or
Medicare programs and, in extreme circumstances, revocation of a facility's
license.
The Medicaid and Medicare programs provide criminal penalties for entities
that knowingly and willfully offer, pay, solicit or receive remuneration in
order to induce business that is reimbursed under these programs. The illegal
remuneration provisions of the Social Security Act, also known as the
"anti-kickback" statute, prohibit the payment or receipt of remuneration
intended to induce the purchasing, leasing, ordering or arranging for any good,
facility, service or item paid by Medicaid or Medicare programs. The violation
of the illegal remuneration provisions is a felony and can result in the
imposition of fines of up to $25,000 per occurrence. In addition, certain states
in which the Company's facilities are located have enacted statutes which
prohibit the payment of kickbacks, bribes and rebates for the referral of
patients. The Medicare program has published certain "Safe Harbor" regulations
which describe various criteria and guidelines for
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<PAGE> 6
transactions which are deemed to be in compliance with the anti-remuneration
provisions. Although the Company has contractual arrangements with some health
care providers, management believes it is in compliance with the anti-kickback
statute and other provisions of the Social Security Act and with the applicable
state statutes. However, there can be no assurance that government officials
responsible for enforcing these statutes will not assert that the Company or
certain transactions in which it is involved are in violation of these statutes.
The Social Security Act also imposes criminal and civil penalties for making
false claims to the Medicaid and Medicare programs for services not rendered or
for misrepresenting actual services rendered in order to obtain higher
reimbursement.
The Medicare and Medicaid programs also provide for the mandatory and/or
permissive exclusion of providers of services who are convicted of certain
offenses or who have been found to have violated certain laws or regulations. In
certain circumstances, conviction of abusive or fraudulent behavior with respect
to one facility may subject other facilities under common control or ownership
to disqualification from participation in Medicaid and Medicare programs. In
addition, some federal and state regulations provide that all facilities under
common control or ownership licensed to do business within a state are subject
to delicensure if any one or more of such facilities is delicensed.
While federal regulations do not provide states with grounds to curtail
funding of their Medicaid cost reimbursement programs due to state budget
deficiencies, states have nevertheless curtailed funding in such circumstances
in the past. No assurance can be given that states will not do so in the future
or that the future funding of Medicaid programs will remain at levels comparable
to the present levels. The United States Supreme Court ruled in 1990 that health
care providers may bring suit in federal court to enforce the Medicaid Act
requirement that the states reimburse nursing facilities at rates which are
reasonable and adequate. Nursing facility operators, such as the Company, have
utilized and should continue to be able to utilize the federal courts to require
states to comply with their legal obligation to adequately fund Medicaid
programs. However, certain of the legislative proposals discussed above contain
provisions which would repeal the provisions of the Medicaid Act which require
states to pay reasonable and adequate rates and which would also eliminate the
right to judicial review of certain aspects of the reimbursement systems of
state Medicaid programs; therefore, there can be no assurance that nursing
facility operators will be able to utilize federal courts for such purposes in
the future.
COMPETITION
The long term care industry is highly competitive. The Company's
competitive position varies from facility to facility, from community to
community and from state to state. Some of the significant competitive factors
for the placing of patients in a nursing facility include quality of care,
reputation, physical appearance of facilities, services offered, family
preferences, location, physician services and price. The Company's operations
compete with services provided by nursing facilities, acute care hospitals,
subacute facilities, transitional hospitals, rehabilitation facilities,
institutional and mail service pharmacies, hospices and home health care
centers. The Company also competes with a number of tax-exempt nonprofit
organizations which can finance acquisitions and capital expenditures on a
tax-exempt basis or receive charitable contributions unavailable to the Company.
There can be no assurance that the Company will not encounter increased
competition which could adversely affect its business, results of operations or
financial condition.
EMPLOYEES
At December 31, 1995, the Company had approximately 83,000 employees. The
Company is subject to both federal minimum wage and applicable federal and state
wage and hour laws and maintains various employee benefit plans.
In recent years, the Company has experienced increases in its labor costs
primarily due to higher wages and greater benefits required 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. Although
the Company expects labor costs to increase in the future, 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
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increases in reimbursable costs and the receipt of related reimbursement rate
increases. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Operating Results."
In the past, the health care industry, including the Company's long-term
care facilities, has experienced a shortage of nurses to staff health care
operations, and, more recently, the health care industry has experienced a
shortage of therapists. The Company is not currently experiencing a nursing or
therapist shortage, but it competes with other health care providers for nursing
and therapist personnel and may compete with other service industries for
persons serving the Company in other capacities, such as nurses' aides. A
nursing, therapist or nurse's aide shortage could force the Company to pay even
higher salaries and make greater use of higher cost temporary personnel. A lack
of qualified personnel might also require the Company to reduce its census or
admit patients requiring a lower level of care, both of which could adversely
affect operating results.
Approximately 10% of the Company's employees are represented by various
labor unions. Certain labor unions have publicly stated that they are
concentrating their organizing efforts within the long-term health care
industry. The Company, being one of the largest employers within the long-term
health care industry, has been the target of a "corporate campaign" for several
years by two AFL-CIO affiliated unions attempting to organize certain of the
Company's facilities. Although the Company has never experienced any material
work stoppages and believes that its relations with its employees (and the
existing unions that represent certain of them) are generally good, the Company
cannot predict the effect continued union representation or organizational
activities will have on the Company's future activities. On March 21, 1996,
twenty Pennsylvania facilities received strike notices for March 29, 1996, but
expect, with minimal disruption, to provide full, continuous patient care
services. There can be no assurance that continued union representation and
organizational activities will not result in material work stoppages, which
could have a material adverse effect on the Company's operations.
On January 29, 1993, the National Labor Relations Board ("NLRB") found that
the Company had violated the National Labor Relations Act (the "Act") at 32 of
its facilities prior to 1989 and issued a corporate-wide order requiring that
the Company cease and desist from such violations and that it take certain
remedial actions. The Company viewed the NLRB's order as incorrect and overly
broad and appealed to the U.S. Court of Appeals. On February 28, 1994, the U.S.
Court of Appeals for the Second Circuit upheld the Company's appeal and reversed
several of the NLRB's findings, holding that the violations were minimal in
nature and number and that the corporate-wide and other extraordinary remedies
sought by the NLRB and the unions were inappropriate.
The NLRB instituted subsequent consolidated administrative proceedings
against the Company alleging the commission of additional unfair labor practices
under the Act at 31 of the Company's facilities. Such proceedings are in various
stages of litigation, and the NLRB's General Counsel is seeking the same kind of
corporate-wide order denied by the Second Circuit in the earlier case. The
Company is vigorously defending the proceedings and believes that many of the
cases, and particularly the request for a corporate-wide remedy, are without
merit. There can be no assurance, however, that the NLRB will not again issue a
corporate-wide order; if it does, such an order would be subject to court
review.
ITEM 2. PROPERTIES.
At January 31, 1996, the Company operated 703 nursing facilities, 30
assisted living centers, 11 transitional hospitals, 53 pharmacies and six
hospices in 37 states and the District of Columbia. Most of the Company's 290
leased nursing facilities are subject to "net" leases which require the Company
to pay all taxes, insurance and maintenance costs. Most of the Company's leases
have original terms from ten to fifteen years and contain at least one renewal
option, which could extend the original term of the leases by five to fifteen
years. Many of the Company's leases also contain purchase options. The Company
considers its physical properties to be in good operating condition and suitable
for the purposes for which they are being used. Certain of the nursing
facilities and assisted living centers owned by the Company are included in the
collateral securing the obligations under its various banking arrangements. See
"Part II, Item 8 -- Note 4 of Notes to Consolidated Financial Statements."
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The following is a summary of the Company's nationwide network of nursing
facilities, assisted living centers, transitional hospitals, pharmacies and
hospices at January 31, 1996:
<TABLE>
<CAPTION>
NURSING TRANSITIONAL
FACILITIES ASSISTED HOSPITALS
------------------ LIVING CENTERS ------------------
TOTAL --------------- TOTAL PHARMACIES HOSPICES
LICENSED TOTAL LICENSED ---------- --------
LOCATION NUMBER BEDS NUMBER UNITS NUMBER BEDS NUMBER NUMBER
- ------------------------ ------ -------- ------ ----- ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama................. 21 2,623 1 24 -- -- 2 --
Arizona................. 3 480 -- -- 2 101 -- --
Arkansas................ 38 4,550 3 49 -- -- 1 1
California.............. 72 7,537 1 113 -- -- 6 --
Colorado................ -- -- -- -- -- -- 1 --
Connecticut............. 3 427 -- -- -- -- 2 --
District of Columbia.... 1 355 -- -- -- -- -- --
Florida................. 65 7,849 4 290 -- -- 8 --
Georgia................. 23 2,656 2 32 -- -- 3 --
Hawaii.................. 2 396 -- -- -- -- -- --
Idaho................... 4 329 -- -- -- -- -- --
Illinois................ 7 597 -- -- -- -- -- --
Indiana................. 71 5,696 1 16 1 40 1 1
Kansas.................. 27 1,825 3 39 -- -- 2 --
Kentucky................ 8 1,047 -- -- -- -- 1 --
Louisiana............... 1 200 -- -- -- -- -- --
Maryland................ 4 585 1 16 -- -- 1 --
Massachusetts........... 25 2,420 -- -- -- -- 2 --
Michigan................ 2 206 -- -- -- -- -- --
Minnesota............... 37 3,280 2 28 -- -- 1 1
Mississippi............. 22 2,504 -- -- -- -- 1 --
Missouri................ 33 3,337 3 101 -- -- 1 --
Nebraska................ 24 2,208 1 16 -- -- -- --
New Jersey.............. 1 150 -- -- -- -- -- --
North Carolina.......... 12 1,514 1 16 -- -- 2 --
Ohio.................... 12 1,435 -- -- 1 44 1 --
Oklahoma................ -- -- -- -- 2 64 -- --
Oregon.................. -- -- -- -- -- -- 1 --
Pennsylvania............ 42 4,912 3 48 -- -- 2 --
Rhode Island............ -- -- -- -- -- -- 1 --
South Carolina.......... 3 302 -- -- -- -- -- --
South Dakota............ 17 1,236 -- -- -- -- -- --
Tennessee............... 8 1,066 2 57 1 35 2 --
Texas................... 49 6,062 -- -- 4 323 7 2
Virginia................ 17 2,353 2 32 -- -- -- --
Washington.............. 13 1,121 -- -- -- -- 2 --
West Virginia........... 3 318 -- -- -- -- -- --
Wisconsin............... 33 3,945 -- -- -- -- 2 1
------ ------ ------ ---- ----- ------ ------- ------
703 75,521 30 877 11 607 53 6
====== ====== ====== ==== ===== ====== ======= ======
CLASSIFICATION
Owned................... 411 45,297 27 685 1 198 -- --
Leased.................. 290 29,971 3 192 10 409 53 6
Managed................. 2 253 -- -- -- -- -- --
------ ------ ------ ---- ----- ------ ------- ------
703 75,521 30 877 11 607 53 6
====== ====== ====== ==== ===== ====== ======= ======
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS.
There are various lawsuits and regulatory actions pending against the
Company arising in the normal course of business, some of which seek punitive
damages. The Company does not believe that the ultimate resolution of these
matters will have a material adverse effect on the Company's financial position
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1995.
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth, as to each executive officer and director of
the Company, such person's name, positions with the Company and age. Each
executive officer and director of the Company holds office until a successor is
elected, or until the earliest of death, resignation or removal. Each executive
officer is elected or appointed by the Board of Directors. The information below
is given as of March 18, 1996.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------------------- --------------------------------------------- ---
<S> <C> <C>
David R. Banks(1)........................ Chairman of the Board, Chief Executive
Officer and Director 59
Boyd W. Hendrickson(1)................... President, Chief Operating Officer and
Director 51
William A. Mathies....................... Executive Vice President and President of
BHRS 36
T. Jerald Moore.......................... Executive Vice President 55
Robert W. Pommerville.................... Executive Vice President, General Counsel and
Secretary 55
Bobby W. Stephens........................ Executive Vice President -- Asset Management 51
Mark D. Wortley.......................... Executive Vice President and President of
Spectra 40
Scott M. Tabakin......................... Senior Vice President, Controller, Chief
Accounting Officer and Acting Chief
Financial Officer 37
Beryl F. Anthony, Jr.(2)(3)(5)........... Director 58
James R. Greene(2)(4).................... Director 74
Edith E. Holiday (3)(4)(5)............... Director 44
Jon E. M. Jacoby(1)(2)................... Director 57
Risa J. Lavizzo-Mourey, M.D.(2)(4)....... Director 41
Louis W. Menk(3)(4)(5)................... Director 77
Marilyn R. Seymann(1)(3)(4)(5)........... Director 53
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Quality Management Committee.
(5) Member of the Nominating Committee.
Mr. Banks has been a director of the Company since 1979 and has served as
Chief Executive Officer since May 1989 and Chairman of the Board since March
1990. Mr. Banks was President of the Company from 1979 to September 1995. Mr.
Banks is a director of Nationwide Health Properties, Inc., Ralston Purina
Company, Wellpoint Health Networks, Inc., and trustee for the University of the
Ozarks and Occidental College.
Mr. Hendrickson joined the Company in 1988 as a Division President. He was
elected Vice President of Marketing in May 1989, Executive Vice President of
Operations and Marketing in February 1990, President
8
<PAGE> 10
of BHRS in January 1995 and President, Chief Operating Officer and a director of
the Company in September 1995.
Mr. Mathies joined the Company in 1981 as an Administrator in training. He
was an Administrator until 1986 at which time he became a Regional Manager. In
1988, Mr. Mathies was elected Vice President of Operations for the California
region and was elected Executive Vice President of the Company and President of
BHRS in September 1995.
Mr. Moore joined the Company as Executive Vice President in December 1992.
Mr. Moore was employed at Aetna Life and Casualty from 1963 to 1992 and was
elected Senior Vice President in 1990.
Mr. Pommerville first joined the Company in 1970 and left in 1976. He
rejoined the Company as Vice President and General Counsel in 1984 and was
elected Secretary in February 1990, Senior Vice President in March 1990 and
Executive Vice President and Acting Compliance Officer in February 1995.
Mr. Stephens joined the Company as a staff accountant in 1969. He was
elected Assistant Vice President in 1978, Vice President of the Company and
President of the Company's Central Division in 1980, and Executive Vice
President in February 1990. Mr. Stephens is a director of City National Bank in
Fort Smith, Arkansas, Beverly Japan Corporation, and Harbortown Properties, Inc.
Mr. Wortley joined the Company as Senior Vice President and President of
Spectra in September 1994 and was elected Executive Vice President in February
1996. From 1988 to 1994, Mr. Wortley was an officer of Therapy Management
Innovations, which provides rehabilitation consulting services to the Company.
Mr. Tabakin joined the Company in October 1992 as Vice President,
Controller and Chief Accounting Officer. He was elected Senior Vice President in
May 1995 and Acting Chief Financial Officer in September 1995. From 1980 to
1992, Mr. Tabakin was with Ernst & Young LLP.
Mr. Anthony served as a member of the United States Congress and was
Chairman of the Democratic Congressional Campaign Committee from 1987 through
1990. In 1993, he became a partner in the Winston & Strawn law firm. He has been
a director of the Company since January 1993.
Mr. Greene's principal occupation has been that of a director and
consultant to various U.S. and international businesses since 1986. He is a
director of a number of mutual funds of Alliance Capital Management Corporation,
Buck Engineering Company and Bank Leumi. He has been a director of the Company
since January 1991.
Ms. Holiday is an attorney. She served as White House Liaison for the
Cabinet and all federal agencies during the Bush administration. Prior to that,
Ms. Holiday served as General Counsel of the U.S. Treasury Department, as well
as its Assistant Secretary of Treasury for Public Affairs and Public Liaison.
She is a director of Amerada Hess Corporation, Bessemer Trust Company, N.A.,
Bessemer Trust Company of New Jersey, Hercules Incorporated and H.J. Heinz
Company. She has been a director of the Company since March 1995.
Mr. Jacoby is Executive Vice President, Chief Financial Officer and a
director of Stephens Group, Inc. Mr. Jacoby has held the indicated positions
with Stephens Group, Inc. since 1986, and prior to that time, served as Manager
of the Corporate Finance Department and Assistant to the President of Stephens
Inc. Mr. Jacoby is a director of the American Classic Voyages Company, Delta and
Pine Land Company, Inc. and Medicus Systems, Inc. He has been a director of the
Company since February 1987.
Dr. Lavizzo-Mourey is Director of the Institute of Aging, Chief of the
Division of Geriatric Medicine and Associate Executive Vice President for health
policy at the University of Pennsylvania, Ralston-Penn Center. From 1992 to
1994, Dr. Lavizzo-Mourey was in the Senior Executive Service in the Agency for
Health Care Policy and Research, U.S. Public Health Service of the Department of
Health and Human Services. She is a director of Medicus Systems, Inc. and
Nellcor Puritan Bennett. She has been a director of the Company since March
1995.
9
<PAGE> 11
Mr. Menk is Chairman of Black Mountain Gas Company. He retired in 1982 as
Chairman and Chief Executive Officer of International Harvester Company, the
predecessor to Navistar International Corporation. He has been a director of the
Company since July 1989.
Ms. Seymann is President and Chief Executive Officer of M One, Inc., a
management and information systems consulting firm specializing in the financial
services industry. From 1990 to 1993, Ms. Seymann was Director and Vice Chairman
of the Federal Housing Finance Board. Prior to that, she served as Managing
Director of Andersen Asset Based Services, a unit of Arthur Andersen LLP. From
1986 to 1990, Ms. Seymann was Executive Vice President of Chase Bank of Arizona
and served as President, Private Banking of Chase Trust Company from 1987 to
1990. She has been a director of the Company since March 1995.
During 1995, there were 13 meetings of the Board of Directors. Each
director attended 75% or more of the meetings of the Board and committees on
which he or she served.
In 1995, directors, other than Mr. Banks and Mr. Hendrickson, received a
retainer fee of $22,000 for serving on the Board and an additional fee of $1,000
for each Board or committee meeting attended. Mr. Banks, the Company's current
Chairman of the Board and Chief Executive Officer, and Mr. Hendrickson, the
Company's current President and Chief Operating Officer, received no additional
cash compensation for serving on the Board or its committees.
During 1993, the Retirement Plan for Outside Directors was approved and
implemented whereby, upon retirement, as defined, each director is eligible to
receive an amount equal to the annual retainer fee for each year of service on
the Board up to a maximum of ten years, with no survivor benefits. These
benefits are paid on a monthly basis beginning on the date of retirement. The
Company paid $18,000 under such plan during the year ended December 31, 1995.
During 1994, the Company's Nonemployee Directors' Stock Option Plan (the
"Nonemployee Directors' Plan") was approved. Such plan became effective June 1,
1994 and will remain in effect until May 31, 2004, subject to earlier
termination by the Board of Directors. There are 200,000 shares of the Company's
$.10 par value common stock ("Common Stock") authorized for issuance, subject to
certain adjustments, under the Nonemployee Directors' Plan. The Nonemployee
Directors' Plan provides that 2,500 nonqualified stock options be granted to
each nonemployee director on June 1 of each year until the plan is terminated,
subject to the availability of shares. Such grants were made in 1994 and 1995 to
each of the nonemployee directors. Such nonqualified stock options are granted
at a purchase price equal to fair market value on the date of grant, become
exercisable one year after date of grant and expire ten years after date of
grant.
EMPLOYEE STOCK PURCHASE PLAN
The Beverly Enterprises 1988 Employee Stock Purchase Plan (as amended and
restated) enables all full-time employees having completed one year of
continuous service to purchase shares of Common Stock at the current market
price through payroll deductions. The Company makes contributions in the amount
of 30% of the participant's contribution. Each participant specifies the amount
to be withheld from earnings per two-week pay period, subject to certain
limitations. The total charge to the Company's statement of operations for the
year ended December 31, 1995 related to this plan was approximately $2,201,000.
At December 31, 1995, there were approximately 4,600 participants in the plan.
Merrill Lynch & Co., Merrill Lynch World Headquarters, North Tower, World
Financial Center, New York, New York 10281, was appointed broker to open and
maintain an account in each participant's name and to purchase shares of common
stock on the New York Stock Exchange for each participant.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges. The table below sets forth, for the periods indicated, the range of
high and low sales prices of the Common Stock as reported on the New York Stock
Exchange composite tape.
<TABLE>
<CAPTION>
PRICES
---------------
HIGH LOW
---- ----
<S> <C> <C>
1994
First Quarter............................................ $16 1/8 $12 3/8
Second Quarter........................................... 14 1/4 12 1/8
Third Quarter............................................ 15 5/8 11 3/4
Fourth Quarter........................................... 15 7/8 13 3/4
1995
First Quarter............................................ $14 3/4 $12 1/2
Second Quarter........................................... 16 1/8 10 7/8
Third Quarter............................................ 14 3/8 11 7/8
Fourth Quarter........................................... 14 1/2 9
1996
First Quarter (through March 18)......................... $12 3/8 $10 1/2
</TABLE>
The Company is subject to certain restrictions under its banking
arrangements related to the payment of cash dividends on its Common Stock.
During 1995 and 1994, no cash dividends were paid on the Company's Common Stock
and no future dividends are currently planned.
At March 18, 1996, there were 7,828 record holders of the Common Stock.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA.
The following table of selected financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes thereto included elsewhere in this Annual Report on Form 10-K.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net operating revenues........................ $ 3,228,553 $ 2,969,239 $ 2,884,451 $ 2,607,756 $ 2,308,307
Interest income............................... 14,228 14,578 15,269 14,502 20,048
----------- ----------- ----------- ----------- -----------
Total revenues............................ 3,242,781 2,983,817 2,899,720 2,622,258 2,328,355
Costs and expenses:
Operating and administrative:
Wages and related......................... 1,736,151 1,600,580 1,593,410 1,486,191 1,358,639
Other..................................... 1,224,681 1,114,916 1,069,536 921,750 770,748
Interest.................................... 84,245 64,792 66,196 70,943 79,243
Depreciation and amortization............... 103,581 88,734 82,938 80,226 78,057
Impairment of long-lived assets:
Adoption of SFAS No. 121.................. 68,130 -- -- -- --
Development and other costs............... 32,147 -- -- -- --
Restructuring costs......................... -- -- -- 57,000 --
----------- ----------- ----------- ----------- -----------
Total costs and expenses.................. 3,248,935 2,869,022 2,812,080 2,616,110 2,286,687
----------- ----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes, extraordinary charge and cumulative
effect of change in accounting for income
taxes....................................... (6,154) 114,795 87,640 6,148 41,668
Provision for income taxes.................... 1,969 37,882 29,684 4,203 12,430
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary charge and
cumulative effect of change in accounting
for income taxes............................ (8,123) 76,913 57,956 1,945 29,238
Extraordinary charge, net of income taxes of
$1,188 in 1994, $1,155 in 1993 and $5,415 in
1992........................................ -- (2,412) (2,345) (8,835) --
Cumulative effect of change in accounting for
income taxes................................ -- -- -- (5,454) --
----------- ----------- ----------- ----------- -----------
Net income (loss)............................. $ (8,123) $ 74,501 $ 55,611 $ (12,344) $ 29,238
=========== =========== =========== =========== ===========
Net income (loss) applicable to common
shares...................................... $ (14,998) $ 66,251 $ 31,173 $ (13,344) $ 29,238
=========== =========== =========== =========== ===========
Income (loss) per share of common stock:
Before redemption premium on preferred
stock, extraordinary charge and cumulative
effect of change in accounting for income
taxes..................................... $ (.16) $ .79 $ .66 $ .01 $ .36
Redemption premium on preferred stock....... -- -- (.25) -- --
----------- ----------- ----------- ----------- -----------
Before extraordinary charge and cumulative
effect of change in accounting for income
taxes..................................... (.16) .79 .41 .01 .36
Extraordinary charge........................ -- (.03) (.03) (.11) --
Cumulative effect of change in accounting
for income taxes.......................... -- -- -- (.07) --
----------- ----------- ----------- ----------- -----------
Net income (loss)........................... $ (.16) $ .76 $ .38 $ (.17) $ .36
=========== =========== =========== =========== ===========
Shares used to compute per share amounts...... 92,233,000 87,087,000 81,207,000 77,685,000 81,218,000
CONSOLIDATED BALANCE SHEET DATA:
Total assets.................................. $ 2,506,461 $ 2,322,578 $ 2,000,804 $ 1,859,361 $ 1,677,851
Current portion of long-term obligations ..... $ 84,639 $ 60,199 $ 43,125 $ 30,466 $ 35,846
Long-term obligations, excluding current
portion..................................... $ 988,909 $ 918,018 $ 706,917 $ 712,896 $ 629,245
Stockholders' equity.......................... $ 820,333 $ 827,244 $ 742,862 $ 593,505 $ 600,443
OTHER DATA:
Patient days.................................. 25,297,000 26,766,000 29,041,000 29,341,000 29,334,000
Average occupancy percentage.................. 88.1% 88.5% 88.5% 88.4% 88.1%
Number of nursing home beds................... 75,669 78,058 85,001 89,298 90,228
</TABLE>
12
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Health care system reform and concerns over rising Medicare and Medicaid
costs continue to be high priorities for the federal and certain state
governments. Although no comprehensive health care, Medicare or Medicaid reform
legislation has yet been implemented, pressures to contain costs and the active
discussion and issues raised by the Clinton Administration, Congress and various
other groups have impacted the health care delivery system. In November 1995,
Congress passed the Seven Year Balanced Budget Reconciliation Act of 1995 (the
"1995 Balanced Budget Act") providing for, among other things, the reshaping of
the Medicare and Medicaid programs. In December 1995, President Clinton vetoed
the 1995 Balanced Budget Act and proposed alternative Medicare and Medicaid
legislation. Each of the legislative proposals offered by the President and
Congress provide for significant reductions in the overall rate of Medicare and
Medicaid spending growth. There is active discussion concerning this proposed
legislation and the form of any final legislation signed into law could differ
significantly from current proposals. The impact of currently proposed
legislation on the Company is not readily determinable. However, in their
currently proposed form, such legislation could have a material adverse effect
on the Company's future financial position, results of operations and cash
flows.
The Company's future operating performance will continue to be affected by
the issues facing the long-term health care industry as a whole, including the
maintenance of occupancy, its ability to continue to expand higher margin
business, the availability of nursing, therapy and other personnel, the adequacy
of funding of governmental reimbursement programs, the demand for nursing home
care and the nature of any health care reform measures that may be taken by the
federal government, as discussed above, as well as by any state governments. The
Company's ability to control costs, including its wages and related expenses
which continue to rise and represent the largest component of the Company's
operating and administrative expenses, will also significantly impact its future
operating results.
As a general matter, increases in the Company's operating costs result in
higher patient rates under Medicaid programs in subsequent periods. However, the
Company'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.
OPERATING RESULTS
1995 Compared to 1994
Net loss was $8,123,000 for the year ended December 31, 1995, as compared
to net income of $74,501,000 for the same period in 1994. Net loss for 1995
included a pre-tax charge of $100,277,000 for impaired long-lived assets related
primarily to the adoption of SFAS No. 121 (as defined below) and the write-off
of software and business development costs, as well as a charge of $4,000,000
related to an overhead and staff reduction program implemented during the fourth
quarter of 1995. Net income for 1994 included a $2,412,000 extraordinary charge,
net of income taxes, related to the write-off of unamortized deferred financing
costs related to certain refinanced debt.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," ("SFAS No. 121")
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount. The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount.
13
<PAGE> 15
In the fourth quarter of 1995, the Company recorded an impairment loss of
approximately $68,130,000 upon adoption of SFAS No. 121. Such loss primarily
related to certain nursing facilities, transitional hospitals, institutional
pharmacies and assisted living centers with current period operating losses.
Such current period operating losses, combined with a history of operating
losses and anticipated future operating losses, led management to believe that
impairment existed at such facilities. In addition, there were certain nursing
facilities for which management expected an adverse impact on future earnings
and cash flows as a result of recent changes in state Medicaid reimbursement
programs. Accordingly, management estimated the undiscounted future cash flows
to be generated by each facility. If the undiscounted future cash flow estimates
were less than the carrying value of the corresponding facility, management
estimated the fair value of such facility and wrote the carrying value down to
their estimate of fair value. Management calculated the fair value of the
impaired facilities by using the present value of estimated future cash flows,
or its best estimate of what such facility, or similar facilities in that state,
would sell for in the open market. Management believes it has the knowledge to
make such estimates of open market sales prices based on the volume of
facilities the Company has purchased and sold in previous years.
In addition to the SFAS No. 121 charge, the Company recorded a fourth
quarter impairment loss for other long-lived assets of approximately $32,147,000
primarily related to the write-off of software and business development costs.
During the fourth quarter of 1995, the Company hired a new Senior Vice President
of Information Technology, who redirected the Company's systems development
initiatives, causing a write-down, or a write-off, of certain software and
software development projects. In addition, the Company wrote off certain
business development and other costs where the Company believed the carrying
amount was unrecoverable.
The Company had a negative annual effective tax rate of 32% for the year
ended December 31, 1995, compared to an annual effective tax rate of 33% for the
same period in 1994. The annual effective tax rate in 1995 was different than
the federal statutory rate primarily due to the impact of nondeductible goodwill
included in the adjustments resulting from the adoption of SFAS No. 121. In
addition, the 1994 annual effective tax rate was lower than the federal
statutory rate primarily due to the utilization of certain tax credit
carryforwards, partially offset by the impact of state income taxes. At December
31, 1995, the Company had targeted jobs tax credit carryforwards of $20,784,000
for income tax purposes which expire in years 2005 through 2009. For financial
reporting purposes, the targeted jobs tax credit carryforwards have been
utilized to offset existing net taxable temporary differences reversing during
the carryforward periods. Due to taxable losses in prior years, future taxable
income was not assumed and a valuation allowance of $198,000 for the year ended
December 31, 1994 was recognized to offset the deferred tax assets related to
those carryforwards. The valuation allowance was eliminated in 1995 due to the
utilization of targeted jobs tax credits.
Net operating revenues and operating and administrative costs increased
approximately $259,300,000 and $245,300,000, respectively, for the year ended
December 31, 1995, as compared to the same period in 1994. These increases
consist of the following: increases in net operating revenues and operating and
administrative costs for facilities which the Company operated during each of
the years ended December 31, 1995 and 1994 ("same facility operations") of
approximately $157,600,000 and $148,900,000, respectively; increases in net
operating revenues and operating and administrative costs of approximately
$239,500,000 and $222,400,000, respectively, related to the expanded operations
of American Transitional Hospitals, Inc. ("ATH") and the acquisitions of
Insta-Care Holdings, Inc. ("Insta-Care") and the institutional pharmacy
subsidiaries of Synetic, Inc. ("Synetic pharmacies") in late 1994 as well as
Pharmacy Management Services, Inc. ("PMSI") in mid-1995; and decreases in net
operating revenues and operating and administrative costs of approximately
$137,800,000 and $126,000,000, respectively, due to the disposition of, or lease
terminations on, 29 facilities in 1995 and 77 facilities in 1994.
The increase in net operating revenues for same facility operations for the
year ended December 31, 1995, as compared to the same period in 1994, was due to
the following: approximately $111,800,000 due primarily to increases in Medicaid
room and board rates, and to a lesser extent, private and Medicare room and
board rates; approximately $37,500,000 due primarily to increases in
pharmacy-related revenues; approximately $23,000,000 due to increased ancillary
revenues as a result of providing additional ancillary services to the Company's
Medicare and private-pay patients; and approximately $8,300,000 due to various
other items.
14
<PAGE> 16
These increases in net operating revenues were partially offset by approximately
$23,000,000 due to a decrease in same facility occupancy to 88.5% for the year
ended December 31, 1995, as compared to 89.5% for the same period in 1994.
The increase in operating and administrative costs for same facility
operations for the year ended December 31, 1995, as compared to the same period
in 1994, was due to the following: approximately $125,700,000 due to increased
wages and related expenses (excluding pharmacy) principally due to higher wages
and greater benefits required to attract and retain qualified personnel, the
hiring of therapists on staff as opposed to contracting for their services and
increased staffing levels in the Company's nursing facilities to cover increased
patient acuity; approximately $4,000,000 due to an overhead and staff reduction
program implemented during the fourth quarter of 1995; approximately $38,100,000
due to increases in nursing supplies and other variable costs; and approximately
$38,800,000 due primarily to increases in pharmacy-related costs and various
other items. These increases in operating and administrative costs were
partially offset by approximately $57,700,000 due to a decrease in contracted
therapy expenses as a result of hiring therapists on staff as opposed to
contracting for their services.
Ancillary revenues are derived from providing services to residents beyond
room, board and custodial care. These services include occupational, physical,
speech, respiratory and IV therapy, as well as, sales of pharmaceuticals and
other services. The Company's overall ancillary revenues for the year ended
December 31, 1995 were approximately $943,000,000 and represented 29.2% of net
operating revenues, as compared to approximately $728,400,000 of ancillary
revenues for the same period in 1994 which represented 24.5% of 1994 net
operating revenues. The Company is pursuing further growth of ancillary revenues
through expansion of specialty services, such as rehabilitation therapy and
sales of pharmaceuticals. Due to the Company's continuing efforts to bring
therapists on staff as opposed to contracting for their services, and the
corresponding reduction in costs, the overall rate of growth in ancillary
revenues could be adversely impacted.
Interest expense increased approximately $19,500,000 as compared to the
same period in 1994 primarily due to additional interest related to the issuance
of approximately $308,000,000 of long-term obligations during late 1994 and in
1995 primarily in conjunction with certain acquisitions. Depreciation and
amortization expense increased approximately $14,800,000 as compared to the same
period in 1994 primarily due to acquisitions, capital additions and improvements
and the opening of newly constructed facilities, partially offset by a decrease
due to the dispositions of, or lease terminations on, certain facilities.
1994 Compared to 1993
Net income was $74,501,000 for the year ended December 31, 1994, as
compared to net income of $55,611,000, as restated per discussion below, for the
same period in 1993. Net income for 1994 included a $2,412,000 extraordinary
charge, net of income taxes, related to the write-off of unamortized deferred
financing costs related to certain refinanced debt. Net income for 1993 included
a $2,345,000 extraordinary charge, net of income taxes, related to the write-off
of unamortized deferred financing costs associated with certain debt that was
repaid or refinanced in 1993. During the third quarter of 1994, the Company
completed the merger of ATH in exchange for 2,400,000 shares of Common Stock.
The merger was accounted for as a pooling of interests and, accordingly, the
Company's consolidated financial statements were restated ("as restated") to
reflect ATH's financial position, results of operations and cash flows for each
period prior to the merger. The merger of ATH was not material to the Company's
financial position or results of operations.
The Company's annual effective tax rate was 33% for the year ended December
31, 1994, compared to 34%, as restated, for the same period in 1993. The 1994
and 1993 annual effective tax rates were lower than the federal statutory rate
primarily due to the utilization of certain tax credit carryforwards, partially
offset by the impact of state income taxes. At December 31, 1994, the Company
had targeted jobs tax credit carryforwards of $21,658,000 for income tax
purposes which expire in years 2004 through 2008. For financial reporting
purposes, the targeted jobs tax credit carryforwards have been utilized to
offset existing net taxable temporary differences reversing during the
carryforward periods. However, due to taxable losses in prior years, future
taxable income has not been assumed and a valuation allowance of $198,000 and
$15,097,000 for the years ended December 31, 1994 and 1993, respectively, was
recognized to offset the deferred tax assets related
15
<PAGE> 17
to those carryforwards. The valuation allowance decreased $14,899,000 from
January 1, 1994 due to the utilization of targeted jobs tax credits.
Net operating revenues and operating and administrative costs increased
approximately $84,800,000 and $52,600,000, respectively, for the year ended
December 31, 1994, as compared to the same period in 1993. These increases
consist of the following: increases in net operating revenues and operating and
administrative costs for facilities which the Company operated during each of
the years ended December 31, 1994 and 1993 ("same facility operations") of
approximately $215,200,000 and $176,900,000, respectively; increases in net
operating revenues and operating and administrative costs of approximately
$34,800,000 and $35,200,000, respectively, related to the expanded operations of
ATH, the acquisition of three nursing facilities in 1993 and the acquisitions of
Insta-Care and Synetic pharmacies in late 1994; and decreases in net operating
revenues and operating and administrative costs of approximately $165,200,000
and $159,500,000, respectively, due to the disposition of, or lease terminations
on, 77 facilities in 1994 and 43 facilities in 1993.
The increase in net operating revenues for same facility operations for the
year ended December 31, 1994, as compared to the same period in 1993, was due to
the following: approximately $114,100,000 due primarily to increases in Medicaid
room and board rates, and to a lesser extent, private and Medicare room and
board rates; approximately $95,800,000 due to increased ancillary revenues as a
result of providing additional ancillary services to the Company's Medicare and
private-pay patients; approximately $7,600,000 due to a shift in the Company's
patient mix to a higher Medicare census; and approximately $21,000,000 due
primarily to an increase in pharmacy-related revenues and various other items.
The Company's Medicare, private and Medicaid census for same facility operations
was 12%, 19%, and 68%, respectively, for the year ended December 31, 1994, as
compared to 11%, 19%, and 69%, respectively, for the same period in 1993. These
increases in net operating revenues were partially offset by approximately
$23,300,000 due to a decrease in same facility occupancy to 89.2% for the year
ended December 31, 1994, as compared to 90.2% for the same period in 1993.
The increase in operating and administrative costs for same facility
operations for the year ended December 31, 1994, as compared to the same period
in 1993, was due to the following: approximately $88,700,000 due to increased
wages and related expenses principally due to higher wages and greater benefits
required to attract and retain qualified personnel, the hiring of therapists on
staff as opposed to contracting for their services, and increased staffing
levels in the Company's nursing facilities to cover higher acuity patients;
approximately $62,400,000 due to additional ancillary costs (excluding wages and
related expenses) associated with the increase in ancillary services provided to
the Company's Medicare and private-pay patients; approximately $5,200,000 due
primarily to an increase in supplies purchased to meet the needs of the
Company's higher acuity patients; and approximately $20,600,000 due primarily to
increases in pharmacy-related costs and various other items.
The Company's overall ancillary revenues for the year ended December 31,
1994 were approximately $728,400,000 and represented 24.5% of net operating
revenues, as compared to approximately $618,800,000 of ancillary revenues for
the same period in 1993 which represented 21.5% of 1993 net operating revenues.
Growth in ancillary revenues, as well as increases in Medicare census, have also
resulted in higher costs for the Company due to the higher acuity services being
provided to these patients. The Company's overall ancillary costs (excluding
wages and related expenses) were approximately $384,500,000 for the year ended
December 31, 1994, compared to approximately $348,000,000 for the same period in
1993.
Interest expense for the year ended December 31, 1994 decreased
approximately $1,400,000 as compared to the same period in 1993 primarily due to
the following: repayment of approximately $45,000,000 of debt in 1993 with a
portion of the proceeds from issuance of the Preferred Stock and the conversion
of approximately $46,000,000 in principal amount of the Company's 9% Debentures
into shares of Common Stock in 1993, net of additional interest related to the
issuance or assumption of approximately $243,000,000 of long-term obligations
primarily during late 1994 in conjunction with certain acquisitions.
Depreciation and amortization expense for the year ended December 31, 1994
increased approximately $5,800,000 as compared to the same period in 1993
primarily due to acquisitions, the opening of newly constructed facilities and
over $100,000,000
16
<PAGE> 18
of capital additions and improvements, partially offset by a decrease due to the
disposition of or lease terminations on certain facilities.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had approximately $56,300,000 in cash and
cash equivalents and net working capital of approximately $165,000,000. The
Company anticipates that approximately $39,700,000 of its existing cash at
December 31, 1995, while not legally restricted, will be utilized to fund
certain workers' compensation and general liability claims, and the Company does
not expect to use such cash for other purposes. The Company had approximately
$37,600,000 of unused commitments under its Revolver/Letter of Credit Facility
as of December 31, 1995.
Net cash provided by operating activities for the year ended December 31,
1995 was approximately $105,200,000, an increase of approximately $11,000,000
from the prior year. Net cash used for investing activities and net cash
provided by financing activities were approximately $143,500,000 and $26,700,000
respectively, for the year ended December 31, 1995. The Company primarily used
cash generated from operations, $25,000,000 of proceeds from the issuance of
long-term obligations, as well as Revolver borrowings to fund capital
expenditures, construction and development costs totaling approximately
$161,900,000. The Company received cash proceeds of approximately $46,900,000
from the dispositions of facilities and other assets which, along with Revolver
borrowings, were used to repay approximately $68,400,000 of long-term
obligations and to fund acquisitions of approximately $34,200,000.
In February 1996, the Company completed the sale of $180,000,000 of 9%
Senior Notes due February 15, 2006 (the "Senior Notes") through a public
offering (the "Senior Notes offering") for net cash proceeds of approximately
$174,850,000. The Company used approximately $87,500,000 of such net proceeds to
prepay certain scheduled maturities under its 1994 Term Loan, approximately
$28,000,000 to prepay certain scheduled maturities under its Term Loan,
approximately $8,750,000 to prepay certain scheduled maturities under its Nippon
Term Loan, and the remaining net proceeds to repay Revolver borrowings and for
general corporate purposes. The Senior Notes are unsecured obligations,
guaranteed by substantially all of the Company's present and future
subsidiaries, and impose on the Company certain restrictive covenants.
Effective November 1, 1995, the Company exercised its option to exchange
(the "Exchange") all of the outstanding shares of its $2.75 Cumulative
Convertible Exchangeable Preferred Stock (liquidation preference $50 per share)
(the "Preferred Stock") for $150,000,000 aggregate principal amount of its
5 1/2% Convertible Subordinated Debentures due August 1, 2018 (the "5 1/2%
Debentures"). The Company issued $50 principal amount of 5 1/2% Debentures in
exchange for each share of Preferred Stock. All holders of the Preferred Stock
were required to participate in the Exchange. The 5 1/2% Debentures contain
conversion and optional redemption provisions substantially identical to those
of the Preferred Stock. Had the Exchange been completed prior to January 1,
1995, the Company's pro forma net loss per share for the year ended December 31,
1995 would have been $.13 as compared to a reported net loss per share of $.16.
In June 1995, the Company completed its acquisition of Pharmacy Management
Services, Inc. ("PMSI") in exchange for approximately 12,400,000 shares of the
Company's Common Stock plus closing and related costs. PMSI is a leading
nationwide provider of medical cost containment and managed care services to
workers' compensation payors and claimants. The acquisition was accounted for as
a purchase.
The Company issued $25,000,000 aggregate principal amount of taxable
revenue bonds ("Series 1995 Bonds"), which require semi-annual interest-only
payments at the rate of 6.88% per annum with respect to $7,000,000 of such bonds
and interest-only payments at the rate of 7.24% per annum with respect to
$18,000,000 of such bonds. The Series 1995 Bonds require a $7,000,000 principal
payment in June 2000, mature in June 2005 and are secured by a letter of credit.
In April 1995, the Company announced that its Board of Directors had
preliminarily approved a plan to spin off to its stockholders approximately 80%
of the common stock of Pharmacy Corporation of America ("PCA"), a wholly-owned
subsidiary of the Company which provides institutional pharmacy services to
17
<PAGE> 19
nursing homes, hospitals and other institutional customers as well as mail
service pharmaceutical products to workers' compensation payors, claimants and
employers. Subsequently, the Company disclosed that certain operational
difficulties at PCA were adversely affecting PCA's operating results and that it
had made changes in PCA's management (including the appointment of Robert D.
Woltil as President) and certain of PCA's operating and pricing policies to
address these difficulties. On December 19, 1995, the Company announced that PCA
was continuing to experience difficulties consolidating recent acquisitions and
that it would defer indefinitely plans to spin off any portion of PCA. On
January 17, 1996, the Company announced that Robert D. Woltil resigned as an
Executive Vice President of the Company and as President of PCA. A successor has
not yet been named. There can be no assurance that the PCA spin-off or any other
strategic transaction will occur.
In 1993, the Company registered with the Securities and Exchange Commission
$100,000,000 aggregate principal amount of certain debt securities, which are to
be offered from time to time as separate series in amounts, at prices and on
terms to be determined at the time of sale. The Company issued $20,000,000 of
8 3/4% First Mortgage Bonds, $30,000,000 of 8 5/8% First Mortgage Bonds and
$25,000,000 of 8 3/4% Notes under such registration. As of December 31, 1995,
$25,000,000 of aggregate principal amount of debt securities under such
registration remained unissued.
The Company believes that its existing cash and cash equivalents, working
capital from operations, net cash proceeds from the Senior Notes offering,
borrowings under its banking arrangements, issuance of certain debt securities
and refinancings of certain existing indebtedness will be adequate to repay its
debts due within one year of approximately $84,600,000 ($41,400,000 after giving
effect to the Senior Notes offering and the application of the net proceeds
therefrom), to make normal recurring capital additions and improvements for the
year ending December 31, 1996 of approximately $174,000,000, to make selective
acquisitions, including the purchase of previously leased facilities, and to
meet working capital requirements.
As of December 31, 1995, the Company had total indebtedness of
approximately $1,073,500,000 (excluding $78,000,000 of Revolver borrowings) and
total stockholders' equity of approximately $820,300,000. The ability of the
Company to satisfy its long-term obligations will be dependent upon its future
performance, which will be subject to prevailing economic conditions and to
financial, business and other factors beyond the Company's control, such as
federal and state health care reform. In addition, health care service
providers, such as the Company, operate in an industry that is currently subject
to significant changes from business combinations, new strategic alliances,
legislative reform, aggressive marketing practices by competitors and market
pressures. In this environment, the Company is frequently contacted by, and
otherwise engages in discussions with, other health care companies and financial
advisors regarding possible strategic alliances, joint ventures, business
combinations and other financial alternatives. The terms of substantially all of
the Company's debt instruments require the Company to repay or refinance
indebtedness under such debt instruments in the event of a change of control.
There can be no assurance that the Company will have the financial resources to
repay such indebtedness upon a change of control. See "-- General."
18
<PAGE> 20
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... 20
Consolidated Balance Sheets........................................................... 21
Consolidated Statements of Operations................................................. 22
Consolidated Statements of Stockholders' Equity....................................... 23
Consolidated Statements of Cash Flows................................................. 24
Notes to Consolidated Financial Statements............................................ 25
Supplementary Data (Unaudited) -- Quarterly Financial Data............................ 41
</TABLE>
19
<PAGE> 21
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Beverly Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of Beverly
Enterprises, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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
Beverly Enterprises, Inc. at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
ERNST & YOUNG LLP
Little Rock, Arkansas
February 2, 1996, except for Note 4,
paragraph 5 and Note 5, paragraph 5,
as to which the date is March 21, 1996
20
<PAGE> 22
BEVERLY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 56,303 $ 67,964
Accounts receivable -- patient, less allowance for doubtful
accounts:
1995 -- $22,860; 1994 -- $28,293............................... 514,820 438,743
Accounts receivable -- nonpatient, less allowance for doubtful
accounts:
1995 -- $497; 1994 -- $302..................................... 15,995 10,896
Notes receivable.................................................. 7,460 5,028
Operating supplies................................................ 59,109 60,243
Deferred income taxes............................................. 24,892 35,098
Prepaid expenses and other........................................ 38,013 34,365
---------- ----------
Total current assets...................................... 716,592 652,337
Property and equipment, net......................................... 1,189,985 1,200,623
Other assets:
Notes receivable, less allowance for doubtful notes:
1995 -- $4,953; 1994 -- $6,429................................. 41,915 41,677
Designated and restricted funds................................... 57,082 41,939
Goodwill, net..................................................... 380,681 245,990
Operating and leasehold rights and licenses, net.................. 18,086 23,336
Other, net........................................................ 102,120 116,676
---------- ----------
Total other assets........................................ 599,884 469,618
---------- ----------
$2,506,461 $2,322,578
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 155,385 $ 117,001
Short-term borrowings............................................. 78,000 --
Accrued wages and related liabilities............................. 134,391 132,066
Accrued interest.................................................. 10,261 10,828
Other accrued liabilities......................................... 88,869 85,110
Current portion of long-term obligations.......................... 84,639 60,199
Income taxes payable.............................................. -- 4,421
---------- ----------
Total current liabilities................................. 551,545 409,625
Long-term obligations............................................... 988,909 918,018
Deferred income taxes payable....................................... 54,687 81,117
Other liabilities and deferred items................................ 90,987 86,574
Commitments and contingencies
Stockholders' equity:
Preferred stock, shares issued and outstanding: 3,000,000......... -- 150,000
Common stock, shares issued: 1995 -- 102,618,241;
1994 -- 89,620,822............................................. 10,262 8,962
Additional paid-in capital........................................ 766,549 609,762
Retained earnings................................................. 83,657 98,655
Treasury stock, at cost: 3,972,208 shares......................... (40,135) (40,135)
---------- ----------
Total stockholders' equity................................ 820,333 827,244
---------- ----------
$2,506,461 $2,322,578
========== ==========
</TABLE>
See accompanying notes.
21
<PAGE> 23
BEVERLY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net operating revenues................................... $3,228,553 $2,969,239 $2,884,451
Interest income.......................................... 14,228 14,578 15,269
---------- ---------- ----------
Total revenues................................. 3,242,781 2,983,817 2,899,720
Costs and expenses:
Operating and administrative:
Wages and related................................... 1,736,151 1,600,580 1,593,410
Other............................................... 1,224,681 1,114,916 1,069,536
Interest............................................... 84,245 64,792 66,196
Depreciation and amortization.......................... 103,581 88,734 82,938
Impairment of long-lived assets:
Adoption of SFAS No. 121............................ 68,130 -- --
Development and other costs......................... 32,147 -- --
---------- ---------- ----------
Total costs and expenses....................... 3,248,935 2,869,022 2,812,080
---------- ---------- ----------
Income (loss) before provision for income taxes and
extraordinary charge................................... (6,154) 114,795 87,640
Provision for income taxes............................... 1,969 37,882 29,684
---------- ---------- ----------
Income (loss) before extraordinary charge................ (8,123) 76,913 57,956
Extraordinary charge, net of income taxes of $1,188 in
1994 and $1,155 in 1993................................ -- (2,412) (2,345)
---------- ---------- ----------
Net income (loss)........................................ $ (8,123) $ 74,501 $ 55,611
========== ========== ==========
Net income (loss) applicable to common shares............ $ (14,998) $ 66,251 $ 31,173
========== ========== ==========
Income (loss) per share of common stock:
Before redemption premium on preferred stock and
extraordinary charge................................ $ (.16) $ .79 $ .66
Redemption premium on preferred stock.................. -- -- (.25)
---------- ---------- ----------
Before extraordinary charge............................ (.16) .79 .41
Extraordinary charge................................... -- (.03) (.03)
---------- ---------- ----------
Net income (loss)...................................... $ (.16) $ .76 $ .38
========== ========== ==========
Shares used to compute per share amounts................. 92,233 87,087 81,207
========== ========== ==========
</TABLE>
See accompanying notes.
22
<PAGE> 24
BEVERLY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
--------- ------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992(1)............ $ 80,000 $ 8,071 $ 541,577 $ 3,992 $(40,135) $ 593,505
Issuance of 3,000,000 shares of Preferred
Stock.................................. 150,000 -- (5,500) -- -- 144,500
Funds designated for the redemption of
preferred stock........................ (100,000) -- -- -- -- (100,000)
Redemption premium on preferred stock..... 20,000 -- -- (20,000) -- --
Conversion of 9% Debentures into common
stock.................................. -- 713 43,770 -- -- 44,483
Employee stock transactions, net.......... -- 41 3,441 -- -- 3,482
Preferred stock dividends................. -- -- -- (5,125) -- (5,125)
Issuance of ATH preferred stock(1)........ -- -- 6,406 -- -- 6,406
Accretion of amounts due upon redemption
of ATH preferred stock (1)............. -- -- 1,218 (1,218) -- --
Cancellation of ATH preferred stock(1).... -- -- (3) 3 -- --
Net income................................ -- -- -- 55,611 -- 55,611
--------- ------- ---------- -------- -------- ---------
Balances at December 31, 1993............... 150,000 8,825 590,909 33,263 (40,135) 742,862
Exercise of stock option grant............ -- 100 11,900 -- -- 12,000
Employee stock transactions, net.......... -- 37 4,830 -- -- 4,867
Preferred stock dividends................. -- -- -- (8,250) -- (8,250)
Issuance of ATH preferred stock(1)........ -- -- 1,264 -- -- 1,264
Accretion of amounts due upon redemption
of ATH preferred stock (1)............. -- -- 859 (859) -- --
Net income................................ -- -- -- 74,501 -- 74,501
--------- ------- ---------- -------- -------- ---------
Balances at December 31, 1994............... 150,000 8,962 609,762 98,655 (40,135) 827,244
Issuance of 12,361,184 shares of common
stock for the purchase of PMSI......... -- 1,236 149,693 -- -- 150,929
Exchange of Preferred Stock into 5 1/2%
Debentures............................. (150,000) -- -- -- -- (150,000)
Employee stock transactions, net.......... -- 64 7,094 -- -- 7,158
Preferred stock dividends................. -- -- -- (6,875) -- (6,875)
Net loss.................................. -- -- -- (8,123) -- (8,123)
--------- ------- ---------- -------- -------- ---------
Balances at December 31, 1995............... $ -- $10,262 $ 766,549 $ 83,657 $(40,135) $ 820,333
========= ======= ========= ======== ======== =========
</TABLE>
- ---------------
(1) Amounts were recorded by ATH prior to its merger with the Company in
September 1994. Total stockholders' equity at December 31, 1992 decreased
$240,000 due to the restatement for ATH.
See accompanying notes.
23
<PAGE> 25
BEVERLY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ (8,123) $ 74,501 $ 55,611
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization....................... 103,581 88,734 82,938
Impairment of long-lived assets..................... 100,277 -- --
Provision for reserves and discounts on patient,
notes and other receivables, net.................. 15,889 14,107 21,363
Amortization of deferred financing costs............ 4,379 4,241 3,743
Extraordinary charge................................ -- 3,600 3,500
Gains on dispositions of facilities and other
assets, net....................................... (2,253) (9,749) (3,667)
Deferred taxes...................................... (20,394) (2,031) 4,708
Net increase (decrease) in insurance related
accounts.......................................... (10,531) 8,342 (3,037)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable -- patient.................... (84,420) (76,320) (40,695)
Operating supplies................................ 1,649 (2,777) 847
Prepaid expenses and other receivables............ (154) 1,597 5,357
Accounts payable and other accrued expenses....... 16,370 (2,809) 6,866
Income taxes payable.............................. (6,194) 7,332 366
Other, net........................................ (4,875) (14,548) (8,911)
--------- --------- ---------
Total adjustments.............................. 113,324 19,719 73,378
--------- --------- ---------
Net cash provided by operating activities...... 105,201 94,220 128,989
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired........ (34,184) (267,227) (49,973)
Proceeds from dispositions of facilities and other
assets.............................................. 46,892 77,211 9,952
Collections on notes receivable and REMIC investment... 16,602 9,580 6,604
Capital expenditures................................... (126,093) (110,281) (85,409)
Construction and development in progress, net.......... (35,818) (14,461) (20,727)
Other, net............................................. (10,945) (12,375) (7,573)
--------- --------- ---------
Net cash used for investing activities......... (143,546) (317,553) (147,126)
Cash flows from financing activities:
Revolver borrowings.................................... 1,017,000 62,000 201,000
Repayments of Revolver borrowings...................... (939,000) (62,000) (201,000)
Proceeds from issuance of long-term obligations........ 25,000 309,308 100,541
Repayments of long-term obligations.................... (68,400) (98,340) (101,016)
Proceeds from issuance of Preferred Stock, net......... -- -- 144,500
Funds designated for the redemption of preferred
stock............................................... -- -- (100,000)
Proceeds from exercise of stock options................ 2,146 14,509 2,537
Proceeds from issuance of ATH preferred stock.......... -- 1,264 6,406
Deferred financing costs............................... (2,161) (7,653) (10,290)
Dividends paid on preferred stock...................... (8,250) (8,250) (3,063)
Proceeds from designated funds, net.................... 349 3,401 4,546
--------- --------- ---------
Net cash provided by financing activities...... 26,684 214,239 44,161
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents..... (11,661) (9,094) 26,024
Cash and cash equivalents at beginning of year........... 67,964 77,058 51,034
--------- --------- ---------
Cash and cash equivalents at end of year................. $ 56,303 $ 67,964 $ 77,058
========= ========= =========
Supplemental schedule of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized)................ $ 80,433 $ 59,242 $ 64,035
Income taxes (net of refunds)....................... 28,557 31,501 17,226
</TABLE>
See accompanying notes.
24
<PAGE> 26
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
References herein to the Company include Beverly Enterprises, Inc. and its
wholly-owned subsidiaries. The Company provides long-term health care in 37
states and the District of Columbia. Its operations include nursing facilities,
subacute and acute long-term transitional hospitals, institutional and mail
service pharmacies, rehabilitation therapy services, assisted living centers,
hospices and home health care centers. The consolidated financial statements of
the Company include the accounts of the Company and all of its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include time deposits and certificates of deposit
with original maturities of three months or less.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation or,
where appropriate, the present value of the related capital lease obligations
less accumulated amortization. Depreciation and amortization are computed by the
straight-line method over the estimated useful lives of the assets.
Intangible Assets
Operating and leasehold rights and licenses (stated at cost less
accumulated amortization of $19,040,000 in 1995 and $21,899,000 in 1994) are
being amortized over the lives of the related assets (principally 40 years) and
leases (principally 10 to 15 years), using the straight-line method. Goodwill
(stated at cost less accumulated amortization of $30,431,000 in 1995 and
$24,171,000 in 1994) is being amortized over 40 years or, if applicable, the
life of the lease using the straight-line method.
On an ongoing basis, the Company reviews the carrying value of its
intangible assets in light of any events or circumstances that indicate they may
be impaired or that the amortization period may need to be adjusted. If such
circumstances suggest the intangible value cannot be recovered, calculated based
on undiscounted cash flows over the remaining amortization period, the carrying
value of the intangible will be reduced by such shortfall. As of December 31,
1995, the Company does not believe there is any indication that the carrying
value or the amortization period of its intangibles needs to be adjusted. See
"-- Impairment of Long-Lived Assets."
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," ("SFAS No. 121")
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount. The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount.
25
<PAGE> 27
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In the fourth quarter of 1995, the Company recorded an impairment loss of
approximately $68,130,000 upon adoption of SFAS No. 121. Such loss primarily
related to certain nursing facilities, transitional hospitals, institutional
pharmacies and assisted living centers with current period operating losses.
Such current period operating losses, combined with a history of operating
losses and anticipated future operating losses, led management to believe that
impairment existed at such facilities. In addition, there were certain nursing
facilities for which management expected an adverse impact on future earnings
and cash flows as a result of recent changes in state Medicaid reimbursement
programs. Accordingly, management estimated the undiscounted future cash flows
to be generated by each facility. If the undiscounted future cash flow estimates
were less than the carrying value of the corresponding facility, management
estimated the fair value of such facility and wrote the carrying value down to
their estimate of fair value. Management calculated the fair value of the
impaired facilities by using the present value of estimated future cash flows,
or its best estimate of what such facility, or similar facilities in that state,
would sell for in the open market. Management believes it has the knowledge to
make such estimates of open market sales prices based on the volume of
facilities the Company has purchased and sold in previous years.
In addition to the SFAS No. 121 charge, the Company recorded a fourth
quarter impairment loss for other long-lived assets of approximately $32,147,000
primarily related to the write-off of software and business development costs.
During the fourth quarter of 1995, the Company hired a new Senior Vice President
of Information Technology, who redirected the Company's systems development
initiatives, causing a write-down, or a write-off, of certain software and
software development projects. In addition, the Company wrote off certain
business development and other costs where the Company believed the carrying
amount was unrecoverable.
Insurance
The Company insures auto liability, general liability and workers'
compensation risks, in most states, through insurance policies with third
parties, some of which may be subject to reinsurance agreements between the
insurer and Beverly Indemnity, Ltd., a wholly-owned subsidiary of the Company.
The liabilities for estimated incurred losses not covered by third party
insurance are discounted at 10% in 1995 and 1994 to their present value based on
expected loss payment patterns determined by independent actuaries. The
discounted insurance liabilities are included in the consolidated balance sheet
captions as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accrued wages and related liabilities.......................... $ 35,265 $ 33,111
Other accrued liabilities...................................... 6,572 7,849
Other liabilities and deferred items........................... 84,720 76,957
-------- --------
$126,557 $117,917
======== ========
</TABLE>
On an undiscounted basis, the total insurance liabilities as of December
31, 1995 and 1994 were $164,060,000 and $148,023,000, respectively. As of
December 31, 1995, the Company has deposited approximately $58,284,000 in funds
(the "Beverly Indemnity funds") that are restricted for the payment of insured
claims. In addition, the Company anticipates that approximately $39,700,000 of
its existing cash at December 31, 1995, while not legally restricted, will be
utilized to fund certain workers' compensation and general liability claims, and
the Company does not expect to use such cash for other purposes.
26
<PAGE> 28
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Stock Options
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense for the stock
option grants.
Revenues
The Company's revenues are derived primarily from providing long-term
health care services. Approximately 77%, 80% and 80% of the Company's net
operating revenues for 1995, 1994 and 1993, respectively, were derived from
funds under federal and state medical assistance programs, and approximately
72%, 78% and 83% of the Company's net patient accounts receivable at December
31, 1995, 1994 and 1993, respectively, are due from such programs. These
revenues and receivables are reported at their estimated net realizable amounts
and are subject to audit and retroactive adjustment. Provisions for estimated
third-party payor settlements are provided in the period the related services
are rendered and are adjusted in the period of settlement. Changes in estimates
related to third party receivables resulted in the recording of approximately
$19,700,000, $11,000,000 and $8,100,000 of revenues for the years ended December
31, 1995, 1994 and 1993, respectively.
Concentration of Credit Risk
The Company has significant accounts receivable, notes receivable and other
assets whose collectibility or realizability is dependent upon the performance
of certain governmental programs, primarily Medicaid and Medicare. These
receivables and other assets represent the only concentration of credit risk for
the Company. The Company does not believe there are significant credit risks
associated with these governmental programs. The Company believes that an
adequate provision has been made for the possibility of these receivables and
other assets proving uncollectible and continually monitors and adjusts these
allowances as necessary.
Earnings per Share
Net income (loss) applicable to common shares is computed by deducting
preferred stock dividends (including the $20,000,000 redemption premium on the
preferred stock in 1993, as discussed below) from net income (loss), when
dilutive. Net loss per share for the year ended December 31, 1995 was computed
by dividing net loss applicable to common shares by the weighted average number
of shares of Common Stock outstanding during the period. Earnings per share for
the years ended December 31, 1994 and 1993 were computed by dividing net income
applicable to common shares by the weighted average number of shares of Common
Stock outstanding during the period and the weighted average number of shares
issuable upon exercise of stock options, calculated using the treasury stock
method. During the year ended December 31, 1993, the Company charged retained
earnings for the $20,000,000 excess (the "redemption premium") to be paid to
redeem the Company's cumulative convertible preferred stock (the "preferred
stock") above its $80,000,000 original recorded value. Although this amount did
not impact the Company's net income, for accounting purposes the $20,000,000
redemption premium was treated as a reduction to income applicable to common
shares in the calculation of earnings per share for the year ended December 31,
1993.
Other
Certain prior year amounts have been reclassified to conform with the 1995
presentation.
27
<PAGE> 29
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. ACQUISITIONS AND DISPOSITIONS
During the year ended December 31, 1995, the Company purchased 17
previously leased nursing facilities (2,118 beds), one previously leased
retirement living center (17 units), and certain other assets for approximately
$32,700,000 cash, approximately $40,400,000 acquired debt and approximately
$1,700,000 security and other deposits. The Company does not operate four of
such facilities which were subleased to other nursing home operators in prior
year transactions and currently remain under lease to such operators. Also
during such period, the Company sold, subleased or terminated the leases on 11
nursing facilities (1,199 beds), 12 homes for the developmentally disabled
(1,065 beds), six retirement living centers (1,141 units) and certain other
assets for cash proceeds of approximately $39,400,000, approximately $3,700,000
of notes receivable and the assumption of approximately $52,800,000 of debt. The
Company recognized net pre-tax gains of approximately $2,000,000 as a result of
these dispositions. In addition, the Company terminated a management agreement
on two nursing facilities (150 beds) and four assisted living centers (510
units). The operations of these facilities were immaterial to the Company's
financial position and results of operations.
In June 1995, the Company acquired Pharmacy Management Services, Inc.
("PMSI") in exchange for approximately 12,400,000 shares of the Company's Common
Stock plus closing and related costs. PMSI is a leading nationwide provider of
medical cost containment and managed care services to workers' compensation
payors and claimants. The acquisition was accounted for as a purchase and was
not material to the Company's financial position or results of operations.
During the year ended December 31, 1994, the Company purchased 19
previously leased nursing facilities (2,202 beds), one previously leased
retirement living center (20 units), and certain other assets for approximately
$43,600,000 cash, approximately $1,000,000 issuance of debt, approximately
$16,900,000 assumed and acquired debt and approximately $1,400,000 security and
other deposits. Also during such period, the Company sold, subleased or
terminated the leases on 77 nursing facilities (7,192 beds) and certain other
assets for cash proceeds of approximately $80,200,000, approximately $700,000 of
notes receivable and the assumption of approximately $40,000 of debt. The
operations of these facilities were immaterial to the Company's financial
position and results of operations.
During the third quarter of 1994, the Company issued 2,400,000 shares of
Common Stock for all of the outstanding stock of American Transitional
Hospitals, Inc. ("ATH"). ATH operates licensed hospitals specializing in
long-term acute care and transitional acute care to medically complex,
chronically ill patients. The merger was accounted for as a pooling of interests
and, accordingly the Company's consolidated financial statements were restated
to reflect ATH's financial position, results of operations and cash flows for
each period prior to the merger. All transactions between the Company and ATH
prior to the merger were eliminated in the restated consolidated financial
statements. The merger of ATH was not material to the Company's financial
position or results of operations.
In November 1994, Pharmacy Corporation of America ("PCA"), a wholly-owned
subsidiary of the Company, acquired Insta-Care Holdings, Inc. ("Insta-Care"),
for cash of approximately $112,000,000, as well as other costs incurred totaling
approximately $10,500,000. Insta-Care provides pharmaceutical dispensing
services in six states to approximately 65,000 patients in nursing homes and
correctional facilities. In December 1994, PCA acquired three institutional
pharmacy subsidiaries of Synetic, Inc. ("Synetic pharmacies"), for cash of
approximately $107,300,000, as well as other costs incurred totaling
approximately $6,000,000. The Synetic businesses provide pharmaceutical
dispensing services in the New England area and the state of Indiana to
approximately 45,000 patients in various institutions, including nursing homes,
transitional care facilities, correctional facilities and group homes. These
acquisitions were accounted for as purchases.
28
<PAGE> 30
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
2. ACQUISITIONS AND DISPOSITIONS -- (CONTINUED)
During the year ended December 31, 1993, the Company acquired three nursing
facilities (328 beds) and leasehold interests in eight nursing facilities (829
beds) and one retirement living center (69 units), all of which were previously
managed by the Company, in addition to one nursing facility (60 beds) and one
retirement living center (187 units) not previously operated by the Company. The
acquisitions of such facilities, and certain other assets, were accounted for as
purchases and were consummated with approximately $6,915,000 cash, approximately
$18,232,000 assumed and acquired debt, approximately $858,000 of security and
other deposits and approximately $454,000 reduction in receivables. In addition,
the Company acquired 25 nursing facilities (2,706 beds) and two retirement
living centers (435 units), which were previously leased by the Company, for
approximately $38,381,000 cash (including approximately $5,000,000 borrowed
under the Company's revolving credit agreement), approximately $5,541,000
issuance of debt, approximately $42,285,000 assumed and acquired debt and
approximately $2,313,000 of security and other deposits. The operations of these
facilities were immaterial to the Company's financial position and results of
operations.
During the year ended December 31, 1993, the Company sold or terminated the
leases on 40 nursing facilities (4,511 beds) and three retirement living centers
(230 units). The Company recognized pre-tax losses of approximately $3,769,000
as a result of these dispositions. In addition, the Company sold certain other
assets for pre-tax gains of approximately $4,850,000. Dispositions of such
facilities and other assets were consummated for approximately $9,583,000 cash
and the assumption of approximately $5,460,000 of debt. The operations of these
facilities were immaterial to the Company's financial position and results of
operations.
3. PROPERTY AND EQUIPMENT
Following is a summary of property and equipment and related accumulated
depreciation and amortization, by major classification, at December 31 (in
thousands):
<TABLE>
<CAPTION>
TOTAL OWNED LEASED
---------------------- ---------------------- ------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Land, buildings and improvements................ $1,375,945 $1,413,359 $1,319,008 $1,355,199 $ 56,937 $ 58,160
Furniture and equipment......................... 347,478 341,283 340,220 334,193 7,258 7,090
Construction in progress........................ 47,587 38,139 47,587 38,139 -- --
---------- ---------- ---------- ---------- --------- --------
1,771,010 1,792,781 1,706,815 1,727,531 64,195 65,250
Less accumulated depreciation and
amortization.................................. 581,025 592,158 537,704 550,225 43,321 41,933
---------- ---------- ---------- ---------- -------- --------
$1,189,985 $1,200,623 $1,169,111 $1,177,306 $ 20,874 $ 23,317
========== ========== ========== ========== ======== ========
</TABLE>
The Company provides depreciation and amortization using the straight-line
method over the following estimated useful lives: land improvements -- 5 to 15
years; buildings -- 35 to 40 years; building improvements -- 5 to 20 years;
leasehold improvements -- 5 to 20 years or term of lease, if less; furniture and
equipment -- 5 to 15 years. Capitalized lease assets are amortized over the
remaining initial terms of the leases.
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995, 1994 and 1993 was $82,752,000, $77,575,000
and $72,169,000, respectively.
29
<PAGE> 31
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS
At December 31, 1995, there were $78,000,000 of outstanding Revolver
borrowings at a weighted average annual interest rate of 7.38%. Long-term
obligations consist of the following at December 31 (dollars in thousands except
per share amounts):
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Notes and mortgages, less imputed interest: 1995 -- $312,
1994 -- $371; due in installments through the year 2020, at
effective interest rates of 5.86% to 14.00%, a portion of which is
secured by property, equipment and other assets with a net book
value of $254,676 at December 31, 1995............................ $ 158,597 $ 129,805
Industrial development revenue bonds, less imputed interest:
1995 -- $61, 1994 -- $74; due in installments through the year
2013, at effective interest rates of 5.03% to 10.50%, a portion of
which is secured by property and other assets with a net book
value of $222,559 at December 31, 1995............................ 214,107 277,762
Term Loan under the 1994 Credit Agreement due in quarterly
installments through October 31, 1999............................. 202,500 225,000
Term Loan under the Bank Credit Facility due in quarterly
installments through March 24, 1999............................... 55,000 55,000
Nippon Term Loan under the Nippon Credit Agreement due in quarterly
installments from June 1996 through March 3, 2000................. 20,000 20,000
Senior secured notes, face amount, less unamortized discount:
1994 -- $71 (repaid in December 1995)............................. -- 17,679
8 3/4% First Mortgage Bonds due July 1, 2008, secured by first
mortgages on eight nursing facilities with an aggregate net book
value of $15,530 at December 31, 1995............................. 19,765 19,922
8 5/8% First Mortgage Bonds due October 1, 2008, secured by first
mortgages on 11 nursing facilities with an aggregate net book
value of $29,218 at December 31, 1995............................. 29,788 29,883
8 3/4% Notes due December 31, 2003, unsecured....................... 24,875 24,975
7 3/4% Note due in quarterly installments through June 1, 2001,
secured by first mortgages on 11 nursing facilities and one
assisted living center with an aggregate net book value of $19,890
at December 31, 1995.............................................. 23,589 24,548
Series 1995 Bonds................................................... 25,000 --
Medium Term Notes due June 15, 2000, secured by eligible receivables
of selected nursing facilities of $72,746 at December 31, 1995.... 50,000 50,000
7 5/8% convertible subordinated debentures due March 15, 2003,
convertible at $20.47 per share of Common Stock................... 67,924 67,924
5 1/2% convertible subordinated debentures due August 1, 2018,
convertible at $13.33 per share of Common Stock................... 150,000 --
Zero coupon notes, face amount, less unamortized discount:
1995 -- $1,039, 1994 -- $1,316; maturing July 16, 2003,
anticipated to be due September 30, 1996, convertible into 13.32
shares of Common Stock per $1 note................................ 1,288 1,380
----------- ----------
1,042,433 943,878
Present value of capital lease obligations, less imputed interest:
1995 -- $972, 1994 -- $1,196; at effective interest rates of 6.07%
to 13.00%......................................................... 31,115 34,339
----------- ----------
1,073,548 978,217
Less amounts due within one year.................................... 84,639 60,199
----------- ----------
$ 988,909 $ 918,018
=========== ==========
</TABLE>
30
<PAGE> 32
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS -- (CONTINUED)
On November 1, 1994, the Company executed a $375,000,000 Credit Agreement
(the "1994 Credit Agreement") which provides for a $225,000,000 Term Loan (the
"1994 Term Loan") and a $150,000,000 Revolver/Letter of Credit Facility (the
"Revolver/LOC Facility"). The proceeds from the 1994 Term Loan were used to
consummate the pharmacy acquisitions (as discussed above). The Company incurred
a $2,412,000 extraordinary charge, net of income taxes, in 1994 related to the
write-off of unamortized deferred financing costs associated with the 1993
revolving credit facility and letter of credit facility, which were replaced by
the Revolver/LOC Facility, as well as with the Company's commercial paper
program which was replaced with Medium Term Notes, as discussed below, and
certain bond refundings. Currently, the 1994 Term Loan and any Revolver
borrowings bear interest at adjusted LIBOR plus 1%, the Prime Rate, as defined,
or the adjusted CD rate, as defined, plus 1 1/8%, at the Company's option. Such
interest rates may be adjusted quarterly based on certain financial ratio
calculations. The Company pays certain commitment fees and commissions with
respect to the Revolver/LOC Facility and had approximately $37,600,000 of unused
commitments under such facility at December 31, 1995. The 1994 Credit Agreement
is secured by a security interest in the stock of PCA and certain of its
subsidiaries and imposes on the Company certain financial tests and restrictive
covenants.
The Company executed a $100,000,000 Bank Credit Facility (the "Bank Credit
Facility") during 1992, which provides for a seven-year term loan (the "Term
Loan"). A portion of the net proceeds from the Preferred Stock offering (as
discussed herein) was used to repay approximately $45,000,000 of the Term Loan
during 1993. Accordingly, in 1993, the Company recorded a $2,345,000
extraordinary charge, net of income taxes, related to the write-off of
unamortized deferred financing costs associated with such debt, as well as
certain bond refundings. Currently, the Term Loan bears interest at adjusted
LIBOR plus 7/8% or the Prime Rate, as defined, at the Company's option, and
requires interest-only payments through September 1996. Such interest rates may
be adjusted quarterly based on certain financial ratio calculations. The Bank
Credit Facility is secured by a mortgage interest in 25 nursing facilities and
assisted living centers with a net book value totaling approximately $53,901,000
at December 31, 1995, and a security interest in certain personal property and
imposes on the Company certain financial tests and restrictive covenants.
The Nippon Credit Agreement, entered into in March 1993, provides for a
seven-year term loan (the "Nippon Term Loan"). Currently, the Nippon Term Loan
bears interest at adjusted LIBOR plus 7/8% or the Prime Rate, as defined, at
the Company's option, and requires interest-only payments through February 1996.
Such interest rates may be adjusted quarterly based on certain financial ratio
calculations. The Nippon Credit Agreement is secured by a mortgage interest in
eight nursing facilities with a net book value totaling approximately
$15,648,000 at December 31, 1995.
In February 1996, the Company completed the sale of $180,000,000 of 9%
Senior Notes due February 15, 2006 (the "Senior Notes") through a public
offering (the "Senior Notes offering") for net cash proceeds of approximately
$174,850,000. The Company used approximately $87,500,000 of such net proceeds to
prepay certain scheduled maturities under the 1994 Term Loan, approximately
$28,000,000 to prepay certain scheduled maturities under the Term Loan,
approximately $8,750,000 to prepay certain scheduled maturities under the Nippon
Term Loan, and the remaining net proceeds to repay Revolver borrowings and for
general corporate purposes. The Senior Notes are unsecured obligations,
guaranteed by substantially all of the Company's present and future
subsidiaries, and impose on the Company certain restrictive covenants.
Effective November 1, 1995, the Company exercised its option to exchange
(the "Exchange") all of the outstanding shares of its Preferred Stock (as
defined below) (liquidation preference $50 per share) for $150,000,000 aggregate
principal amount of its 5 1/2% Convertible Subordinated Debentures due August 1,
2018 (the "5 1/2% Debentures"). The Company issued $50 principal amount of
5 1/2% Debentures in exchange
31
<PAGE> 33
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS -- (CONTINUED)
for each share of Preferred Stock. All holders of the Preferred Stock were
required to participate in the Exchange. The 5 1/2% Debentures contain
conversion and optional redemption provisions substantially identical to those
of the Preferred Stock. Had the Exchange been completed prior to January 1,
1995, the Company's pro forma net loss per share for the year ended December 31,
1995 would have been $.13 as compared to a reported net loss per share of $.16.
In June 1995, the Company issued $25,000,000 aggregate principal amount of
taxable revenue bonds ("Series 1995 Bonds"), which require semi-annual
interest-only payments at the rate of 6.88% per annum with respect to $7,000,000
of such bonds and interest-only payments at the rate of 7.24% per annum with
respect to $18,000,000 of such bonds. The Series 1995 Bonds require a $7,000,000
principal payment in June 2000, mature in June 2005 and are secured by a letter
of credit.
In December 1994, the Company replaced its commercial paper program with
$50,000,000 of medium term notes (the "Medium Term Notes"). The Medium Term
Notes bear interest at LIBOR, as defined, plus .35%. Pursuant to the Medium Term
Notes agreement, eligible receivables of selected nursing facilities are sold to
Beverly Funding Corporation ("Beverly Funding"), a wholly-owned subsidiary of
the Company. At December 31, 1995, Beverly Funding had total assets of
approximately $73,500,000 which cannot be used to satisfy claims of the Company
or any of its subsidiaries.
In 1993, the Company registered with the Securities and Exchange Commission
$100,000,000 aggregate principal amount of certain debt securities, which are to
be offered from time to time as separate series in amounts, at prices and on
terms to be determined at the time of sale. The Company issued $20,000,000 of
8 3/4% First Mortgage Bonds, $30,000,000 of 8 5/8% First Mortgage Bonds and
$25,000,000 of 8 3/4% Notes under such registration. As of December 31, 1995,
$25,000,000 of aggregate principal amount of debt securities under such
registration remained unissued.
Maturities and sinking fund requirements of long-term obligations,
including capital leases, for the years ending December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 THEREAFTER TOTAL
------- -------- -------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Future minimum lease payments................... $ 7,018 $ 5,677 $ 5,010 $ 4,299 $ 3,687 $ 30,788 $ 56,479
Less interest................................... 3,369 2,635 2,307 2,042 1,824 13,187 25,364
------- -------- -------- ------- ------- -------- ----------
Net present value of future minimum lease
payments...................................... 3,649 3,042 2,703 2,257 1,863 17,601 31,115
Notes, mortgages, bonds and debentures.......... 80,990 103,595 123,540 91,847 85,894 556,567 1,042,433
------- -------- -------- ------- ------- -------- ----------
$84,639 $106,637 $126,243 $94,104 $87,757 $574,168 $1,073,548
======= ======== ======== ======= ======= ======== ==========
</TABLE>
Many of the capital and operating leases contain at least one renewal
option (which could extend the term of the leases by five to fifteen years),
purchase options, escalation clauses and provisions for payments by the Company
of real estate taxes, insurance and maintenance costs.
The industrial development revenue bonds were originally issued prior to
1985 primarily for the construction or acquisition of nursing facilities. Bond
reserve funds are included in designated funds. These funds are invested
primarily in certificates of deposit and in United States government securities
and are carried at cost, which approximates market value. Net capitalized
interest relating to construction was not material in 1995, 1994 or 1993.
32
<PAGE> 34
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
5. COMMITMENTS AND CONTINGENCIES
The future minimum rental commitments required by all noncancelable
operating leases with initial or remaining terms in excess of one year as of
December 31, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1996............................................................... $ 82,557
1997............................................................... 65,651
1998............................................................... 52,794
1999............................................................... 41,354
2000............................................................... 25,575
Thereafter......................................................... 51,885
$319,816
</TABLE>
Total future minimum rental commitments are net of approximately
$18,131,000 of minimum sublease rentals due in the future under noncancelable
subleases. Rent expense on operating leases, net of sublease rent income, for
the years ended December 31 was as follows: 1995 -- $127,074,000;
1994 -- $127,187,000; 1993 -- $135,262,000. Sublease rent income was
approximately $5,426,000, $5,410,000 and $3,226,000 for the years ended December
31, 1995, 1994 and 1993, respectively. Contingent rent expense, based primarily
on revenues, was approximately $22,000,000, $22,000,000 and $20,000,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
In 1992, the Company entered into an agreement to outsource its management
information systems functions for a period of seven years, with an option to
renew based on mutual agreement among the parties. The future minimum
commitments required under such agreement as of December 31, 1995, are as
follows: 1996 -- $7,941,000; 1997 -- $7,941,000; 1998 -- $7,941,000; 1999 --
$4,632,000. The Company incurred approximately $8,529,000, $8,906,000 and
$10,179,000 under such agreement during the years ended December 31, 1995, 1994
and 1993, respectively.
The Company is contingently liable for approximately $110,901,000 of
long-term obligations maturing on various dates through 2019, as well as annual
interest and letter of credit fees of approximately $9,155,000. Such contingent
liabilities principally arose from the Company's sale of nursing facilities and
retirement living centers. The Company operates the facilities related to
approximately $26,046,000 of the principal amount for which it is contingently
liable, pursuant to long-term agreements accounted for as operating leases. In
addition, the Company is contingently liable for various operating leases that
were assumed by purchasers and are secured by the rights thereto.
Approximately 10% of the Company's employees are represented by various
labor unions. Certain labor unions have publicly stated that they are
concentrating their organizing efforts within the long-term health care
industry. The Company, being one of the largest employers within the long-term
health care industry, has been the target of a "corporate campaign" for several
years by two AFL-CIO affiliated unions attempting to organize certain of the
Company's facilities. Although the Company has never experienced any material
work stoppages and believes that its relations with its employees (and the
existing unions that represent certain of them) are generally good, the Company
cannot predict the effect continued union representation or organizational
activities will have on the Company's future activities. On March 21, 1996,
twenty Pennsylvania facilities received strike notices for March 29, 1996, but
expect, with minimal disruption, to provide full, continuous patient care
services. There can be no assurance that continued union representation and
organizational activities will not result in material work stoppages, which
could have a material adverse effect on the Company's operations.
There are various lawsuits and regulatory actions pending against the
Company arising in the normal course of business, some of which seek punitive
damages. The Company does not believe that the ultimate
33
<PAGE> 35
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
5. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
resolution of these matters will have a material adverse effect on the Company's
consolidated financial position or results of operations.
6. STOCKHOLDERS' EQUITY
The Company had 300,000,000 shares of authorized $.10 par value common
stock ("Common Stock") at December 31, 1995 and 1994. The Company is subject to
certain restrictions under its banking arrangements related to the payment of
cash dividends on its Common Stock.
The Company had 25,000,000 shares of authorized $1 par value preferred
stock at December 31, 1995 and 1994. The Board of Directors has authority,
without further stockholder action, to set rights, privileges and preferences
for any unissued shares of preferred stock.
In December 1986, the Company issued 999,999 shares of its preferred stock
(the "preferred stock") with a stated and liquidation value of $100 per share to
a wholly-owned subsidiary of Stephens Group, Inc. On January 3, 1994, the
Company used approximately $100,000,000 of the net proceeds from the Preferred
Stock offering (as defined below) to redeem the preferred stock. The preferred
stock dividend rate was scheduled to increase from 1% to 10% on January 1, 1994.
In August 1993, the Company issued 3,000,000 shares of $2.75 Cumulative
Convertible Exchangeable Preferred Stock (the "Preferred Stock"), with a
liquidation value of $50 per share through a public offering (the "Preferred
Stock offering"). Effective November 1, 1995, the Company exercised its option
to exchange all of the outstanding shares of such Preferred Stock for
$150,000,000 aggregate principal amount of its 5 1/2% Debentures (as discussed
above).
During 1994, the Board of Directors of the Company adopted a Stockholder
Rights Plan (the "Rights Plan"). The Rights Plan provides for the distribution
of one Common Stock Purchase Right (the "Rights") for each share of Common Stock
outstanding at the close of business on November 2, 1994. Under certain
circumstances, the Rights become exercisable to purchase shares of Common Stock,
or securities of an acquiring entity, at one-half of market value. The Rights
are designed to protect stockholders in the event of an unsolicited attempt to
acquire the Company and to deal with the possibility of unilateral actions by
hostile acquirors. These Rights are redeemable at the option of the Company at
$.01 per Right. The issuance of the Rights has no dilutive effect on the
Company's earnings per share.
During 1994, the Company's Nonemployee Directors' Stock Option Plan (the
"Nonemployee Directors' Plan") was approved. Such plan became effective June 1,
1994 and will remain in effect until May 31, 2004, subject to earlier
termination by the Board of Directors. There are 200,000 shares of Common Stock
authorized for issuance, subject to certain adjustments, under the Nonemployee
Directors' Plan. The Nonemployee Directors' Plan provides that 2,500
nonqualified stock options be granted to each nonemployee director on June 1 of
each year until the plan is terminated, subject to the availability of shares.
Such nonqualified stock options are granted at a purchase price equal to fair
market value on the date of grant, become exercisable one year after date of
grant and expire ten years after date of grant.
The Company has 3,000,000 shares of Common Stock authorized for issuance,
subject to certain adjustments, under its 1993 Incentive Stock Plan in the form
of nonqualified stock options, incentive stock options, restricted stock,
performance awards and other stock unit awards. Incentive stock options must be
granted at a purchase price equal to market price on the date of grant.
Nonqualified stock options may be granted at no less than 85% of market price on
the date of grant. All grants made at less than market price must be in lieu of
cash payments. All options are exercisable no sooner than one year from the
grant date and expire 10 years from the grant date. Restricted stock awards are
outright stock grants which have a minimum vesting period of one year for
performance-based awards, and three years for other awards. Performance awards
and other stock unit awards, including phantom units, may be granted based on
the achievement of
34
<PAGE> 36
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. STOCKHOLDERS' EQUITY -- (CONTINUED)
certain performance or other goals and will carry certain restrictions, as
defined. The Compensation Committee of the Board of Directors is responsible for
administering the 1993 Incentive Stock Plan and will have complete discretion in
determining the number of shares or units to be granted, in setting performance
goals and in applying other restrictions to awards, as needed, under the plan.
The Company has 2,400,000 shares of Common Stock authorized for issuance
under its 1985 Nonqualified Stock Option Plan. Under the plan, options are
granted at a purchase price equal to market price on the date of grant, become
exercisable no sooner than one year after date of grant and expire no later than
twelve years after date of grant, as determined by the Compensation Committee of
the Board of Directors. In addition to options, the plan provides for outright
grants of Common Stock, subject to forfeiture provisions. As a condition
precedent to the release of such shares, the employee must be continuously
employed with the Company from and after the date of grant and remain employed
on share release dates. Commencing one year after the grant date, the shares
will be released in accordance with a schedule determined at the time of grant.
The following table summarizes stock option, restricted stock and other
stock units data relative to the Company's Nonemployee Directors' Plan, the 1993
Incentive Stock Plan and the 1985 Nonqualified Stock Option Plan for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------- ------------------------------ -----------------------------
NUMBER NUMBER NUMBER
OF PRICE OF PRICE OF PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
--------- ---------------- --------- ---------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year............ 4,106,272 $ 4.38 to $18.63 3,989,411 $ 4.38 to $18.63 3,483,334 $4.38 to $18.63
Changes during the year:
Granted...................... 355,500 $11.25 to $15.88 635,000 $12.13 to $15.25 952,000 $9.63 to $13.25
Exercised.................... (271,073) $ 4.38 to $12.50 (374,918) $ 4.38 to $15.00 (329,459) $4.38 to $12.00
Cancelled.................... (238,150) $ 4.38 to $18.63 (143,221) $ 4.38 to $18.63 (116,464) $4.38 to $18.63
--------- --------- ---------
Options outstanding at end
of year...................... 3,952,549(1) $ 4.38 to $18.63 4,106,272 $ 4.38 to $18.63 3,989,411 $4.38 to $18.63
========= ========= =========
Options available for grant.... 1,243,953 1,735,318 2,162,800
========= ========= =========
Restricted stock outstanding at
beginning of year............ 267,353 431,800 513,000
Changes during the year:
Granted...................... 236,555 14,553 96,000
Vested....................... (182,153) (167,000) (162,800)
Forfeited.................... (15,703) (12,000) (14,400)
--------- --------- ---------
Restricted stock outstanding at
end of year.................. 306,052 267,353 431,800
========= ========= =========
Phantom units outstanding at
beginning of year............ 44,529 --
Changes during the year:
Granted...................... 54,110 44,529
Cancelled.................... (7,697) --
--------- ---------
Phantom units outstanding at
end of year.................. 90,942 44,529
========= =========
</TABLE>
- ---------------
(1) Includes 2,660,629 options exercisable at December 31, 1995.
During 1995, in conjunction with the acquisition of PMSI, the Company
assumed PMSI's 1990 Incentive and Non-statutory Stock Option Plan, as amended,
(the "PMSI Plan") and issued options to purchase shares of the Company's Common
Stock in exchange for each option then outstanding under the PMSI Plan. During
1995, 84,179 of such options were exercised at prices ranging from $4.83 to
$8.72 per share. At December 31, 1995, there were 258,132 options outstanding
under such plan at prices ranging from
35
<PAGE> 37
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
6. STOCKHOLDERS' EQUITY -- (CONTINUED)
$5.01 to $8.72 per share, all of which were exercisable. No options are
available for grant under the PMSI Plan.
During 1994, in conjunction with the merger of ATH, the Company assumed
ATH's 1993 Nonqualified Stock Option Plan (the "ATH Plan") and issued options to
purchase shares of the Company's Common Stock in exchange for each option then
outstanding under the ATH Plan. During 1995 and 1994, 20,310 and 451,
respectively, of such options were exercised at a price of $.83 per share. At
December 31, 1995, there were 91,887 options outstanding under such plan at a
price of $.83 per share, of which 44,666 were exercisable. In addition, the
Company signed an option agreement with an officer of ATH and issued options to
purchase shares of the Company's Common Stock in exchange for each option to
purchase shares of ATH stock previously held by such officer. At December 31,
1995, there were 38,548 options outstanding under such agreement at a price of
$.83 per share, all of which were exercisable. Also during 1994, in conjunction
with the acquisition of Insta-Care, the Company issued options to purchase
shares of its Common Stock in exchange for each option then outstanding under
the Insta-Care Holdings, Inc. First Employees Stock Option Plan (the "Insta-Care
Plan"). During 1995, 40,448 of such options were exercised at prices ranging
from $1.54 to $2.12 per share. At December 31, 1995, there were 53,266 options
outstanding under the Insta-Care Plan at prices ranging from $1.54 to $2.12 per
share, of which 26,928 were exercisable. No options are available for grant
under the ATH Plan or the Insta-Care Plan.
As of December 31, 1993, the Company had 1,000,000 shares of Common Stock
authorized for issuance under a separate option grant at an option price of
$12.00 per share. On January 26, 1994, such option was exercised in full and the
Company received $12,000,000 in cash proceeds from such transaction. In April
1994, the Company filed a Registration Statement on Form S-3 with the Securities
and Exchange Commission to register such 1,000,000 shares. Such registration did
not result in any additional proceeds to the Company.
The Beverly Enterprises 1988 Employee Stock Purchase Plan (as amended and
restated) enables all full-time employees having completed one year of
continuous service to purchase shares of Common Stock at the current market
price through payroll deductions. The Company makes contributions in the amount
of 30% of the participant's contribution. Each participant specifies the amount
to be withheld from earnings per two-week pay period, subject to certain
limitations. The total charges to the Company's consolidated statements of
operations for the years ended December 31, 1995, 1994 and 1993 related to this
plan were approximately $2,201,000, $1,790,000 and $1,493,000, respectively.
7. INCOME TAXES
The provisions for taxes on income before extraordinary charge consist of
the following for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Federal:
Current............................................ $ 17,518 $31,523 $19,115
Deferred........................................... (16,877) (2,824) 3,373
State:
Current............................................ 4,845 8,390 4,327
Deferred........................................... (3,517) 793 2,869
-------- ------- -------
$ 1,969 $37,882 $29,684
======== ======= =======
</TABLE>
36
<PAGE> 38
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
7. INCOME TAXES -- (CONTINUED)
The Company had a negative annual effective tax rate of 32% for the year
ended December 31, 1995, compared to annual effective tax rates of 33% and 34%
for the years ended December 31, 1994 and 1993, respectively. The annual
effective tax rate in 1995 was different than the federal statutory rate
primarily due to the impact of nondeductible goodwill included in the
adjustments resulting from the adoption of SFAS No. 121. In addition, the
Company's annual effective tax rates for 1994 and 1993 were lower than the
federal statutory rate primarily due to the utilization of certain tax credit
carryforwards, partially offset by the impact of state income taxes.
A reconciliation of the provision for (benefit from) income taxes, computed
at the statutory rate, to the Company's annual effective tax rate is summarized
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------------- --------------- --------------
AMOUNT % AMOUNT % AMOUNT %
------- --- -------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Tax (benefit) at statutory rate......... $(2,154) 35 $ 40,178 35 $30,674 35
Targeted jobs tax credits............... (1,014) 17 (16,199) (14) (4,949) (5)
State tax provision, net................ 863 (14) 6,130 5 4,346 5
Amortization of intangibles............. 3,797 (62) 940 1 964 1
Effect of ATH merger.................... -- -- -- -- 810 1
Other................................... 477 (8) 6,833 6 (2,161) (3)
------- --- ------- --- ------- --
$ 1,969 (32) $ 37,882 33 $29,684 34
======= === ======= === ======= ==
</TABLE>
Deferred income taxes reflect the impact of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The tax effects of temporary
differences giving rise to the Company's deferred tax assets and liabilities at
December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------- ---------------------
ASSET LIABILITY ASSET LIABILITY
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Insurance reserves......................... $ 53,333 $ -- $ 50,061 $ --
Targeted jobs tax credit carryforwards..... 20,784 -- 21,658 --
Alternative minimum tax credit
carryforwards............................ 15,129 -- 16,758 --
Provision for dispositions................. 17,825 6,771 31,775 5,766
Depreciation and amortization.............. 25,395 143,267 6 147,451
Operating supplies......................... -- 13,378 -- 12,815
Other...................................... 23,666 22,511 24,565 24,612
-------- -------- -------- --------
156,132 185,927 144,823 190,644
Valuation allowance........................ -- -- (198) --
-------- -------- -------- --------
$156,132 $ 185,927 $144,625 $ 190,644
======== ======== ======== ========
</TABLE>
At December 31, 1995, the Company had targeted jobs tax credit
carryforwards of $20,784,000 for income tax purposes which expire in years 2005
through 2009. For financial reporting purposes, the targeted jobs tax credit
carryforwards have been utilized to offset existing net taxable temporary
differences reversing during the carryforward periods. Due to taxable losses in
prior years, future taxable income was not assumed and a valuation allowance of
$198,000 for the year ended December 31, 1994 was recognized to offset the
deferred tax assets related to those carryforwards. The valuation allowance was
eliminated in 1995 due to the utilization of targeted jobs tax credits.
37
<PAGE> 39
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. RELATED PARTY TRANSACTIONS
On January 3, 1994, the Company redeemed the preferred stock and paid the
holder of such stock approximately $18,000 of interest for the two days it
remained outstanding in 1994. During 1993, the Company declared and paid all
required quarterly dividends to the holder of its preferred stock which amounted
to $1,000,000. An affiliate of the Company's former preferred stockholder
provides investment services relating to certain of the Company's acquisitions
and dispositions and has provided underwriting and placement services on the
Company's public and private offerings. Fees paid by the Company for such
services amounted to approximately $105,000, $745,000 and $2,180,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Statement No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company. The following methods and
assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:
Cash and Cash Equivalents
The carrying amount reported in the consolidated balance sheets for cash
and cash equivalents approximates its fair value.
Notes Receivable (Including Current Portion)
For variable-rate notes that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair values
for other loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality.
Beverly Indemnity Funds
The fair value of the Beverly Indemnity funds is based on information
obtained from the trustee and the manager of such funds. Such funds are included
in the consolidated balance sheet captions "Prepaid expenses and other" and
"Designated and restricted funds" based on when the corresponding claims are
expected to be paid. These funds are invested primarily in United States
government securities with maturity dates ranging primarily from one to five
years. The Company intends to hold such securities to maturity.
Investment in a Real Estate Mortgage Investment Conduit (REMIC)
The fair value of the Company's REMIC investment, which is included in the
consolidated balance sheet caption "Other, net," is based on information
obtained from the REMIC servicer. The Company intends to hold such investment to
maturity.
38
<PAGE> 40
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. FAIR VALUES OF FINANCIAL INSTRUMENTS -- (CONTINUED)
Short-term Borrowings and Long-term Obligations (Including Current Portion)
The carrying amounts of the Company's Revolver borrowings, 1994 Term Loan,
Term Loan under the Bank Credit Facility, Nippon Term Loan, Medium Term Notes
and certain other variable-rate borrowings approximate their fair values. The
fair values of the remaining long-term obligations are estimated using
discounted cash flow analyses, based on the Company's incremental borrowing
rates for similar types of borrowing arrangements.
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents............... $ 56,303 $ 56,303 $ 67,964 $ 67,964
Notes receivable, net (including current
portion).............................. 49,375 51,800 46,705 47,000
Beverly Indemnity funds................. 58,284 59,806 50,092 48,480
REMIC investment........................ 17,974 18,000 25,780 24,000
Short-term borrowings................... 78,000 78,000 -- --
Long-term obligations (including current
portion).............................. 1,073,548 1,097,000 978,217 941,000
</TABLE>
In order to consummate certain dispositions and other transactions, the
Company has agreed to guarantee the debt assumed or acquired by the purchaser or
the performance under a lease, by the lessor. It was not practicable to estimate
the fair value of the Company's off-balance sheet guarantees (See Note 5). The
Company does not charge a fee for entering into such agreements and contracting
with a financial institution to estimate such amounts could not be done without
incurring excessive costs. In addition, unlike the Company, a financial
institution would not be in a position to assume the underlying obligations and
operate the nursing facilities collateralizing the obligations, which would
significantly impact the calculation of the fair value of such off-balance sheet
guarantees.
10. ADDITIONAL INFORMATION
Effective July 31, 1987, Beverly Enterprises, a California corporation
("Beverly California"), became a wholly-owned subsidiary of Beverly Enterprises,
Inc., a Delaware corporation ("Beverly Delaware"). Effective January 1, 1995,
Beverly California changed its name to Beverly Health and Rehabilitation
Services, Inc. ("BHRS") and distributed certain of its wholly-owned subsidiaries
to Beverly Delaware in an effort to better focus management's attention on
specific services delivered by the Company within the long-term health care
arena. Such subsidiaries included, among others, PCA, ATH, and Beverly
Indemnity, Ltd. Beverly Delaware (the parent) provides financial, administrative
and legal services to these subsidiaries, including BHRS, for which it charges
management fees.
39
<PAGE> 41
BEVERLY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
10. ADDITIONAL INFORMATION -- (CONTINUED)
The following summarized financial information concerning BHRS is being
reported because BHRS's 7 5/8% convertible subordinated debentures due March
2003 and its zero coupon notes (collectively, the "Debt Securities") are
publicly held. Beverly Delaware is co-obligor of these Debt Securities. Summary
financial information for BHRS is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Total revenues.................................. $2,797,348 $2,985,107 $2,899,616
Total costs and expenses........................ 2,780,463 2,870,529 2,812,274
Income before extraordinary charge.............. 7,598 76,767 57,756
Net income...................................... 7,598 74,777 55,411
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Current assets.................................. $ 421,641 $ 577,307
Long-term assets................................ 1,365,413 1,695,216
Current liabilities............................. 367,074 402,463
Long-term liabilities........................... 709,515 1,071,276
</TABLE>
40
<PAGE> 42
BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------- -----------------------------------------------------
1ST 2ND 3RD 4TH TOTAL 1ST 2ND 3RD 4TH TOTAL
-------- -------- -------- -------- --------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues.... $799,119 $793,637 $838,410 $811,615 $3,242,781 $720,425 $728,144 $766,667 $768,581 $2,983,817
======== ======== ======== ======== ========== ======== ======== ======== ======== ==========
Income (loss)
before provision
for (benefit
from) income
taxes and
extraordinary
charge.......... $ 26,692 $ 23,074 $ 39,965 $(95,885) $ (6,154) $ 22,559 $ 28,406 $ 35,069 $ 28,761 $ 114,795
Provision for
(benefit from)
income taxes.... 10,143 8,768 15,187 (32,129) 1,969 7,444 9,374 11,573 9,491 37,882
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ----------
Income (loss)
before
extraordinary
charge.......... 16,549 14,306 24,778 (63,756) (8,123) 15,115 19,032 23,496 19,270 76,913
Extraordinary
charge.......... -- -- -- -- -- -- -- -- (2,412) (2,412)
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ----------
Net income
(loss).......... $ 16,549 $ 14,306 $ 24,778 $(63,756) $ (8,123) $ 15,115 $ 19,032 $ 23,496 $ 16,858 $ 74,501
======== ======== ======== ======== ========== ======== ======== ======== ======== ==========
Net income (loss)
applicable to
common shares... $ 14,486 $ 12,244 $ 22,715 $(64,443) $ (14,998) $ 13,052 $ 16,970 $ 23,496 $ 14,796 $ 66,251
======== ======== ======== ======== ========== ======== ======== ======== ======== ==========
Income (loss) per
share of common
stock:
Before
extraordinary
charge........ $ .17 $ .14 $ .23 $ (.65) $ (.16) $ .15 $ .19 $ .24 $ .20 $ .79
Extraordinary
charge........ -- -- -- -- -- -- -- -- (.03) (.03)
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ----------
Net income
(loss)........ $ .17 $ .14 $ .23 $ (.65) $ (.16) $ .15 $ .19 $ .24 $ .17 $ .76
======== ======== ======== ======== ========== ======== ======== ======== ======== ==========
Common stock price
range:
High............ $ 14.75 $ 16.13 $ 14.38 $ 14.50 $ 16.13 $ 14.25 $ 15.63 $ 15.88
Low............. $ 12.50 $ 10.88 $ 11.88 $ 9.00 $ 12.38 $ 12.13 $ 11.75 $ 13.75
</TABLE>
The Company had a negative annual effective tax rate of 32% for the year
ended December 31, 1995, compared to an annual effective tax rate of 33% for the
same period in 1994. The annual effective tax rate in 1995 was different than
the federal statutory rate primarily due to the impact of nondeductible goodwill
included in the adjustments resulting from the adoption of SFAS No. 121 (as
defined herein). In addition, the 1994 annual effective tax rate was lower than
the federal statutory rate primarily due to the utilization of certain tax
credit carryforwards, partially offset by the impact of state income taxes.
Where fully diluted earnings per share would be anti-dilutive, primary
earnings per share was used.
41
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1996, to
be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1996, to
be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1996, to
be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1996, to
be filed pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1 and 2. The Consolidated Financial Statements and Consolidated Financial
Statement Schedule
The consolidated financial statements and consolidated financial statement
schedule listed in the accompanying index to consolidated financial statements
and financial statement schedules are filed as part of this annual report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are incorporated
by reference herein or are filed as part of this annual report.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated December 8, 1995,
which reported under Item 5 that the Company would record a non-cash charge
against 1995 fourth quarter earnings of $100 to $110 million before taxes,
related primarily to the mandated adoption of Statement of Financial Accounting
Standards No. 121.
The Company filed a Current Report on Form 8-K, dated December 19, 1995,
which reported under Item 5 that the Company would defer indefinitely plans to
spin off any portion of Pharmacy Corporation of America, and filed under Item 7
the Company's press release dated December 19, 1995.
(c) Exhibits
See the accompanying index to exhibits referenced in Item 14(a)(3) above
for a list of exhibits incorporated herein by reference or filed as part of this
annual report.
(d) Financial Statement Schedule
See the accompanying index to consolidated financial statements and
financial statement schedules referenced in Item 14(a)1 and 2, above.
42
<PAGE> 44
BEVERLY ENTERPRISES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
(ITEM 14(a))
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Consolidated financial statements:
Report of Ernst & Young LLP, Independent Auditors.............................. 20
Consolidated Balance Sheets at December 31, 1995 and 1994...................... 21
Consolidated Statements of Operations for each of the three years in the period
ended December 31, 1995....................................................... 22
Consolidated Statements of Stockholders' Equity for each of the three years in
the period ended December 31, 1995............................................ 23
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1995....................................................... 24
Notes to Consolidated Financial Statements..................................... 25
Supplementary Data (Unaudited) -- Quarterly Financial Data..................... 41
2. Consolidated financial statement schedule for each of the three years in the period
ended December 31, 1995:
II -- Valuation and Qualifying Accounts........................................ 44
</TABLE>
All other statements and schedules are omitted because they are either not
applicable or the items do not exceed the various disclosure levels.
43
<PAGE> 45
BEVERLY ENTERPRISES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED DUE TO
BALANCE AT (CREDITED) ACQUISITIONS BALANCE
BEGINNING TO AND AT END
DESCRIPTION OF YEAR OPERATIONS WRITE-OFFS DISPOSITIONS OTHER OF YEAR
- ------------------------------------------ ---------- ---------- ---------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful accounts:
Accounts receivable -- patient....... $ 28,293 $ 21,008 $ (30,326) $ 3,885 $ -- $22,860
Accounts receivable -- nonpatient.... 2,802 (1,919) (70) -- -- 813*
Notes receivable..................... 6,429 (3,200) (61) 1,285 500 4,953
------- -------- -------- -------- -------- -------
$ 37,524 $ 15,889 $ (30,457) $ 5,170 $ 500 $28,626
======= ======== ======== ======== ======== =======
Valuation allowance on deferred tax
assets............................... $ 198 $ (198) $ -- $ -- $ -- $ --
======= ======== ======== ======== ======== =======
Year ended December 31, 1994:
Allowance for doubtful accounts:
Accounts receivable -- patient....... $ 19,999 $ 18,124 $ (20,109) $ 10,339 $ (60) $28,293
Accounts receivable -- nonpatient.... 343 233 (334) -- 2,560 2,802*
Notes receivable..................... 10,440 (4,250) (58) -- 297 6,429
------- -------- -------- -------- -------- -------
$ 30,782 $ 14,107 $ (20,501) $ 10,339 $ 2,797 $37,524
======= ======== ======== ======== ======== =======
Accrued restructuring costs............. $ 34,310 $ (2,400) $ -- $(15,684) $(16,226)(1) $ --
======= ======== ======== ======== ======== =======
Valuation allowance on deferred tax
assets............................... $ 15,097 $ (14,899) $ -- $ -- $ -- $ 198
======= ======== ======== ======== ======== =======
Year ended December 31, 1993:
Allowance for doubtful accounts:
Accounts receivable -- patient....... $ 18,074 $ 21,686 $ (21,820) $ 2,125 $ (66) $19,999
Accounts receivable -- nonpatient.... 5,030 305 (701) -- (4,291) 343
Notes receivable..................... 7,364 (628) (653) -- 4,357 10,440
------- -------- -------- -------- -------- -------
$ 30,468 $ 21,363 $ (23,174) $ 2,125 $ -- $30,782
======= ======== ======== ======== ======== =======
Accrued restructuring costs............. $ 48,053 $ -- $ -- $(11,713) $ (2,030) $34,310
======= ======== ======== ======== ======== =======
Valuation allowance on deferred tax
assets............................... $ 17,611 $ (2,514) $ -- $ -- $ -- $15,097
======= ======== ======== ======== ======== =======
</TABLE>
- ---------------
* Includes amounts classified in long-term other assets as well as current
assets.
(1) Primarily relates to costs of relocating certain administrative, operational
and management information system support functions.
44
<PAGE> 46
BEVERLY ENTERPRISES, INC.
INDEX TO EXHIBITS
(ITEM 14(a)(3))
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------
<C> <S>
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 By-Laws 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 February 1, 1996 between Beverly Enterprises, Inc.
and Chemical Bank, as Trustee, with respect to Beverly Enterprises, Inc.'s
9% Senior Notes due February 15, 2006
4.2 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)
4.3 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)
4.4 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)
4.5 First Supplemental Indenture dated as of April 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds 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)
4.6 Second Supplemental Indenture dated as of July 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds 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 June 30, 1993)
4.7 Indenture dated as of December 30, 1993 (the "Notes Indenture"), between
Beverly Enterprises, Inc. and Boatmen's Trust Company, as Trustee, with
respect to the Notes (incorporated by reference to Exhibit 4.2 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-3 filed on November 9,
1993 (File No. 33-50965))
4.8 First Supplemental Indenture dated as of December 30, 1993 to the Notes
Indenture, with respect to 8 3/4% 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)
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------
<C> <S>
4.9 Rights Agreement dated as of September 29, 1994, between Beverly
Enterprises, Inc. and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 1 to Beverly Enterprises'
Registration Statement on Form 8-A filed on October 18, 1994)
4.10 Amendment, dated as of April 6, 1995, to the Rights Agreement between
Beverly Enterprises, Inc. and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 4.20 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1995)
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.
10.1* Amended and Restated 1981 Beverly Incentive 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))
10.2* 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") (as amended by Amendment No.1)
(incorporated by reference to Exhibit 10.4 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1994)
10.4* Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by
reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Registration
Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663))
10.5* Form of Other Stock Unit Agreement under the 1993 Plan (incorporated
by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File
No. 33-57663))
10.6* Form of Phantom Unit Agreement under the 1993 Plan
10.7* Form of Performance Share Award Agreement under the 1993 Plan
10.8* 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)
10.9* Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises,
Inc.'s Registration Statement on Form S-8 filed on September 21,
1994 (File No. 33-55571))
10.10* 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)
10.11* 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, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1993)
10.12* Amendment No. 1, effective September 29, 1994, to the Executive Life
Plan (incorporated by reference to Exhibit 10.10 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.13* 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)
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------
<C> <S>
10.14* Amended and Restated Deferred Compensation Plan effective July 18, 1991
(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)
10.15* Amendment No. 1, effective September 29, 1994, to the Deferred Compensation
Plan (incorporated by reference to Exhibit 10.13 to Beverly Enterprises,
Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File
No. 33-57663))
10.16* 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, 1987)
10.17* 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)
10.18* 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)
10.19* 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)
10.20* Amendment No. 4, effective as of January 1, 1993, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1994)
10.21* Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1994)
10.22* 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)
10.23* 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)
10.24* 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)
10.25* 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))
10.26* 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))
10.27* 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))
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------
<C> <S>
10.28* Form of Employment Contract, made as of December 8, 1995, between Beverly
Enterprises, Inc. and David R. Banks
10.29* Form of Employment Contract, made as of December 8, 1995, between Beverly
Enterprises, Inc. and Boyd W. Hendrickson
10.30* Form of Employment Contract, made as of December 8, 1995, between Beverly
Enterprises, Inc. and Robert D. Woltil
10.31* Form of Change In Control Severance Agreement, made as of December 8, 1995,
between Beverly Enterprises, Inc. and its Executive Vice Presidents
10.32* Form of Change In Control Severance Agreement, made as of December 8, 1995,
between Beverly Enterprises, Inc. and certain of its officers
10.33* Form of Change In Control Severance Agreement, made as of December 8, 1995,
between Beverly Enterprises, Inc. and David L. Redmond
10.34* Form of First Amendment to Change In Control Severance Agreement between
Beverly Enterprises, Inc. and David L. Redmond
10.35* Form of Agreement between Beverly Enterprises, Inc. and Ronald C. Kayne
10.36* Form of Consulting Agreement, entered into as of June 1, 1995, between
Beverly Enterprises, Inc. and Ronald C. Kayne
10.37* 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)
10.38* American Transitional Hospitals, Inc. 1993 Nonqualified Stock Option Plan
assumed by Beverly Enterprises, Inc. (incorporated by reference to Exhibit
10.39 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4
(Amendment No. 1) filed on August 5, 1994 (File No. 33-54501))
10.39* Stock Option Agreement between Beverly Enterprises, Inc. and Robert C.
Crosby dated September 2, 1994 (incorporated by reference to Exhibit 4.4 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-8 filed on
September 21, 1994 (File No. 33-55571))
10.40 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 California
Corporation's Annual Report on Form 10-K for the year ended December 31,
1985)
10.41 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)
10.42 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)
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------
<C> <S>
10.43 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)
10.44 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)
10.45 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 year ended December 31, 1992)
10.46 Seventh Amendment dated as of May 2, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.31 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
10.47 Eighth Amendment dated as of November 1, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.41 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))
10.48 Ninth Amendment dated as of November 9, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.42 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))
10.49 Tenth Amendment dated as of December 6, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.43 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))
10.50 Eleventh Amendment dated as of March 27, 1995 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.44 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995)
10.51 Twelfth Amendment dated as of October 23, 1995 to the LTCB Credit Agreement
10.52 Thirteenth Amendment dated as of September 29, 1995 to the LTCB Credit
Agreement
10.53 Fourteenth Amendment dated as of December 7, 1995 to the LTCB Credit
Agreement
10.54 Fifteenth Amendment dated as of February 12, 1996 to the LTCB Credit
Agreement
10.55 First Amendment and Restatement dated as of December 1, 1994 to Master Sale
and Servicing Agreement dated as of December 1, 1990 among Beverly Funding
Corporation, Beverly California Corporation, the wholly-owned subsidiaries
of Beverly Enterprises, Inc. listed therein, Beverly Enterprises, Inc. and
certain wholly-owned subsidiaries of Beverly Enterprises, Inc. which may
become parties thereto (incorporated by reference to Exhibit 10.44 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.56 Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture") (incorporated by reference to Exhibit 10.45 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))
10.57 Series Supplement dated as of December 1, 1994 to the Chemical Indenture
(incorporated by reference to Exhibit 10.46 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))
10.58 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)
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------
<C> <S>
10.59 Second Amendment dated as of May 19, 1994 to the Nippon Credit Agreement
(incorporated by reference to Exhibit 10.37 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
10.60 Third Amendment dated as of November 1, 1994 to the Nippon Credit Agreement
(incorporated by reference to Exhibit 10.49 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))
10.61 Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.50 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))
10.62 Fifth Amendment dated as of December 30, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995)
10.63 Sixth Amendment dated as of July 25, 1995 to the Nippon Credit Agreement
10.64 Seventh Amendment dated as of September 29, 1995 to the Nippon Credit
Agreement
10.65 Eighth Amendment dated as of February 14, 1996 to the Nippon Credit
Agreement
10.66 Credit Agreement dated as of November 1, 1994 among Beverly California
Corporation, Beverly Enterprises, Inc., the Banks listed therein, and
Morgan Guaranty Trust Company of New York, as Issuing Bank and as Agent
(the "Morgan Credit Agreement") (incorporated by reference to Exhibit 10.51
to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.67 First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))
10.68 Second Amendment dated as of September 29, 1995 to the Morgan Credit
Agreement
10.69 Third Amendment dated as of February 12, 1996 to the Morgan Credit
Agreement
10.70 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)
10.71 Form of Employment Agreement executed by Robert C. Crosby and ATH at the
time ATH became a wholly-owned subsidiary of Beverly Enterprises, Inc.
(incorporated by reference to Exhibit 10.38 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on July 8, 1994 (File No.
33-54501))
10.72 Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc.
Executive Benefits Plan (incorporated by reference to Exhibit 10.55 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
11.1 Computation of Net Income (Loss) Per Share for the years ended December 31,
1995, 1994, 1993, 1992 and 1991
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
27.1 Financial Data Schedule for the year ended December 31, 1995
</TABLE>
- ---------------
* Exhibits 10.1 through 10.39 are the management contracts, compensatory plans,
contracts and arrangements in which any director or named executive officer
participates.
50
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BEVERLY ENTERPRISES, INC.
Registrant
Dated: March 25, 1996 By: /s/ DAVID R. BANKS
-------------------------------
David R. Banks
Chairman of the Board, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Registrant
and in the capacities and on the dates indicated:
<TABLE>
<C> <S> <C>
/s/ DAVID R. BANKS Chairman of the Board, Chief March 25, 1996
- ------------------------ Executive Officer, and Director
David R. Banks
/s/ BOYD W. HENDRICKSON President, Chief Operating March 25, 1996
- ------------------------ Officer and Director
Boyd W. Hendrickson
/s/ SCOTT M. TABAKIN Senior Vice President, Controller, March 25, 1996
- ------------------------ Chief Accounting Officer
Scott M. Tabakin and Acting Chief Financial Officer
/s/ BERYL F. ANTHONY, JR. Director March 25, 1996
- ------------------------
Beryl F. Anthony, Jr.
/s/ JAMES R. GREENE Director March 25, 1996
- ------------------------
James R. Greene
/s/ EDITH E. HOLIDAY Director March 25, 1996
- ------------------------
Edith E. Holiday
/s/ JON E. M. JACOBY Director March 25, 1996
- ------------------------
Jon E. M. Jacoby
Director March 25, 1996
- ------------------------
Risa J. Lavizzo-Mourey
Director March 25, 1996
- ------------------------
Louis W. Menk
/s/ MARILYN R. SEYMANN Director March 25, 1996
- ------------------------
Marilyn R. Seymann
</TABLE>
51
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
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 -- By-Laws 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 February 1, 1996 between Beverly Enterprises,
Inc. and Chemical Bank, as Trustee, with respect to Beverly
Enterprises, Inc.'s 9% Senior Notes due February 15, 2006
4.2 -- 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)
4.3 -- 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)
4.4 -- 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)
4.5 -- First Supplemental Indenture dated as of April 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds
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)
4.6 -- Second Supplemental Indenture dated as of July 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds
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 June 30, 1993)
4.7 -- Indenture dated as of December 30, 1993 (the "Notes Indenture"),
between Beverly Enterprises, Inc. and Boatmen's Trust Company, as
Trustee, with respect to the Notes (incorporated by reference to
Exhibit 4.2 to Beverly Enterprises, Inc.'s Registration Statement on
Form S-3 filed on November 9, 1993 (File No. 33-50965))
4.8 -- First Supplemental Indenture dated as of December 30, 1993 to the
Notes Indenture, with respect to 8 3/4% 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)
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
4.9 -- Rights Agreement dated as of September 29, 1994, between Beverly
Enterprises, Inc. and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 1 to Beverly Enterprises'
Registration Statement on Form 8-A filed on October 18, 1994)
4.10 -- Amendment, dated as of April 6, 1995, to the Rights Agreement between
Beverly Enterprises, Inc. and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 4.20 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1995)
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.
10.1* -- Amended and Restated 1981 Beverly Incentive 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))
10.2* -- 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") (as amended by Amendment No.
1) (incorporated by reference to Exhibit 10.4 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1994)
10.4* -- Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by
reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Registration
Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663))
10.5* -- Form of Other Stock Unit Agreement under the 1993 Plan (incorporated
by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File
No. 33-57663))
10.6* -- Form of Phantom Unit Agreement under the 1993 Plan
10.7* -- Form of Performance Share Award Agreement under the 1993 Plan
10.8* -- 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)
10.9* -- Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises,
Inc.'s Registration Statement on Form S-8 filed on September 21, 1994
(File No. 33-55571))
10.10* -- 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)
10.11* -- 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, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1993)
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.12* -- Amendment No. 1, effective September 29, 1994, to the Executive Life
Plan (incorporated by reference to Exhibit 10.10 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.13* -- 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)
10.14* -- Amended and Restated Deferred Compensation Plan effective July 18,
1991 (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)
10.15* -- Amendment No. 1, effective September 29, 1994, to the Deferred
Compensation Plan (incorporated by reference to Exhibit 10.13 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed
on February 13, 1995 (File No. 33-57663))
10.16* -- 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, 1987)
10.17* -- 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)
10.18* -- 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)
10.19* -- 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)
10.20* -- Amendment No. 4, effective as of January 1, 1993, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.18 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1994)
10.21* -- Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.19 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1994)
10.22* -- 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)
10.23* -- 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)
10.24* -- 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)
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.25* -- 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))
10.26* -- 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))
10.27* -- 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))
10.28* -- Form of Employment Contract, made as of December 8, 1995, between
Beverly Enterprises, Inc. and David R. Banks
10.29* -- Form of Employment Contract, made as of December 8, 1995, between
Beverly Enterprises, Inc. and Boyd W. Hendrickson
10.30* -- Form of Employment Contract, made as of December 8, 1995, between
Beverly Enterprises, Inc. and Robert D. Woltil
10.31* -- Form of Change In Control Severance Agreement, made as of December 8,
1995, between Beverly Enterprises, Inc. and its Executive Vice
Presidents
10.32* -- Form of Change In Control Severance Agreement, made as of December 8,
1995, between Beverly Enterprises, Inc. and certain of its officers
10.33* -- Form of Change In Control Severance Agreement, made as of December 8,
1995, between Beverly Enterprises, Inc. and David L. Redmond
10.34* -- Form of First Amendment to Change In Control Severance Agreement
between Beverly Enterprises, Inc. and David L. Redmond
10.35* -- Form of Agreement between Beverly Enterprises, Inc. and Ronald C.
Kayne
10.36* -- Form of Consulting Agreement, entered into as of June 1, 1995,
between Beverly Enterprises, Inc. and Ronald C. Kayne
10.37* -- 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)
10.38* -- American Transitional Hospitals, Inc. 1993 Nonqualified Stock Option
Plan assumed by Beverly Enterprises, Inc. (incorporated by reference
to Exhibit 10.39 to Beverly Enterprises, Inc.'s Registration
Statement on Form S-4 (Amendment No. 1) filed on August 5, 1994 (File
No. 33-54501))
10.39* -- Stock Option Agreement between Beverly Enterprises, Inc. and Robert
C. Crosby dated September 2, 1994 (incorporated by reference to
Exhibit 4.4 to Beverly Enterprises, Inc.'s Registration Statement on
Form S-8 filed on September 21, 1994 (File No. 33-55571))
10.40 -- 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 California Corporation's Annual Report on Form 10-K
for the year ended December 31, 1985)
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.41 -- 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)
10.42 -- 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)
10.43 -- 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)
10.44 -- 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)
10.45 -- 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 year ended
December 31, 1992)
10.46 -- Seventh Amendment dated as of May 2, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.31 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
10.47 -- Eighth Amendment dated as of November 1, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.41 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.48 -- Ninth Amendment dated as of November 9, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.42 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.49 -- Tenth Amendment dated as of December 6, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.43 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.50 -- Eleventh Amendment dated as of March 27, 1995 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.44 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995)
10.51 -- Twelfth Amendment dated as of October 23, 1995 to the LTCB Credit
Agreement
10.52 -- Thirteenth Amendment dated as of September 29, 1995 to the LTCB
Credit Agreement
10.53 -- Fourteenth Amendment dated as of December 7, 1995 to the LTCB Credit
Agreement
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.54 -- Fifteenth Amendment dated as of February 12, 1996 to the LTCB Credit
Agreement
10.55 -- First Amendment and Restatement dated as of December 1, 1994 to
Master Sale and Servicing Agreement dated as of December 1, 1990
among Beverly Funding Corporation, Beverly California Corporation,
the wholly-owned subsidiaries of Beverly Enterprises, Inc. listed
therein, Beverly Enterprises, Inc. and certain wholly-owned
subsidiaries of Beverly Enterprises, Inc. which may become parties
thereto (incorporated by reference to Exhibit 10.44 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.56 -- Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture") (incorporated by reference to Exhibit 10.45 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.57 -- Series Supplement dated as of December 1, 1994 to the Chemical
Indenture (incorporated by reference to Exhibit 10.46 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.58 -- 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)
10.59 -- Second Amendment dated as of May 19, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.37 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
10.60 -- Third Amendment dated as of November 1, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.49 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.61 -- Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.50 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.62 -- Fifth Amendment dated as of December 30, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995)
10.63 -- Sixth Amendment dated as of July 25, 1995 to the Nippon Credit
Agreement
10.64 -- Seventh Amendment dated as of September 29, 1995 to the Nippon Credit
Agreement
10.65 -- Eighth Amendment dated as of February 14, 1996 to the Nippon Credit
Agreement
10.66 -- Credit Agreement dated as of November 1, 1994 among Beverly
California Corporation, Beverly Enterprises, Inc., the Banks listed
therein, and Morgan Guaranty Trust Company of New York, as Issuing
Bank and as Agent (the "Morgan Credit Agreement") (incorporated by
reference to Exhibit 10.51 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on February 13, 1995 (File
No. 33-57663))
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.67 -- First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))
10.68 -- Second Amendment dated as of September 29, 1995 to the Morgan Credit
Agreement
10.69 -- Third Amendment dated as of February 12, 1996 to the Morgan Credit
Agreement
10.70 -- 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)
10.71 -- Form of Employment Agreement executed by Robert C. Crosby and ATH at
the time ATH became a wholly-owned subsidiary of Beverly Enterprises,
Inc. (incorporated by reference to Exhibit 10.38 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on July
8, 1994 (File No. 33-54501))
10.72 -- Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc.
Executive Benefits Plan (incorporated by reference to Exhibit 10.55
to Beverly Enterprises, Inc.'s Registration Statement on Form S-4
filed on February 13, 1995 (File No. 33-57663))
11.1 -- Computation of Net Income (Loss) Per Share for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991
21.1 -- Subsidiaries of Registrant
23.1 -- Consent of Ernst & Young LLP, Independent Auditors
27.1 -- Financial Data Schedule for the year ended December 31, 1995
</TABLE>
- ---------------
* Exhibits 10.1 through 10.39 are the management contracts, compensatory plans,
contracts and arrangements in which any director or named executive officer
participates.
<PAGE> 1
================================================================================
BEVERLY ENTERPRISES, INC.
______________________________
$180,000,000
9% SENIOR NOTES DUE 2006
_______________________________
_______________________________
INDENTURE
DATED AS OF FEBRUARY 1, 1996
______________________________
______________________________
CHEMICAL BANK
__________________________
AS TRUSTEE
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 1.3. Incorporation By Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 2 THE SECURITIES; OFFER TO PURCHASE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.5. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.9. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.14. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.15. Offer to Purchase by Application of Excess Proceeds . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3 REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.1. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.2. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.3. Selection of Securities to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.4. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.5. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.6. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.7. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
i
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ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.3. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.4. Compliance Certificate; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.7. Limitations on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.8. Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . 46
SECTION 4.9. Limitations on Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . . . . . 48
SECTION 4.10. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.11. Limitations on Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.12. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.13. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.14. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.15. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 5 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.1. Limitations on Mergers, Consolidations or Sales of Assets . . . . . . . . . . . . . . . . . 58
SECTION 5.2. Successor Corporation or Person Substituted . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 6 DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.7. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
ii
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SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.9. Successor Trustee or Agent by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 8 DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.1. Defeasance and Discharge of This Indenture and the Securities . . . . . . . . . . . . . . . 75
SECTION 8.2. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 8.6. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 9.3. Compliance With TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 9.5. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 9.6. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 10 GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.2. Execution and Delivery of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.3. Future Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.4. Guarantor May Consolidate, Etc. on Certain Terms . . . . . . . . . . . . . . . . . . . . . 92
SECTION 10.5. Release of Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 10.6. Certain Bankruptcy Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.1. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.3. Communication by Holders With Other Holders . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 11.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 96
SECTION 11.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 11.6. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.8. No Personal Liability of Directors, Officers, Employees and Stockholders . . . . . . . . . 97
SECTION 11.9. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.11. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.12. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.14. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 11.15. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
EXHIBIT A Form of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
iv
<PAGE> 6
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
<S> <C> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 11.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3; 11.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(ii)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(i)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(iii)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a) (last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13; 9.4
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
</TABLE>
N.A. means not applicable.
* THIS CROSS-REFERENCE TABLE IS NOT PART OF THE INDENTURE.
<PAGE> 7
INDENTURE dated as of February 1, 1996, among Beverly
Enterprises, Inc., a Delaware corporation (the "Company"), the corporations
listed on the signature page hereto (the "Guarantors") and Chemical Bank, a New
York corporation, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the 9%
Senior Notes due 2006 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. Definitions.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar or Paying Agent.
<PAGE> 8
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback or by merger or consolidation) other than in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by Section 4.13 and/or Section 5.1 hereof and not by
Section 4.10 hereof), and (ii) the issuance or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$10 million or (b) for net proceeds in excess of $10 million. Notwithstanding
the foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a
Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity
Interests by a Subsidiary to the Company or to another Subsidiary, (c) a
Restricted Payment that is permitted by Section 4.7 hereof and (d) a Nursing
Facility Swap shall not be deemed to be an Asset Sale.
"Bankruptcy Law" means title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Beverly Funding" means Beverly Funding Corporation, a
Delaware corporation, and any successor thereto.
"Beverly Indemnity" means Beverly Indemnity, Ltd., a Vermont
corporation, and any successor thereto.
"Board of Directors" means the Board of Directors of the
Company or any authorized committee thereof.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease" means, at the time any determination thereof
is to be made, any lease of property, real or personal, in respect of which the
present value of the minimum rental commitment would be capitalized on a
balance sheet of the lessee in accordance with GAAP.
2
<PAGE> 9
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a Capital Lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"cash" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (iii) certificates of
deposit with maturities of one year or less from the date of acquisition,
bankers' acceptances (or, with respect to foreign banks, similar instruments)
with maturities not exceeding one year and overnight bank deposits, in each
case with any domestic commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, or any
United States branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $100 million, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's or S&P and in each case maturing within one year after the date of
acquisition, and (vi) investments in money market funds which invest
substantially all their assets in securities of
3
<PAGE> 10
the types described in the foregoing clauses (i) through (v).
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole to any Person or
group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), other than to a Person or group who, prior to such transaction, held a
majority of the voting power of the voting stock of the Company, (ii) the
acquisition by any Person or group, as defined above, of a direct or indirect
interest in more than 50% of the voting power of the voting stock of the
Company, by way of merger, consolidation or otherwise, or (iii) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Commission" means the Securities and Exchange Commission.
"Company" means Beverly Enterprises, Inc., as obligor under
the Securities, unless and until a successor replaces Beverly Enterprises,
Inc., in accordance with Article 5 hereof and thereafter includes such
successor.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period, plus
(i) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) the Fixed Charges
of such Person and its Subsidiaries for such period, to the extent that such
Fixed Charges were deducted in computing such Consolidated Net Income, plus
(iii) depreciation and amortization (including amortization of goodwill and
other intangibles) of such Person and its Subsidiaries for such period to the
extent that such depreciation and amortization were deducted in computing such
Consolidated Net Income, plus (iv) other non-cash items of such Person and its
Subsidiaries for such period to the extent such non-cash items were deducted in
computing such Consolidated Net
4
<PAGE> 11
Income, in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, the depreciation and amortization of, and the other non-cash items
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis; provided that, (i) the
Net Income, if positive, of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the referent
Person or a Subsidiary thereof, (ii) the Net Income, if positive, of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance
5
<PAGE> 12
sheet as of such date with respect to any series of preferred stock (other than
Redeemable Stock), less all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made in accordance with GAAP as a result of the acquisition of
such business), subsequent to the Issue Date, in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, and excluding
the cumulative effect of a change in accounting principles, all as determined
in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the Issue Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated
as of November 1, 1994, by and among Beverly California Corporation, a
California corporation, the Company and Morgan Guaranty Trust Company of New
York and the other banks that are party thereto, providing for $225,000,000 in
aggregate principal amount of senior term debt and up to $150,000,000 in
aggregate principal amount of Senior Revolving Debt, including any related
notes, collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, extended, renewed, refunded,
replaced or refinanced, in whole or in part, from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
"Debt to Consolidated Cash Flow Ratio" means with respect to
any Person as of any date of determination (the "Debt Ratio Calculation Date"),
the ratio of (i) the aggregate amount of Indebtedness of such Person
6
<PAGE> 13
and its Subsidiaries, on a consolidated basis, outstanding as of the Debt Ratio
Calculation Date to (ii) the Consolidated Cash Flow of such Person for the
Reference Period immediately preceding such Debt Ratio Calculation Date. In
the event that such Person or any of its Subsidiaries incurs, assumes,
guarantees, redeems or repays any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the Reference Period but prior to the Debt Ratio Calculation Date, then the
Debt to Consolidated Cash Flow Ratio shall be calculated giving pro forma
effect to such incurrence, assumption, guarantee, redemption or repayment of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable Refer- ence Period. For
purposes of making the computation referred to above, (i) acquisitions that
have been made by such Person or any of its Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the Reference Period or subsequent to such Reference Period and on or
prior to the Debt Ratio Calculation Date shall be deemed to have occurred on
the first day of the Reference Period, (ii) the Consolidated Cash Flow
attributable to operations or businesses disposed of prior to the Debt Ratio
Calculation Date shall be excluded and (iii) in any Reference Period commencing
on or prior to November 1, 1995, the Exchange shall be deemed to have occurred
on the first day of such Reference Period.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Exchange" means the exchange of the Company's $2.75
Cumulative Convertible Exchangeable Preferred Stock, $1 par value, for the
Company's 5 1/2% Convertible Subordinated Debentures due August 1, 2018,
consummated on November 1, 1995.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
7
<PAGE> 14
"Excluded Guarantee Subsidiary" shall have the meaning
specified in Section 10.3.
"Existing Collateral" means property or assets of Beverly or
its Subsidiaries (other than Beverly Funding) that are, or since the Issue Date
have been, subject to one or more Permitted Liens.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries in existence on the Issue Date, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that such Person or any of its Subsidiaries incurs, assumes, guarantees,
redeems or repays any Indebtedness (other than revolving credit borrowings) or
issues or redeems preferred stock subsequent to the commencement of the period
for which the Fixed Charge Coverage Ratio is being calculated but prior to the
date on which the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence, assumption,
guarantee, redemption or repayment of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable Reference Period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the Reference Period
or subsequent to such Reference Period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the Reference Period, (ii)
the Consolidated Cash Flow and Fixed Charges attributable to operations or
businesses disposed of prior to the Calculation Date shall be excluded and
(iii) in any Reference Period commencing on or prior to November 1, 1995, the
Exchange shall be deemed to have occurred on the first day of such Reference
Period.
"Fixed Charges" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Subsidiaries for
8
<PAGE> 15
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit
or bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations) and (ii) the consolidated interest expense of such Person
and its Subsidiaries that was capitalized during such period, and (iii)
interest actually paid by such Person or any of its Subsidiaries under any
guarantee of Indebtedness or other obligation of any other Person and (iv) the
product of (a) all cash dividend payments (and non-cash dividend payments in
the case of a Person that is a Subsidiary) on any series of preferred stock of
such Person, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP; provided, however, in the
event that any cash dividend payment is deductible for federal, state and/or
local tax purposes, the amount of the tax deduction relating to such cash
dividend payment for such period shall be subtracted from the Fixed Charges for
such Person for such period.
"Future Subsidiary Guarantor" shall have the meaning specified
in Section 10.3.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect from time to time.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
9
<PAGE> 16
"Guarantors" means (i) the Subsidiaries designated as such on
the signature pages hereof, and their successors and assigns and (ii) Future
Subsidiary Guarantors that became Guarantors pursuant to the terms of this
Indenture, but excluding Beverly Funding and Beverly Indemnity, any Persons
whose guarantees have been released pursuant to the terms of this Indenture,
and any Excluded Guarantee Subsidiary.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts or currency swap agreements and (iii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency values.
"Holder" means a Person in whose name a Security is
registered.
"Indebtedness" means, with respect to any Person, (i) any
Redeemable Stock of such Person, (ii) any indebtedness of such Person, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (iii) all indebtedness of any other Person
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), and (iv) to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Interest Payment Date" means the stated due date of an
installment of interest on the Securities.
10
<PAGE> 17
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other Person or any agreement to make any such acquisition; (b) the making
by such Person of any deposit with, or advance, loan or other extension of
credit to, such other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other Person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than guarantees of
Indebtedness of the Company or any Subsidiary to the extent permitted by
Section 4.9 hereof, the entering into by such Person of any guarantee of, or
other credit support or contingent obligation with respect to, Indebtedness or
other liability of such other Person; provided, however, Investments shall not
be deemed to include extensions of trade credit by such Person or any of its
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of such Person or such Subsidiary, as the case may be.
"Issue Date" means February 14, 1996, the date on which the
Securities are to be originally issued hereunder.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment are
authorized or obligated by law, regulation or executive order to remain closed.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset given to secure Indebtedness, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement
11
<PAGE> 18
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction
with respect to any such lien, pledge, charge or security interest).
"Maturity Date" means, when used with respect to any Security,
the date specified on such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence of
any acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Senior Asset
Sale Offer).
"Moody's" means Moody's Investors Services, Inc. and its
successors.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP, and before any
reduction in respect of preferred stock dividends, excluding, however, the
effect of any extraordinary or other material non-recurring gain or loss
outside the ordinary course of business, together with any related provision
for taxes on such extraordinary or other material non-recurring gain or loss.
"Net Proceeds" means the aggregate cash or Cash Equivalent
proceeds received by the Company or any of its Subsidiaries in respect of any
Asset Sale, net of the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions) and any other expenses incurred or to be incurred by the Company
or a Subsidiary as a direct result of the sale of such assets (including,
without limitation, severance, relocation, lease termination and other similar
expenses), taxes actually paid or payable as a result thereof, amounts required
to be applied to the repayment of Indebtedness (other than Subordinated
Indebtedness or Senior Revolving Debt) secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.
"Non-Cash Consideration" means any non-cash or non-Cash
Equivalent consideration received by the Company or a Subsidiary of the Company
in connection with an
12
<PAGE> 19
Asset Sale and any non-cash or non-Cash Equivalent consideration received by
the Company or any of its Subsidiaries upon disposition thereof.
"Non-Qualified Asset Sale" means an Asset Sale in which the
Non-Cash Consideration received by the Company or its Subsidiaries exceeds 25%
of the total consideration received in connection with such Asset Sale
calculated in accordance with clause (x), but not clause (y), of the proviso to
the first sentence in Section 4.10 hereof. The Spinoff Transaction shall be
deemed not to constitute a Non-Qualified Asset Sale.
"Nursing Facility" means a nursing facility, hospital,
outpatient clinic, assisted living center, hospice, long-term care facility or
other facility that is used or useful in the provision of healthcare services.
"Nursing Facility Swap" means an exchange of assets by the
Company or one or more Subsidiaries of the Company for one or more Nursing
Facilities and/or one or more Related Businesses or for the Capital Stock of
any Person owning one or more Nursing Facilities and/or one or more Related
Businesses.
"Obligations" means any principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officers" means the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary and any Vice President of the Company or any Subsidiary, as the case
may be.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom must be the principal executive officer, principal
financial officer or principal accounting officer of the Company or any
Subsidiary, as the case may be.
13
<PAGE> 20
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, any Subsidiary or the Trustee.
"Payment Default" means any failure to pay any scheduled
installment of principal on any Indebtedness within the grace period provided
for such payment in the documentation governing such Indebtedness.
"PCA" means Pharmacy Corporation of America, a California
corporation, and its successors.
"Permitted Liens" means (i) Liens in favor of the Company;
(ii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Subsidiary of the Company or
becomes a Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger, consolidation or acquisition and do
not extend to any assets other than those of the Person merged into or
consolidated with the Company or that becomes a Subsidiary of the Company;
(iii) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (iv) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens existing on the Issue Date; (vi) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) Liens to secure Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was secured by a Lien permitted
hereunder and that was incurred in accordance with the provisions hereof;
provided that such Liens do not extend to or cover any property or assets of
the Company or any of its Subsidiaries other than assets or property securing
the Indebtedness so refinanced or Substitute Mortgage Collateral therefor;
(viii) Liens on Substitute Mortgage Collateral; (ix) Purchase Money Liens; (x)
Liens
14
<PAGE> 21
on Medicare, Medicaid or other patient accounts receivable of the Company or
its Subsidiaries and any other Liens granted by a Receivables Subsidiary, in
each case in connection with a Receivables Financing; provided that the
aggregate principal or redemption amount of Receivables Financing outstanding
shall not exceed 50% of the net amount of the uncollected Medicare, Medicaid or
other patient accounts receivable then owing to the Company or its
Subsidiaries; (xi) Liens on real estate and related personal property with a
fair market value not in excess of 50% of the fair market value of any Existing
Collateral which has become free and clear of all Liens securing Indebtedness
since the Closing Date; (xii) Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens imposed by law incurred in
the ordinary course of business; (xiii) easements, rights-of-way, zoning
restrictions, reservations, encroachments and other similar encumbrances in
respect of real property; (xiv) any interest or title of a lessor under any
Capitalized Lease Obligation; (xv) Liens upon specific items of inventory or
equipment and proceeds of the Company or any Subsidiary securing its
obligations in respect of bankers' acceptances issued or created for its
account (whether or not under the Credit Agreement) to facilitate the purchase,
shipment, or storage of such inventory and equipment; (xvi) Liens securing
reimbursement obligations with respect to letters of credit (whether or not
issued under the Credit Agreement) otherwise permitted hereunder and issued in
connection with the purchase of inventory or equipment by the Company or any
Subsidiary in the ordinary course of business; (xvii) Liens to secure (or
encumbering deposits securing) obligations arising from warranty or contractual
service obligations of the Company or any Subsidiary, including rights of
offset and setoff; (xviii) Liens securing Acquired Debt or acquisition
Indebtedness otherwise permitted hereunder; provided that (A) the Indebtedness
secured shall not exceed the fair market value of the assets so acquired (such
fair market value to be determined in good faith by the Board of Directors of
the Company at the time of such acquisition) and (B) such Indebtedness shall be
incurred, and the Lien securing such Indebtedness shall be created, within 12
months after such acquisition; (xix) Liens securing Hedging Obligations
agreements relating to Indebtedness otherwise permitted under the Indenture;
(xx) Liens securing stay and appeal bonds or judgment Liens in connection with
any
15
<PAGE> 22
judgment not giving rise to a Default hereunder; (xxi) Liens on property or
assets ("Substitute Liens") in substitution for Liens released on the stock of
PCA and its Subsidiaries; provided that (A) the fair market value of such
property or assets subject to such Substitute Liens (as conclusively evidenced
by a resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) is substantially equivalent to or less than the fair
market value of the stock of PCA and its Subsidiaries, and (B) the Indebtedness
secured by such Substitute Liens is permitted by the terms hereof; and (xxii)
other Liens on assets of the Company or any of its Subsidiaries securing
Indebtedness that is permitted hereunder to be outstanding having an aggregate
principal amount at any one time outstanding not to exceed $5 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace, defease
or refund, other Indebtedness of the Company or any of its Subsidiaries;
provided that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of any premiums paid and reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is Subordinated Indebtedness, such Permitted
Refinancing Indebtedness has a final maturity date of, and is subordinated in
right of payment to, the Securities on terms at least as favorable to the
Holders of Securities as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) if the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is a Subsidiary that is not
a Guarantor, such Permitted Refinancing Indebtedness shall only be incurred by
such Subsidiary.
16
<PAGE> 23
"Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust or unincorporated organization (including any subdivision or ongoing
business of any such entity or substantially all of the assets of any such
entity, subdivision or business).
"Purchase Money Indebtedness" means any Indebtedness of a
Person to any seller or other Person incurred to finance the acquisition or
construction (including in the case of a Capital Lease Obligation, the lease)
of any asset or property which is incurred within 180 days of such acquisition
or completion of construction and is secured only by the assets so financed.
"Purchase Money Lien" means a Lien granted on an asset or
property to secure Purchase Money Indebtedness permitted to be incurred under
the Indenture and incurred solely to finance the acquisition or construction of
such asset or property; provided, however, that such Lien encumbers only such
asset or property and is granted within 180 days of such acquisition or
completion of construction.
"Qualified Equity Interests" shall mean all Equity Interests
of the Company other than Redeemable Stock of the Company.
"Receivables Financing" means the sale or other disposition of
Medicare, Medicaid or other patient accounts receivable of the Company or any
of its Subsidiaries to a Receivables Subsidiary followed by a financing
transaction in connection with such sale or disposition of such accounts
receivable.
"Receivables Subsidiary" means a Subsidiary of the Company
exclusively engaged in Receivables Financing and activities reasonably related
thereto.
"Record Date" means a Record Date specified in the Securities
whether or not such Record Date is a Business Day.
"Redeemable Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable),
17
<PAGE> 24
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder thereof, in whole or in part, on or prior to the date on which
the Securities mature.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to Article 3 of
this Indenture and Paragraph 5 in the form of Security.
"Redemption Price," when used with respect to any Security to
be redeemed, means the redemption price for such redemption pursuant to
Paragraph 5 in the form of Security, which shall include, without duplication,
in each case, accrued and unpaid interest to the Redemption Date (subject to
the provisions of Section 3.5).
"Reference Period," with regard to any Person means the four
full fiscal quarters (or such lesser period during which such Person has been
in existence) for which internal financial statements are available ended
immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Securities or this Indenture.
"Related Business" means the business conducted by the Company
and its Subsidiaries as of the Issue Date and any and all healthcare service
businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses. Without limiting the generality of
the foregoing, Related Business shall include the operation of long-term and
specialty healthcare services, skilled nursing care, subacute care,
rehabilitation programs, pharmaceutical services, geriatric care and home
healthcare.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
18
<PAGE> 25
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than (i) Investments in Cash Equivalents,
(ii) Investments in a Subsidiary, (iii) Investments in any Person that as a
consequence of such Investment becomes a Subsidiary, (iv) Investments existing
on the Issue Date, (v) accounts receivable, advances, loans, extensions of
credit created or acquired in the ordinary course of business, (vi) Investments
made as a result of the receipt of Non-Cash Consideration from an Asset Sale
that was made pursuant to and in compliance with Section 4.10 hereof including,
without limitation, as a result of the Spinoff Transaction, (vii) Investments
made as the result of the guarantee by the Company or any of its Subsidiaries
of Indebtedness of a Person or Persons other than the Company or any Subsidiary
of the Company that is secured by Liens on assets sold or otherwise disposed of
by the Company or such Subsidiary to such Person or Persons; provided that such
Indebtedness was in existence prior to the contemplation of such sale or other
disposition and that the terms of such guarantee permit the Company or such
Subsidiary to foreclose on the pledged or mortgaged assets if the Company or
such Subsidiary are re- quired to perform under such guarantee, and (viii)
Investments in any Related Business; provided, however, that a merger of
another Person with or into the Company or a Guarantor shall not be deemed to
be a Restricted Investment so long as the surviving entity is the Company or a
direct wholly owned Guarantor.
"S&P" means Standard & Poor's, a division of The McGraw Hill
Companies, and its successors.
"Securities" means the securities described above, issued
under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Revolving Debt" means revolving credit loans and
letters of credit outstanding from time to time under the Credit Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated
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<PAGE> 26
pursuant to the Securities Act, as such Regulation is in effect on the Issue
Date.
"Spinoff Transaction" means a pro rata distribution by the
Company to its stockholders of all or a portion of the shares of PCA or a sale
or other disposition to a Person or Persons other than the Company or a
Subsidiary of the Company of all or a portion of the shares of PCA or all or
substantially all of the assets of PCA.
"Stockholders' Equity" means, with respect to any Person as of
any date, the stockholders' equity of such Person determined in accordance with
GAAP as of the date of the most recent available internal financial statements
of such Person, and calculated on a pro forma basis to give effect to any
acquisition or disposition by such Person consummated or to be consummated
since the date of such financial statements and on or prior to the date of such
calculation.
"Subordinated Indebtedness" means Indebtedness of the Company
or a Guarantor that is subordinated in right of payment to the Securities or
such Subsidiary's Guarantee of the Securities, as applicable.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of such Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Substitute Mortgage Collateral" means real estate and related
personal property on which Liens are created in substitution for the release of
Liens on other real estate and related personal property ("Initial Liens");
provided, that (i) such Initial Liens were permitted hereunder, (ii) the fair
market value of the
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<PAGE> 27
Substitute Mortgage Collateral (as conclusively evidenced by an Officers'
Certificate delivered to the Trustee within 60 days prior to the date of such
substitution of collateral) is substantially equivalent to or less than the
fair market value of the property subject to the released Initial Liens and
(iii) the Indebtedness secured by the Liens on Substitute Mortgage Collateral
is permitted hereunder.
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S.C. Section 77aaa-77bbbb) as in effect on the date on which this Indenture
is qualified under the TIA, except as provided in Section 9.3 hereof;
provided, however, that, in the event the Trust Indenture Act of 1939 is
amended after such date, "TIA" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
"Transfer Restriction" means, with respect to the Company's
Subsidiaries, any encumbrance or restriction on the ability of any Subsidiary
to (i)(a) pay dividends or make any other distributions to the Company or any
of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries, or (iii) transfer any of
its properties or assets to the Company or any of its Subsidiaries.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"U.S. Government Obligations" means direct noncallable
obligations of, or noncallable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment
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<PAGE> 28
at final maturity, in respect thereof, by (b) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the making
of such payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned
by such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- -----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . 4.11
"Change of Control Offer" . . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment" . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment Date" . . . . . . . . . . . . . . 4.13
"Commencement Date" . . . . . . . . . . . . . . . . . . . . 2.15
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . 8.3
"Event of Default" . . . . . . . . . . . . . . . . . . . . . 6.1
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . 4.10
"Guarantee" . . . . . . . . . . . . . . . . . . . . . . . . 10.1
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . 8.2
"Notice of Default" . . . . . . . . . . . . . . . . . . . . 6.1
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . 2.15
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . 2.15
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . 2.15
"Purchase Price" . . . . . . . . . . . . . . . . . . . . . . 4.10
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Restricted Payments" . . . . . . . . . . . . . . . . . . . 4.7
"Senior Asset Sale Offer" . . . . . . . . . . . . . . . . . 4.10
</TABLE>
SECTION 1.3. Incorporation By Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
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<PAGE> 29
The following TIA terms used in this Indenture have the
following meanings:
"Indenture Securities" means the Securities;
"Indenture Security Holder" means a Holder;
"Indenture to be Qualified" means this Indenture;
"Indenture Trustee" or "Institutional Trustee" means the
Trustee;
"Obligor" on the Securities means the Company, any Guarantor
and any successor obligor upon the Securi- ties.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by the Commission
rule under the TIA have the meanings so assigned to them.
SECTION 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions;
(6) "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole (as
amended or supplemented from time to time) and not to
any particular Article, Section or other subdivision;
and
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(7) references to sections of or rules under the
Securities Act or the Exchange Act shall be deemed to
include substitute, replacement and successor
sections or rules adopted by the Commission from time
to time.
ARTICLE 2
THE SECURITIES; OFFER TO PURCHASE PROCEDURES
SECTION 2.1. Form and Dating.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements approved as to form by the Company and
required by law, stock exchange rule, agreements to which the Company is
subject or usage. The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and to the
extent applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. Each Security shall be dated the date of
its authentication. The Securities shall be issuable only in registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.2. Execution and Authentication.
Two Officers of the Company shall sign the Securities for the
Company by manual or facsimile signature. The Company's seal shall be
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture. The form of Trustee's certificate of authentication to be
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borne by the Securities shall be substantially as set forth in Exhibit A
hereto.
The Trustee shall, upon a written order of the Company signed
by two Officers of the Company, from time to time, authenticate Securities for
original issue up to the aggregate principal amount stated in paragraph 4 of
the Securities. The aggregate principal amount of Securities outstanding at
any time shall not exceed the amount set forth herein except as provided in
Section 2.8 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.3. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where
Securities may be presented for registration of transfer or for exchange
(including any co-registrar, the "Registrar") and (ii) an office or agency
where Securities may be presented for payment (the "Paying Agent"). The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may, from time to time, appoint one or more
co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without prior notice to any Holder. The Company shall
notify the Trustee and the Trustee shall notify the Holders of the name and
address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any of its Subsidiaries may act as Paying
Agent or Registrar. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name
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and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
Section 7.7 hereof.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of notices and demands in connection with
the Securities.
SECTION 2.4. Paying Agent to Hold Money in Trust.
On or prior to the due date of principal of, premium, if any,
and interest on any Securities, the Company shall deposit with the Trustee or
the Paying Agent money sufficient to pay such principal, premium, if any, and
interest becoming due. The Company shall require each Paying Agent other than
the Trustee to agree in writing that the Paying Agent shall hold in trust for
the benefit of the Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the
Securities, and shall notify the Trustee of any Default by the Company in
making any such payment. While any such Default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company) shall have no further liability for the money delivered to the
Trustee. If the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall furnish to the Trustee
at least seven Business Days before each Interest Payment Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Holders, including the aggregate
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principal amount of the Securities held by each thereof, and the Company shall
otherwise comply with TIA Section 312(a).
SECTION 2.6. Transfer and Exchange.
When Securities are presented to the Registrar with a request
to register the transfer or to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall register the transfer or
make the exchange if its requirements for such transactions are met; provided,
however, that any Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Holder thereof or by his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's request.
Neither the Company nor the Registrar shall be required to (i)
issue, register the transfer of, or exchange Securities during a period
beginning at the opening of business 15 days before the day of any selection of
Securities for redemption under Section 3.2 hereof and ending at the close of
business on the day of selection, (ii) register the transfer of, or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part, or (iii) register
the transfer or exchange of a Security between the record date and the next
succeeding Interest Payment Date.
No service charge shall be made to any Holder for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10 or 9.5 hereof, which shall be paid by the
Company).
Prior to due presentment for registration of a transfer of
any Security, the Trustee, any Agent, the Company and any agent of the
foregoing may deem and treat
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the Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of, premium, if
any, and interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue (provided, that defaulted interest
shall be paid as set forth in Section 2.12 hereof), and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary.
SECTION 2.7. Replacement Securities.
If any mutilated Security is surrendered to the Trustee or the
Company, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Security, the Company shall, upon written
request of the Holder thereof, issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss which any of them may suffer if a Security
is replaced. Each of the Company and the Trustee may charge for its expenses
in replacing a Security.
Every replacement Security is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionally with all other Securities duly issued hereunder.
SECTION 2.8. Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it (or its agent),
those delivered to it for cancellation and those described in this Section as
not outstanding.
If a Security is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser (as such term
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is defined in Section 8-302 of the Uniform Commercial Code as in effect in the
State of New York).
If the principal amount of any Security is considered paid
under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases
to accrue.
Subject to Section 2.9 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities then outstanding have concurred in any demand, direction,
waiver or consent, Securities owned by the Company or any Affiliate of the
Company shall be considered as though not outstanding, except that for purposes
of determining whether the Trustee shall be protected in relying on any such
demand, direction, waiver or consent, only Securities that a Responsible
Officer actually knows to be so owned shall be so considered. Notwithstanding
the foregoing, Securities that are to be acquired by the Company or an
Affiliate of the Company pursuant to an exchange offer, tender offer or other
agreement shall not be deemed to be owned by the Company or an Affiliate of the
Company until legal title to such Securities passes to the Company or such
Affiliate, as the case may be.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee, upon receipt of the written order of the
Company signed by two Officers of the Company, shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company and the Trustee
consider appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee, upon receipt of the written order of the
Company signed by two Officers of the Company, shall authenticate definitive
securities in exchange for temporary Securities. Until such exchange, Holders
of temporary Securities shall be entitled to all of the rights, benefits and
privileges of this Indenture.
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SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
(or its agent) for cancellation. The Registrar and Paying Agent shall forward
to the Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee (or its agent) shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy such cancelled Securities unless the Company
otherwise directs. The Company may not issue new Securities to replace
Securities that it has paid or that have been delivered to the Trustee (or its
agent) for cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior
to the related payment date, in each case at the rate provided in the
Securities and in Section 4.1 hereof. The Company shall, with the consent of
the Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before the special record date, the Company (or, upon
written request of the Company, the Trustee, in the name of and at the expense
of the Company) shall mail to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
SECTION 2.13. Record Date.
The record date for purposes of determining the identity of
Holders entitled to vote or consent to any action by vote or consent authorized
or permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.14. CUSIP Number.
The Company in issuing the Securities may use a "CUSIP"
number, and if it does so, the Trustee shall use
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the CUSIP number in notices to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities and that reliance may be
placed only on the other identification numbers printed on the Securities. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.15. Offer to Purchase by Application of Excess
Proceeds.
In the event that the Company shall commence a Senior Asset
Sale Offer pursuant to Section 4.10 hereof, it shall follow the procedures
specified below.
No later than 10 days following the date on which the
aggregate amount of Excess Proceeds exceeds $25 million, the Company shall
notify the Trustee of such Senior Asset Sale Offer and provide the Trustee with
an Officers' Certificate setting forth, in addition to the information to be
included therein pursuant to Section 4.10 hereof, the calculations used in
determining the amount of Net Proceeds to be applied to the purchase of
Securities. The Company shall commence or cause to be commenced such Senior
Asset Sale Offer on a date no later than 20 days after such notice (the
"Commencement Date").
The Senior Asset Sale Offer shall remain open for at least 20
Business Days after the Commencement Date relating to such Senior Asset Sale
Offer and shall remain open for no more than such 20 Business Days, except to
the extent required by applicable law (as so extended, the "Offer Period"). No
later than three Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount (the "Offer
Amount") of Securities required to be purchased in such Senior Asset Sale Offer
pursuant to Section 4.10 hereof or, if less than the Offer Amount has been
tendered, all Securities tendered in response to the Senior Asset Sale Offer,
in each case for an amount in cash equal to the Purchase Price.
If the Purchase Date is on or after an interest payment record
date and on or before the related interest payment date, any accrued interest
shall be paid to the Person in whose name a Security is registered at the close
of business on such record date, and no additional
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interest shall be payable to Holders who tender Securities pursuant to the
Senior Asset Sale Offer.
On the Commencement Date of any Senior Asset Sale Offer, the
Company shall send or shall cause to be sent by first class mail, a notice to
each of the Holders at their last registered address, with a copy to the
Trustee and the Paying Agent, offering to repurchase the Securities held by
such Holder pursuant to the procedure specified in such notice. Such notice,
which shall govern the terms of the Senior Asset Sale Offer, shall contain all
instructions and materials necessary to enable the Holders to tender Securities
pursuant to the Senior Asset Sale Offer and shall state:
(1) that the Senior Asset Sale Offer is being made
pursuant to this Section 2.15 and Section 4.10 hereof
and the length of time the Senior Asset Sale Offer
shall remain open;
(2) the Offer Amount, the Purchase Price and the Purchase
Date;
(3) that any Security not tendered or accepted for
payment shall continue to accrue interest;
(4) that, unless the Company defaults in the payment of
the Purchase Price, any Security accepted for payment
pursuant to the Senior Asset Sale Offer shall cease
to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased
pursuant to any Senior Asset Sale Offer shall be
required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Company, a
depositary, if appointed by the Company, or a Paying
Agent at the address specified in the notice prior to
the close of business on the Business Day next
preceding the Purchase Date;
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(6) that Holders shall be entitled to withdraw their
election if the Company, depositary or Paying Agent,
as the case may be, receives, not later than the
close of business on the Business Day next preceding
the termination of the Offer Period, a facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such
Security purchased;
(7) that, if the aggregate principal amount of Securities
surrendered by Holders exceeds the Offer Amount, the
Trustee shall select the Securities to be purchased
on a pro rata basis (with such adjustments as may be
deemed appropriate by the Trustee so that only
Securities in denominations of $1,000, or integral
multiples thereof, shall be purchased);
(8) that Holders whose Securities were purchased only in
part shall be issued new Securities equal in
principal amount to the unpurchased portion of the
Securities surrendered; and
(9) the circumstances and relevant facts regarding such
Asset Sale and any other information that would be
material to a decision as to whether to tender a
Security pursuant to the Senior Asset Sale Offer.
On the Purchase Date, the Company shall, to the extent lawful,
(i) accept for payment, on a pro rata basis to the extent necessary, an
aggregate principal amount equal to the Offer Amount of Securities and other
Indebtedness ranking on a parity with the Securities whose provisions require
the Company to make an offer to purchase or redeem such Indebtedness with
proceeds from any asset sales tendered pursuant to the Senior Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Securities and other
Indebtedness or portions thereof so tendered, (ii) deposit with the Paying
Agent an amount equal to the Purchase Price in respect of
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all Securities and other Indebtedness or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Securities and other
Indebtedness so accepted together with an Officers' Certificate stating the
aggregate principal amount of Securities and other Indebtedness or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Securities so tendered payment in an amount equal to the Purchase
Price for such Securities and the Trustee shall promptly authenticate and mail
(or cause to be transferred by book entry) a new Security to such Holder equal
in principal amount to any unpurchased portion of the Securities surrendered, if
any; provided that each such new Security shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce the
results of the Senior Asset Sale Offer on or as soon as practicable after the
Purchase Date.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
purchase of Securities and other Indebtedness as a result of the Senior Asset
Sale Offer.
ARTICLE 3
REDEMPTION
SECTION 3.1. Right of Redemption.
Redemption of Securities, as permitted by any provision of
this Indenture, shall be made in accordance with such provision and this
Article 3. The Company will not have the right to redeem any Securities prior
to February 15, 2001. On or after February 15, 2001, the Company will have the
right to redeem all or any part of the Securities at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth therein under
the caption "Optional Redemption," in each case (subject to the right of
Holders of record on a Record Date to receive interest due on an Interest
Payment Date that is on or prior to such Redemption Date, and subject to the
provisions set forth in Section 3.5 hereof) including accrued and unpaid
interest to the Redemption Date.
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SECTION 3.2. Notices to Trustee.
If the Company elects to redeem Securities pursuant to
Paragraph 5 of the Securities, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of
Securities to be redeemed pursuant to Paragraph 5 of the Securities by
crediting against any such redemption Securities it has not previously
delivered to the Trustee for cancellation, it shall so notify the Trustee of
the amount of the reduction and deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for
in this Section 3.2 at least 45 days before the Redemption Date (unless a
shorter notice period shall be satisfactory to the Trustee). Any such notice
may be cancelled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.3. Selection of Securities to be Redeemed.
If less than all of the Securities are to be redeemed pursuant
to Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed
on a pro rata basis, by lot, by a method that complies with the requirements of
any exchange on which the Securities are listed or by such other method as the
Trustee shall determine to be fair and appropriate.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities in denominations of $1,000 may be redeemed
only in whole. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities
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called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.4. Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a notice of
redemption by first class mail, postage prepaid, to the Trustee and each Holder
whose Securities are to be redeemed to such Holder's last address as then shown
on the registry books of the Registrar. At the Company's request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the
amount of accrued and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number
of the Paying Agent;
(4) that Securities called for redemption
must be surrendered to the Paying Agent at the address specified in
such notice to collect the Redemption Price;
(5) that, unless the Company defaults in its
obligation to deposit cash or U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, cash in an amount to fund
the Redemption Price with the Paying Agent in accordance with Section
3.6 hereof or such redemption payment is otherwise prohibited,
interest on Securities called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price,
including accrued and unpaid interest to the Redemption Date, upon
surrender to the Paying Agent of the Securities called for redemption
and to be redeemed;
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(6) if any Security is being redeemed in
part, the portion of the principal amount equal to the unredeemed
portion thereof, of such Security to be redeemed and that, on or after
the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued upon cancellation of the
original Security;
(7) if less than all the Securities are to
be redeemed, the identification of the particular Securities (or
portion thereof) to be redeemed, as well as the aggregate principal
amount of such Securities to be redeemed and the aggregate principal
amount of Securities to be outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be
redeemed; and
(9) that the notice is being sent pursuant
to this Section 3.4 and pursuant to the optional redemption provisions
of Paragraph 5 of the Securities.
SECTION 3.5. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.4, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price,
including interest, if any, accrued and unpaid to the Redemption Date;
provided that if the Redemption Date is after a regular Record Date and on or
prior to the Interest Payment Date to which such Record Date relates, the
accrued interest shall be payable to the Holder of the redeemed Securities
registered on the relevant Record Date; and provided, further that if a
Redemption Date is a non-Business Day, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
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SECTION 3.6. Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit
with the Trustee or the Paying Agent (other than the Company or an Affiliate of
the Company) cash or U.S. Government Obligations sufficient to pay the
Redemption Price of, including accrued and unpaid interest on, all Securities
to be redeemed on such Redemption Date (other than Securities or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation). The Trustee or the Paying Agent
shall promptly return to the Company any cash or U.S. Government Obligations
so deposited which is not required for that purpose upon the written request of
the Company.
If the Company complies with the preceding paragraph and the
other provisions of this Article 3 and payment of the Securities called for
redemption is not otherwise prohibited, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such
payment is made on the unpaid principal, and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the rate and in the
manner provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part,
the Company shall issue and the Trustee shall authenticate and deliver to the
Holder, at the expense of the Company, a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
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ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Securities.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Securities on the dates and in the manner
provided in this Indenture and the Securities. Principal, premium, if any, and
interest shall be considered paid on the date due if the Trustee or the Paying
Agent, if other than the Company or a Subsidiary of the Company, holds as of
10:00 a.m. New York City Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Trustee or such Paying
Agent shall return to the Company, no later than three days following the date
of payment, any money that exceeds such amount of principal, premium, if any,
and interest to be paid on the Securities.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the interest rate then applicable
to the Securities to the extent lawful. In addition, it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee or Registrar) where Securities may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Company shall give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices
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and demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates Chemical Bank, Corporate Trust
Department, 450 West 33rd Street, New York, New York 10001 as one such office
or agency of the Company in accordance with Section 2.3 hereof.
SECTION 4.3. Reports.
(a) Whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
deliver to the Trustee, within 15 days after it files or would have been
required to file such with the Commission, annual and quarterly financial
statements substantially equivalent to financial statements that would have
been included in a report filed with the Commission on Forms 10-Q and 10-K, if
the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the Commission, and, in each case, together with
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations" which would be so required. In addition, whether or not required
by the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and will make such
information available to securities analysts and prospective investors upon
request. All obligors on the Securities shall comply with the provisions of
TIA Section 314(a).
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(b) The Trustee, at the Company's expense, shall promptly
mail copies of all such annual reports, information, documents and other
reports provided to the Trustee pursuant to Section 4.3(a) hereof to the
Holders at their addresses appearing in the register of Securities maintained
by the Registrar. The Company shall provide the Trustee with a sufficient
number of copies of all reports and other documents and information that the
Trustee may be required to deliver to the Holders under this Section 4.3.
SECTION 4.4. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate complying with
Section 314(a)(4) of the TIA and stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining
whether each has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each entity has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each is taking or
proposes to take with respect thereto, all without regard to periods of grace
or notice requirements, and that to the best of his or her knowledge no event
has occurred and remains in existence by reason of which payments on account of
the principal of or interest, if any, on the Securities is prohibited or if
such event has occurred, a description of the event and what action each is
taking or proposes to take with respect thereto. The Officers' Certificate
shall also notify the Trustee should the relevant fiscal year end on any date
other than the current fiscal year end date.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.3 above shall be
accompanied by a written state-
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ment of the Company's certified independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company or any
Subsidiary of the Company has violated any provisions of Article 4 or of
Article 5 of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming
actually aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be
deemed to have knowledge of any Default or any Event of Default unless one of
its Trust Officers receives written notice thereof from the Company or any of
the Holders.
SECTION 4.5. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except (i) as contested in good faith by appropriate
proceedings and with respect to which appropriate reserves have been taken in
accordance with GAAP or (ii) where the failure to effect such payment is not
adverse in any material respect to the Holders.
SECTION 4.6. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit
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or advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.7. Limitations on Restricted Payments.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of the Equity Interests of the Company or any
of its Subsidiaries (other than (x) dividends or distributions payable in
Qualified Equity Interests of the Company, (y) dividends or distributions
payable to the Company or any Subsidiary of the Company, and (z) dividends or
distributions by any Subsidiary of the Company payable to all holders of a
class of Equity Interests of such Subsidiary on a pro rata basis); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any of its Subsidiaries; (iii) make any principal payment on,
or purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness, except at the original final maturity date thereof;
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment (the amount of any such Restricted Payment, if other than
cash or Cash Equivalents, shall be the fair market value (as conclusively
evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee within 60 days prior to the date of such
Restricted Payment) of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to such Restricted Payment):
(a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence
thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as
if such Restricted Payment had been made at the
beginning of
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the Reference Period immediately preceding the date
of such Restricted Payment, have been permitted to
incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.9 hereof;
and
(c) such Restricted Payment, together with the aggregate
of all other Restricted Payments made by the Company
and its Subsidiaries after December 31, 1995
(excluding Restricted Payments permitted by clauses
(ii), (iii), (iv) and (v) of the next succeeding
paragraph), is less than the sum (without
duplication) of (1) 50% of the Consolidated Net
Income of the Company for the period (taken as one
accounting period) from the beginning of the first
fiscal quarter commencing after December 31, 1995 to
the end of the Company's most recently ended fiscal
quarter for which internal financial statements are
available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (2) 100% of
the aggregate net cash proceeds received by the
Company from the issue or sale (other than to a
Subsidiary of the Company) since December 31, 1995 of
Qualified Equity Interests of the Company or of debt
securities of the Company or any of its Subsidiaries
that have been converted into or exchanged for such
Qualified Equity Interests of the Company, plus(3) to
the extent that any Restricted Investment that was
made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the lesser
of (A) the cash return of capital with respect to
such Restricted Investment (net of taxes and the cost
of disposition, if any) or (B) the initial amount of
such Restricted Investment, plus (4) $20 million.
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The foregoing provisions shall not prohibit the following
Restricted Payments:
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of
declaration such payment would have otherwise
complied with the provisions hereof;
(ii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company
or any Subsidiary in exchange for, or out of the
net cash proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Company) of
Qualified Equity Interests of the Company; provided
that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded
from clause (c)(2) of the preceding paragraph;
(iii) the defeasance, redemption or repurchase of
Subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted
Refinancing Indebtedness or in exchange for or out
of the net cash proceeds from the substantially
concurrent sale (other than to a Subsidiary of the
Company) of Qualified Equity Interests of the
Company; provided that the amount of any such net
cash proceeds that are utilized for any such
redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of
the preceding paragraph;
(iv) any purchase or defeasance of Subordinated
Indebtedness to the extent required upon a change
of control or asset sale (as defined therein) by
the indenture or other agreement or instrument
pursuant to which such Subordinated Indebtedness
was issued, but only if the Company (1) in the case
of a Change of
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Control, has complied with its obligations under
the provisions described under Section 4.13 of this
Indenture or (2) in the case of an Asset Sale, has
applied the Net Proceeds from such Asset Sale in
accordance with the provisions under Sections 2.15
and 4.10 of this Indenture; and
(v) any Restricted Payment permitted in accordance with
the provisions of the second paragraph of Section
4.10 of this Indenture;
provided, however, in the case of each of clauses (ii), (iii), (iv) and (v) of
this paragraph, no Default or Event of Default shall have occurred or be
continuing at the time of such Restricted Payment or would occur as a
consequence thereof.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed.
SECTION 4.8. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual Transfer Restriction (other than a
consensual Transfer Restriction with respect to Beverly Funding), except for
such Transfer Restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the Issue Date,
(b) this Indenture,
(c) applicable law,
(d) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of
its Subsidiaries as in
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effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition or in
violation of Section 4.9 hereof), which encumbrance
or restriction is not applicable to any Person, or
the properties or assets of any Person, other than
the Person, or the property or assets of the Person,
so acquired, provided that the Consolidated Cash Flow
of such Person shall not be taken into account in
determining whether such acquisition was permitted by
the terms hereof except to the extent that such
Consolidated Cash Flow would be permitted to be
dividended to the Company without the prior consent
or approval of any third party,
(e) customary non-assignment provisions in leases entered
into in the ordinary course of business,
(f) purchase money obligations for property acquired in
the ordinary course of business that impose
restrictions on the ability of any of the Company's
Subsidiaries to transfer the property so acquired to
the Company or any of its Subsidiaries,
(g) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements
governing the Indebtedness being refinanced, or
(h) the Credit Agreement and related documentation as the
same is in effect on the Issue Date and as amended or
replaced from time to time, provided that no such
amendment or replacement is more restrictive as to
Transfer Restrictions than the Credit Agreement and
related documentation as in effect on the Issue Date.
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Nothing contained in this Section 4.8 shall prevent the
Company or any Subsidiary of the Company from creating, incurring, assuming or
suffering to exist any Permitted Liens or entering into agreements in
connection therewith that impose restrictions on the transfer or disposition of
the property or assets subject to such Permitted Liens.
SECTION 4.9. Limitations on Incurrence of Indebtedness and
Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") after the Issue Date any
Indebtedness (including Acquired Debt) and the Company will not permit any of
its Subsidiaries (other than Beverly Funding) to issue any shares of preferred
stock; provided, however, that the Company and its Subsidiaries may incur
Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for
the Reference Period immediately preceding the date on which such additional
Indebtedness is incurred would have been at least 2.5 to 1, in each case
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred at the
beginning of such Reference Period. Indebtedness consisting of reimbursement
obligations in respect of a letter of credit shall be deemed to be incurred
when the letter of credit is first issued.
The foregoing provision shall not apply to:
(a) the incurrence by the Company or any of its
Subsidiaries of Senior Revolving Debt pursuant to the
Credit Agreement in an aggregate principal amount at
any time outstanding (with letters of credit being
deemed to have a principal amount equal to the
maximum potential reimbursement obligation of the
Company or any Subsidiary with respect thereto) not
to exceed an amount equal to $150 million less the
aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce
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the commitments with respect to such Indebtedness
pursuant to Sections 2.15 and 4.10 hereof after the
Issue Date;
(b) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Securities;
(c) the incurrence by the Company or any of its
Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or
refund, Indebtedness that was permitted by this
Indenture to be incurred (including, without
limitation, Existing Indebtedness);
(d) the incurrence by the Company or any of its
Subsidiaries of intercompany Indebtedness between or
among the Company and any of its Subsidiaries;
provided that in the case of such Indebtedness of the
Company, such obligations shall be unsecured;
(e) the incurrence by the Company or any of its
Subsidiaries of Hedging Obligations that are incurred
for the purpose of fixing or hedging interest rate or
currency risk with respect to any fixed or floating
rate Indebtedness that is permitted by the terms
hereof to be outstanding or any receivable or
liability the payment of which is determined by
reference to a foreign currency; provided that the
notional principal amount of any such Hedging
Obligation does not exceed the principal amount of
the Indebtedness or the amount of such receivable or
liability to which such Hedging Obligation relates;
(f) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by perfor-
mance bonds, warranty or contractual service
obligations, standby letters of credit or appeal
bonds, in each
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case to the extent incurred in the ordinary course of
business of the Company or such Subsidiary; and
(g) the incurrence by the Company or any of its
Subsidiaries of Indebtedness (in addition to
Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount at any
time outstanding not to exceed $100 million.
For purposes of determining any particular amount of
Indebtedness under this covenant, guarantees, Liens or obligations with respect
to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with this covenant, (i) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
permitted by the second paragraph of this covenant, the Company shall classify
such item of Indebtedness and only be required to include the amount and type
of such Indebtedness in one of the categories of permitted Indebtedness
described above and (ii) the outstanding principal amount on any date of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness on such date.
SECTION 4.10. Asset Sales.
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale, unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (as conclusively determined
by a resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Subsidiary is in the form of cash or Cash
Equivalents; provided that for purposes of this provision, (x) the amount of
(A) any liabilities (as shown on the most recent balance sheet of the Company
or such Subsidiary or in the notes thereto) of the Company or such Subsidiary
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(other than liabilities that are by their terms subordinated to the Securities
or the Guarantees) that are assumed by the transferee of any such assets and
(B) any securities or other obligations received by the Company or any such
Subsidiary from such transferee that are immediately converted by the Company
or such Subsidiary into cash or Cash Equivalents (or as to which the Company or
such Subsidiary has received at or prior to the consummation of the Asset Sale
a commitment (which may be subject to customary conditions) from a nationally
recognized investment, merchant or commercial bank to convert into cash or Cash
Equivalents within 90 days of the consummation of such Asset Sale and which are
thereafter actually converted into cash or Cash Equivalents within such 90-day
period) shall be deemed to be cash or Cash Equivalents (but shall not be deemed
to be Net Proceeds for purposes of the following provisions until reduced to
cash or Cash Equivalents) and (y) the fair market value of any Non-Cash
Consideration received by the Company or a Subsidiary in any Non-Qualified
Asset Sale shall be deemed to be cash to the extent that the aggregate fair
market value (as conclusively determined by resolution of the Board of
Directors set forth in any Officers' Certificate delivered to the Trustee) of
all Non-Cash Consideration (measured at the time received and without giving
effect to any subsequent changes in value) received by the Company or any of
its Subsidiaries since the Issue Date in all Non-Qualified Asset Sales does not
exceed 6% of the Company's Stockholders' Equity as of the date of such
consummation. Notwithstanding the foregoing, to the extent the Company or any
of its Subsidiaries receives Non-Cash Consideration as proceeds of an Asset
Sale, such Non-Cash Consideration shall be deemed to be Net Proceeds for
purposes of (and shall be applied in accordance with) the following provisions
when the Company or such Subsidiary receives cash or Cash Equivalents from a
sale, repayment, exchange, redemption or retirement of or extraordinary
dividend or return of capital on such Non-Cash Consideration.
The provisions of clauses (i) and (ii) of the immediately
preceding paragraph shall not apply to the Spinoff Transaction if, after giving
pro forma effect to such transaction, including the application by the Company
of the net proceeds, if any, of any such transaction, as if it had occurred at
the beginning of the Reference Period immediately preceding the date on which
such
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transaction occurs, (i) the Company would have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.9 of this Indenture, (ii)
the Company's Fixed Charge Coverage Ratio would not be reduced by 15% or more
from the Company's actual Fixed Charge Coverage Ratio for such Reference
Period, (iii) the Company's Debt to Consolidated Cash Flow Ratio as of the date
such transaction occurs would not be increased by 15% or more from the
Company's actual Debt to Consolidated Cash Flow Ratio as of such date, (iv) PCA
shall have satisfied in full all indebtedness of PCA and its Subsidiaries to
Beverly and its Subsidiaries and (v) no Default or Event of Default would
exist. If the Spinoff Transaction (including the Company's proposed
application of the net proceeds thereof, if any) satisfies the requirements of
the immediately preceding sentence, the Company shall be entitled to (A)
consummate the Spinoff Transaction and (B) use up to $100 million of the Net
Proceeds of such transaction to make Restricted Payments or for any other
purpose not prohibited by this Indenture; provided that (x) any Net Proceeds in
excess of $100 million shall be applied in accordance with the following
provisions and (y) all Non-Cash Consideration received by the Company or any
Subsidiary of the Company as a result of or in connection with the Spinoff
Transaction will be deemed to be Net Proceeds for purposes of (and shall be
applied in accordance with) the foregoing clause (B) and the following
provisions when the Company or such Subsidiary receives cash or Cash
Equivalents from a sale, repayment, exchange, redemption or retirement of or
extraordinary dividend or return of capital on such Non-Cash Consideration.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or such Subsidiary may apply such Net Proceeds (i) to
purchase one or more Nursing Facilities or Related Businesses and/or a
controlling interest in the Capital Stock of a Person owning one or more
Nursing Facilities and/or one or more Related Businesses, (ii) to make a
capital expenditure or to acquire other tangible assets, in each case, that are
used or useful in any business in which the Company is permitted to be engaged
pursuant to Section 4.15 hereof, (iii) to perma- nently reduce Indebtedness
(other than Subordinated Indebtedness) of the Company or its Subsidiaries, (iv)
to permanently reduce Senior Revolving Debt
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(and to correspondingly reduce commitments with respect thereto, except that up
to an aggregate of $20 million of Net Proceeds from Asset Sales may be applied
after the date hereof to reduce Senior Revolving Debt without a corresponding
reduction in commitments with respect thereto) or (v) if such Net Proceeds are
derived from the Spinoff Transaction, use up to $100 million of the Net
Proceeds of such transaction to make Restricted Payments or for any other
purpose not prohibited by this Indenture, in accordance with the second
sentence of the preceding paragraph. Pending the final application of any such
Net Proceeds, the Company or such Subsidiary may temporarily reduce Senior
Revolving Debt or otherwise invest such Net Proceeds in any manner that is not
prohibited by the terms hereof. Any Net Proceeds from Asset Sales that are not
so invested or applied shall be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $25 million, the Company shall
make an offer to all Holders of Securities and holders of any other
Indebtedness of the Company ranking on a parity with the Securities from time
to time outstanding with similar provisions requiring the Company to make an
offer to purchase or to redeem such Indebtedness with proceeds from any asset
sales, pro rata in proportion to the respective principal amounts of the
Securities and such other Indebtedness then outstanding (a "Senior Asset Sale
Offer") to purchase the maximum principal amount of Securities and such other
Indebtedness that may be purchased out of the Excess Proceeds, at an offer
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase (the "Purchase
Price"), in accordance with the procedures set forth in Section 2.15 hereof.
To the extent that the aggregate amount of Securities and such other
Indebtedness tendered pursuant to a Senior Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes not prohibited at the time by the provisions of this
Indenture. If the aggregate principal amount of Securities and such other
Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Securities and such other Indebtedness shall be purchased on a
pro rata basis. Upon completion of a Senior Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
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SECTION 4.11. Limitations on Transactions With Affiliates.
The Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of their
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction") unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Subsidiary than those that
could have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
was approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10 million, an opinion as to the fairness of such
Affiliate Transaction to the Company or such Subsidiary from a financial point
of view issued by an investment banking firm of national standing; provided
that (x) transactions or payments pursuant to any employment arrangements,
director or officer indemnification agreements or employee or director benefit
plans entered into by the Company or any of its Subsidiaries in the ordinary
course of business of the Company or such Subsidiary, (y) transactions between
or among the Company and/or its Subsidiaries and (z) Restricted Payments
permitted under Section 4.7 hereof, in each case, shall not be deemed to be
Affiliate Transactions.
SECTION 4.12. Limitations on Liens.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (except Permitted Liens) on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom unless all payments due hereunder and under the
Securities are secured on an
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equal and ratable basis with the Obligations so secured until such time as such
Obligations are no longer secured by a Lien.
SECTION 4.13. Change of Control.
Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, thereon to the date of
purchase (the "Change of Control Payment") on a date that is not more than 90
days after the occurrence of such Change of Control (the "Change of Control
Payment Date").
Within 45 days following any Change of Control, the Company
shall mail or cause to be mailed a notice of a Change of Control to each Holder
(at its last registered address with a copy to the Trustee and the Paying
Agent) offering to repurchase the Securities held by such Holder pursuant to
the procedures specified in such notice. The Change of Control Offer shall
remain open from the time of mailing until at least the close of business on
the third Business Day preceding the Change of Control Payment Date. The
notice, which shall govern the terms of the Change of Control Offer, shall
contain all instructions and materials necessary to enable the Holders to
tender Securities pursuant to the Change of Control Offer and shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.13 and that all Securities
tendered will be accepted for payment;
(2) the Change of Control Payment and the Change of
Control Payment Date, which date shall be no earlier
than 30 days from the date such notice is mailed;
(3) that any Security not tendered will continue to
accrue interest in accordance with the terms of this
Indenture;
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(4) that, unless the Company defaults in the payment of
the Change of Control Payment, all Securities
accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to any Change of Control Offer will be
required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Company, a
depositary, if appointed by the Company, or a Paying
Agent at the address specified in the notice prior to
the close of business on the Business Day next
preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent,
as the case may be, receives, not later than the
close of business on the third Business Day next
preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the
Security the Holder delivered for purchase, and a
statement that such Holder is withdrawing his
election to have such Security purchased;
(7) that Holders whose Securities are being purchased
only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the
Securities surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an
integral multiple thereof; and
(8) the circumstances and relevant facts regarding such
Change of Control and any other information that
would be material to a decision as to whether to
tender a Security pursuant to the Change of Control
Offer.
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On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered and not withdrawn pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Securities or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Securities so accepted
together with an Officers' Certificate stating the aggregate principal amount
of Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Securities so tendered the Change
of Control Payment for such Securities, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Security equal in principal amount to any unpurchased portion of the
Securities surrendered, if any; provided that each such new Security shall be
in a principal amount of $1,000 or an integral multiple thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Securities as a result of a Change of Control.
SECTION 4.14. Corporate Existence.
Subject to Section 4.13 and Article 5 hereof, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect (i) its corporate existence, and the corporate, partnership or
other existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of each
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company
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and its Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
SECTION 4.15. Line of Business.
The Company shall not, and shall not permit any of its
Subsidiaries to, engage to any material extent in any business other than the
ownership, operation and management of Nursing Facilities and Related
Businesses.
ARTICLE 5
SUCCESSORS
SECTION 5.1. Limitations on Mergers, Consolidations or Sales
of Assets.
The Company may not consolidate or merge with or into (whether
or not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(i) the Company is the surviving corporation or the
Person formed by or surviving any such
consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been
made is a corporation organized or existing under
the laws of the United States, any state thereof or
the District of Columbia;
(ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company)
or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition
shall have been made assumes all the Obligations of
the Company under this Indenture and the Securities
pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee;
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(iii) immediately after such transaction no Default or
Event of Default exists; and
(iv) the Company or the Person formed by or surviving
any such consolidation or merger (if other than the
Company), or to which such sale, assignment,
transfer, lease, conveyance or other disposition
shall have been made (A) shall have Consolidated
Net Worth immediately after the transaction equal
to or greater than the Consolidated Net Worth of
the Company immediately preceding the transaction
and (B) shall, at the time of such transaction and
after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the
Reference Period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.9 hereof.
The Company shall deliver to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate covering
clauses (i) through (iv) above and an Opinion of Counsel covering clauses (i)
and (ii) above, and each stating that the proposed transaction and such
supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
SECTION 5.2. Successor Corporation or Person Substituted.
Upon any consolidation or merger or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.1 hereof, the successor
corporation or Person formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition, the provisions of
this Indenture referring to the "Company" shall refer instead
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to the successor corporation or Person and not to the Company), and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation or Person had been named as the
Company, herein.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default.
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of
interest on the Securities;
(ii) default in payment when due of the principal of,
or premium, if any, on the Securities, at
maturity or otherwise;
(iii) failure by the Company or any Guarantor to comply
with the provisions of Section 4.10 or 4.13
hereof;
(iv) failure by the Company or any Guarantor for 30
days after notice to comply with the provisions
of Section 4.7 or 4.9 hereof;
(v) failure by the Company or any Guarantor for 60
days after notice to comply with any of its
agreements in this Indenture or the Securities;
(vi) any default that occurs under any mortgage,
indenture or instrument under which there may be
issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by
the Company or any of its Significant
Subsidiaries (or the payment of which is
guaranteed by the Company or any of its
Significant Subsidiaries), whether such
Indebtedness or guarantee exists on the
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date hereof or is created after the date hereof,
which default (a) constitutes a Payment Default
or (b) results in the acceleration of such
Indebtedness prior to its express maturity and,
in each case, the principal amount of any such
Indebtedness, together with the principal amount
of any other such Indebtedness under which there
has been a Payment Default or that has been so
accelerated, aggregates in excess of $20 million;
(vii) failure by the Company or any of its Significant
Subsidiaries to pay a final judgment or judgments
aggregating in excess of $20 million entered by a
court or courts of competent jurisdiction against
the Company or such Significant Subsidiaries,
which judgment or judgments are not paid,
discharged or stayed for a period of 60 days;
(viii) any Guarantee shall cease, for any reason not
permitted by this Indenture, to be in full force
and effect or any Guarantor, or any Person acting
on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Guarantee;
(ix) the Company or any Significant Subsidiary thereof
pursuant to or within the meaning of any
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case in which it
is the debtor,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its
property,
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(d) makes a general assignment for the benefit of
its creditors, or
(e) admits in writing its inability generally to
pay its debts as the same become due; and
(x) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Significant Subsidiary thereof in an in-
voluntary case in which it is the debtor,
(b) appoints a Custodian of the Company or any
Significant Subsidiary thereof or for all or
substantially all of the property of the
Company or any Significant Subsidiary
thereof, or
(c) orders the liquidation of the Company or any
Significant Subsidiary thereof, and the order
or decree remains unstayed and in effect for
60 consecutive days.
A Default under clause (iv) or (v) is not an Event of Default
until the Trustee notifies the Company in writing, or the Holders of at least
25% in aggregate principal amount of the then outstanding Securities notify the
Company and the Trustee in writing, of the Default and the Company does not
cure the Default within 30 days, with respect to a Default under clause (iv),
or 60 days, with respect to a Default under clause (v), after receipt of such
notice. The written notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default."
SECTION 6.2. Acceleration.
If any Event of Default occurs (other than an Event of Default
with respect to the Company specified in clause (ix) or (x) of Section 6.1
hereof) and is continuing, the Trustee by notice to the Company, or the Holders
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of at least 25% in aggregate principal amount of the then outstanding
Securities by written notice to the Company and the Trustee, may declare the
unpaid principal of, premium, if any, and accrued and unpaid interest on all
the Securities to be due and payable immediately. Upon such declaration the
principal, premium, if any, and interest shall be due and payable immediately.
If an Event of Default specified in clause (ix) or (x) of Section 6.1 hereof
occurs with respect to the Company such an amount shall ipso facto become and
be immediately due and payable without further action or notice on the part of
the Trustee or any Holder.
SECTION 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding by written notice to the Trustee may,
on behalf of the Holders of all of the Securities, waive any existing Default
or Event of Default and its consequences under this Indenture except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest on any Security. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
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SECTION 6.5. Control by Majority.
Holders of the Securities may not enforce this Indenture or
the Securities except as provided in this Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability. The Trustee may take any other action which it
deems proper which is not inconsistent with any such direction.
SECTION 6.6. Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or
the Securities only if:
(i) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in principal amount
of the then outstanding Securities make a
written request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request
within 60 days after receipt of the request and
the offer and, if requested, the provision of
indemnity; and
(v) during such 60-day period the Holders of a
majority in principal amount of the then
outstanding Securities do not give the Trustee
a direction inconsistent with the request.
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A Holder may not use this Indenture to prejudice the rights of another Holder
or to obtain a preference or priority over another Holder.
SECTION 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal, premium, if any, and
interest on the Security, on or after the respective due dates expressed in the
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
the Holder.
SECTION 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company or any
other obligor for the whole amount of principal, premium, if any, and interest
remaining unpaid on the Securities and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover amounts due the Trustee under Section 7.7 hereof, including the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized 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 (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in
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the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.7 hereof out of the estate in any
such proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of any and all distributions,
dividends, money, securities and other properties which the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.7, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the
Securities for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Securities for principal, premium, if any, and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section 6.10 upon five Business Days prior
notice to the Company.
SECTION 6.11. Undertaking for Costs.
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 or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 hereof, or a suit by
Holders of more than 10% in principal amount of the then outstanding
Securities.
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee.
(i) If an Event of Default 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 man would
exercise or use under the circumstances in the
conduct of his own affairs.
(ii) Except during the continuance of an Event of
Default known to the Trustee:
(a) the duties of the Trustee shall be
determined solely by the express
provisions of this Indenture or the TIA
and the Trustee need perform only those
duties that are specifically set forth in
this Indenture or the TIA and no others,
and no implied covenants or
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obligations shall be read into this
Indenture against the Trustee, and
(b) 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.
However, in the case of any such
certificates or opinions which by any
provisions hereof are required to be
furnished to the Trust- ee, the Trustee
shall examine the certificates and
opinions to determine whether or not they
conform to the requirements of this
Indenture.
(iii) The Trustee may not be relieved from liabilities
for its own negligent action, its own negligent
failure to act, or its own willful misconduct,
except that:
(a) this paragraph does not limit the effect
of paragraph (ii) of this Section;
(b) the Trustee shall not be liable for any
error of judgment made in good faith by a
Responsible Officer, unless it is proved
that the Trustee was negligent in ascer-
taining the pertinent facts; and
(c) the Trustee shall not be liable with
respect to any action it takes or omits
to take in good faith in accordance with
a direction received by it pursuant to
Sec- tion 6.5 hereof.
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(iv) Whether or not therein expressly so provided,
every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs
(i), (ii), and (iii) of this Section.
(v) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur
any liability. The Trustee may refuse to perform
any duty or exercise any right or power unless it
receives security and indemnity satisfactory to
it against any loss, liability or expense.
(vi) The Trustee shall not be liable for interest on
any money received by it except as the Trustee
may agree in writing with the Company. Absent
written instruction from the Company, the Trustee
shall not be required to invest any such money.
Money held in trust by the Trustee need not be
segregated from other funds except to the extent
required by law.
(vii) The Trustee shall not be charged with knowledge
of any Default or Event of Default with respect
to the Securities unless either (1) a Responsible
Officer shall have actual knowledge of such
Default or Event of Default or (2) written notice
of such Default or Event of Default shall have
been given to the Trustee by the Company, any
Guarantor or any other obligor on the Securities
or by any Holder of the Securities.
SECTION 7.2. Rights of Trustee.
(i) The Trustee may conclusively rely upon any
document believed by it to be genuine and to have
been signed or presented by the proper Person.
The Trustee need not investigate any fact or
matter stated in the document.
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(ii) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an
Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to
take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. The Trustee
may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection
from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith
and in reliance thereon.
(iii) The Trustee may act through its attorneys and
agents and shall not be responsible for the
misconduct or negligence of any agent appointed
with due care.
(iv) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it
believes to be authorized or within its rights or
powers conferred upon it by this Indenture. A
permissive right granted to the Trustee hereunder
shall not be deemed an obligation to act.
(v) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or
notice from the Company shall be sufficient if
signed by an Officer of the Company.
(vi) The Trustee shall not be charged with knowledge
of any Default or Event of Default with respect
to the Securities unless either (1) a Responsible
Officer shall have actual knowledge of such
Default or Event of Default or (2) written notice
of such Default or Event of Default shall have
been given to the Trustee by the Company, any
Guarantor
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or any other obligor on the Securities or by any
Holder of the Securities.
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, nor shall it be accountable for the Company's use of the proceeds
from the Securities or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, nor shall it be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee, nor shall it be responsible for any statement or recital herein or
any statement in the Securities or any other document in connection with the
sale of the Securities or pursuant to this Indenture other than its certificate
of authentication.
SECTION 7.5. Notice of Defaults.
The Company is required, upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders a notice of
the Default or Event of Default within 90 days after such Default or Event of
Default occurs. Except in the case of a Default or Event of Default in payment
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders.
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SECTION 7.6. Reports by Trustee to Holders.
Within 60 days after each December 31 beginning with the
December 31 following the Issue Date, the Trustee shall mail to the Holders a
brief report dated as of such reporting date that complies with TIA Section
313(a) (but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA Section 313(b). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Securities are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
rendered by it hereunder. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation
for its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities, damages, claims or expenses incurred by it arising out of
or in connection with the acceptance of its duties and the administration of
the trusts under this Indenture, except as set forth below. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of
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such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
In addition, the Trustee will not be under any obligation to
exercise any of its rights or powers under this Indenture at the request of any
Holder of Securities, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
The obligations of the Company under this Section 7.7 shall
survive the satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through its own
negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay principal
and interest on particular Securities. Such Lien shall survive the resignation
or removal of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(ix) or (x) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of a majority in principal amount of the then outstanding Securities
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
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(1) the Trustee fails to comply with Section 7.10
hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent
or an order for relief is entered with re- spect to
the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of at least 10% in principal amount of the then
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any Holder who has
been a Holder for at least six months fails to comply with Section 7.10 hereof,
such Holder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.7 hereof. Notwithstanding replacement of the
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Trustee pursuant to this Section 7.8, the Company's obligations under Section
7.7 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee or Agent by Merger, Etc.
If the Trustee or any Agent consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee or Agent.
SECTION 7.10. Eligibility; Disqualification.
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 thereof authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
federal or state authority and shall have a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. Preferential Collection of Claims Against
Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1. Defeasance and Discharge of This Indenture and
the Securities.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
with respect to the Securities, elect to have either Section 8.2 or 8.3
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hereof be applied to all outstanding Securities upon compliance with the
conditions set forth below in this Article 8.
SECTION 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company and the Guarantors shall be
deemed to have been discharged from their respective obligations with respect
to all outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.5
hereof and the other Sections of this Indenture referred to in clauses (i) and
(ii) of this Section 8.2, and to have satisfied all its other obligations under
such Securities and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Securities to receive solely from the trust fund described in Section 8.4
hereof, and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due, (ii) the Company's obligations with respect to such
Securities under Sections 2.4, 2.6, 2.7, 2.10 and 4.2 hereof, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder, including,
without limitation, the Trustee's rights under Section 7.7 hereof, and the
Company's obligations in connection therewith and (iv) this Article 8. Upon
Legal Defeasance as provided herein, the Guarantee of each Guarantor shall be
fully released and discharged and the Trustee shall promptly execute and
deliver to the Company any documents reasonably requested by the Company to
evidence or effect the foregoing. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof with respect to the
Securities.
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SECTION 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, the Company and the Guarantors shall be
released from their respective obligations under the covenants contained in
Sections 2.15, 4.3, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and
Article 5 hereof with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Securities shall not be deemed
outstanding for accounting purposes). For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of a reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Sections 6.1(iii) and 6.1(iv) hereof, but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby. In addition upon the Company's exercise under
Section 8.1 hereof of the option applicable to this Section 8.3, Sections
6.1(v) through 6.1(viii) hereof shall not constitute Events of Default.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.2 or Section 8.3 hereof to the outstanding Securities:
(i) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or
another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the
provisions of this Article 8 applicable to it) as
trust funds in trust for the
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purpose of making the following payments,
specifically pledged as security for, and
dedicated solely to, the benefit of the Holders
of such Securities, (a) cash in an amount, or (b)
U.S. Government Obligations which through the
scheduled payment of principal and interest in
respect thereof in accordance with their terms
will provide, not later than one day before the
due date of any payment, cash in an amount, or
(c) a combination thereof, in such amounts as
will be sufficient, in the opinion of a
nationally recognized firm of independent public
accountants expressed in a written certification
thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the
Paying Agent (or other qualifying trustee) to pay
and discharge the principal of, premium, if any,
and interest on such outstanding Securities on
the Maturity Date or on the applicable Redemption
Date, as the case may be, of such principal or
installment of principal, premium, if any, or
interest on the Securities, and the Holders of
the Securities must have a valid, perfected,
exclusive security interest in such trust;
provided that the Paying Agent shall have been
irrevocably instructed to apply such cash and the
proceeds of such U.S. Government Obligations to
said payments with respect to the Securities.
The Paying Agent shall promptly advise the
Trustee in writing of any cash or Securities
deposited pursuant to this Section 8.4.
(ii) In the case of an election under Section 8.2
hereof, the Company shall have delivered to the
Trustee an Opinion of Counsel in the United
States confirming that (a) the Company has
received from, or there has been published by,
the Internal Revenue Service a ruling or (b)
since the Issue Date, there has been a change in
the applicable federal income tax law, in either
case to the effect
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that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the
outstanding Securities will not recognize income,
gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be
subject to federal income tax on the same
amounts, in the same manner and at the same times
as would have been the case if such Legal
Defeasance had not occurred.
(iii) In the case of an election under Section 8.3
hereof, the Company shall have delivered to the
Trustee an Opinion of Counsel in the United
States confirming that the Holders of the
outstanding Securities will not recognize income,
gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be
subject to federal income tax on the same
amounts, in the same manner and at the same times
as would have been the case if such Covenant
Defeasance had not occurred.
(iv) No Default or Event of Default with respect to
the Securities shall have occurred and be
continuing on the date of such deposit (other
than a Default or Event of Default resulting from
the borrowing of funds to be applied to such
deposit) or, insofar as Section 6.1(ix) or 6.1(x)
hereof is concerned, at any time in the period
ending on the 91st day after the date of such
deposit (it being understood that this condition
shall not be deemed satisfied until the
expiration of such period, but in the case of
Covenant Defeasance, the covenants which are
defeased under Section 8.3 hereof will cease to
be in effect unless an Event of Default under
Section 6.1(ix) or Section 6.1(x) hereof occurs
during such period).
(v) Such Legal Defeasance or Covenant Defeasance
shall not result in a breach
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or violation of, or constitute a default under
any material agreement or instrument (other than
this Indenture) to which the Company or any of
its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound
(other than a breach, violation or default
resulting from the borrowing of funds to be
applied to such deposit).
(vi) The Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that after
the 91st day following the deposit, the trust
funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights
generally.
(vii) The Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit
made by the Company pursuant to its election
under Section 8.2 or 8.3 hereof was not made by
the Company with the intent of preferring the
Holders of the Securities over the other
creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding
creditors of the Company or others.
(viii) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of
Counsel in the United States, each stating that
all conditions precedent relating to either the
Legal Defeasance under Section 8.2 hereof or the
Covenant Defeasance under Section 8.3 hereof (as
the case may be) have been complied with as
contemplated by this Section 8.4.
SECTION 8.5. Deposited Cash and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all cash and U.S. Government
Obligations (including the proceeds
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thereof) deposited with the Paying Agent (or other qualifying trustee,
collectively for purposes of this Section 8.5, the "Paying Agent") pursuant to
Section 8.4 hereof in respect of the outstanding Securities shall be held in
trust and applied by the Paying Agent, in accordance with the provisions of
such Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as Paying Agent) as the Trustee
may determine, to the Holders of such Securities of all sums due and to become
due thereon in respect of principal, premium, if any, and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 8.4 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Securities.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee or the Paying Agent, as applicable, shall deliver or pay to the
Company from time to time upon the Company's request any cash or U.S.
Government Obligations held by it as provided in Section 8.4 hereof which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which
may be the opinion delivered under Section 8.4(i) hereof), are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6. Repayment to Company.
Any cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying
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Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and
The Wall Street Journal (national edition), 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 notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or
U.S. Government Obligations in accordance with Section 8.2 or 8.3 hereof, as
the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if
the Company makes any payment of principal of, premium, if any, or interest on
any Security following the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Security to receive such
payment from the cash and U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. Without Consent of Holders.
Notwithstanding Section 9.2 hereof, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture or the
Securities without the consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
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(ii) to provide for uncertificated Securities in
addition to or in place of certificated
Securities;
(iii) to provide for the assumption of the Company's
obligations to the Holders of the Securities in
the case of a merger, consolidation or sale of
assets pursuant to Article 5 hereof;
(iv) to provide for the assumption of any Guarantor's
obligations to the Holders of the Securities in
the case of a merger, consolidation or sale of
assets pursuant to Section 10.4 hereof;
(v) to provide for additional Guarantors of the
Securities;
(vi) to evidence the release of any Guarantor in
accordance with Article 10 hereof;
(vii) to make any change that would provide any
additional rights or benefits to the Holders of
the Securities or that does not adversely affect
the legal rights hereunder of any such Holder;
(viii) to comply with requirements of the Commission in
order to effect or maintain the qualification of
this Indenture under the TIA;
(ix) in any other case where a supplemental indenture
is required or permitted to be entered into
pursuant to the provisions of Article 10 hereof
without the consent of any Holder; or
(x) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with
respect to the Securities.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental indenture,
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and upon receipt by the Trustee of the documents described in Section 9.6
hereof, the Trustee shall join with the Company in the execution of any amended
or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture which affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2. With Consent of Holders.
Except as otherwise provided herein, this Indenture or the
Securities may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange
offer for such Securities), and any existing default or compliance with any
provision of this Indenture or the Securities may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for such Securities).
Upon the request of the Company, accompanied by a resolution
of its Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders as aforesaid, and
upon receipt by the Trustee of the documents described in Section 9.6 hereof,
the Trustee shall join with the Company and the Guarantors in the execution of
such amended or supplemental indenture unless such amended or supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to
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the Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture or waiver. Subject to Sections 6.4 and 6.7
hereof, the Holders of a majority in aggregate principal amount of the
Securities then outstanding may waive compliance in a particular instance by
the Company or any Guarantor with any provision of this Indenture or the
Securities. Without the consent of each Holder affected, however, an amendment
or waiver may not (with respect to any Security held by a non-consenting
Holder):
(i) reduce the principal amount of Securities whose
Holders must consent to an amendment, supplement
or waiver;
(ii) reduce the principal of or change the fixed
maturity of any Security;
(iii) reduce the rate of or change the time for payment
of interest on any Security;
(iv) waive a Default or Event of Default in the
payment of principal of, or premium, if any, or
interest, on the Securities (except a rescission
of acceleration of the Securities by the Holders
of at least a majority in aggregate principal
amount thereof and a waiver of the Payment
Default that resulted from such acceleration);
(v) make any Security payable in money other than
that stated in the Securities;
(vi) make any change in Section 6.4 or 6.7 hereof; or
(vii) make any change in this sentence of this Section
9.2.
SECTION 9.3. Compliance with TIA.
Every amendment to this Indenture or the Securities shall be
set forth in a supplemental indenture that complies with the TIA as then in
effect.
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SECTION 9.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. However, any such Holder or subsequent Holder may
revoke the consent as to its Security if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment waiver, or supplement becomes effective in accordance
with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record
date for determining which Holders must consent to such amendment, supplement
or waiver. If the Company fixes a record date, the record date shall be fixed
at (i) the later of 30 days prior to the first solicitation of such consent or
the date of the most recent list of Holders furnished to the Trustee prior to
such solicitation pursuant to Section 2.5 hereof or (ii) such other date as the
Company shall designate.
If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment or waiver or revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless such amendment, supplement or waiver makes a
change described in any of clauses (i) through (vii) of Section 9.2, in which
case, the amendment, supplement or waiver shall bind only each Holder of a
Security who has consented to it and every subsequent Holder of a Security or
portion of a Security that evidences the same indebtedness as the consenting
Holder's Security.
SECTION 9.5. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Security
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thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new
Security shall not affect the validity and effect of such amendment, supplement
or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplemental
indenture does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing or refusing to sign such amendment or supplemental indenture, the
Trustee shall be entitled to receive and, subject to Section 7.1, shall be
fully protected in relying upon, in addition to the documents required by
Section 11.4, an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
shall be valid and binding upon the Company in accordance with its terms.
Neither the Company nor any Guarantor may sign such amendment or supplemental
indenture until its Board of Directors approves it.
ARTICLE 10
GUARANTEE
SECTION 10.1. Guarantee.
In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the Guarantors
hereby irrevocably and unconditionally guarantees (the "Guarantee"), jointly
and severally, on a senior basis, to each Holder of a Security authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company under this Indenture or the
Securities, that, in accordance with the terms of this Indenture and the
Securities: (i) the principal and premium (if any) of and interest on the
Securities will be paid in full when due, whether at the
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Maturity Date or Interest Payment Date, by acceleration, call for redemption or
otherwise; (ii) the purchase price for all Securities properly and timely
tendered for acceptance in response to a Change of Control Offer or a Senior
Asset Sale Offer will be timely, or otherwise in accordance with the provisions
of this Indenture, paid in full; (iii) all other payment obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full; and (iv) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, they
will be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at the Maturity Date, as so extended, by
acceleration, call for redemption, upon a Change of Control Offer, upon a
Senior Asset Sale Offer or otherwise. Failing payment when due of any amount
so Guaranteed for whatever reason, each Guarantor shall be jointly and
severally obligated to pay the same before failure so to pay becomes an Event
of Default. If the Company or a Guarantor defaults in the payment of the
principal of, premium, if any, or interest on, the Securities when and as the
same shall become due, whether upon maturity, acceleration, call for
redemption, upon a Change of Control Offer, Asset Sale Offer or otherwise,
without the necessity of action by the Trustee or any Holder, each Guarantor
shall be required, jointly and severally, to promptly make such payment in
full.
Each Guarantor hereby agrees that its obligations with regard
to this Guarantee shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence
of any action to enforce the same, any delays in obtaining or realizing upon or
failures to obtain or realize upon collateral, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstances
that might otherwise constitute a legal or equitable discharge or defense of a
Guarantor (except as provided in Sections 10.4 and 10.5 hereof). Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company or right to require
the prior disposition of the assets of the Company to meet its obligations,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged (except to the extent released pursuant
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to Sections 10.4 or 10.5 hereof) except by complete performance of the
obligations contained in the Securities and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
trustee, or similar official acting in relation to either the Company or such
Guarantor, any amount paid by either the Company or such Guarantor to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect (except to the extent released
pursuant to Sections 10.4 or 10.5 hereof). Each Guarantor agrees that it will
not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby. Each Guarantor further agrees that, as between
such Guarantor, on the one hand, and the Holders and the Trustee, on the other
hand, (i) the maturity of the obligations guaranteed hereby may be accelerated
as provided in Article 6 hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Company of the obligations guaranteed hereby, and (ii)
in the event of any declaration of acceleration of those obligations as
provided in Article 6, those obligations (whether or not due and payable) will
forthwith become due and payable by each of the Guarantors for the purpose of
this Guarantee.
Each Guarantor and by its acceptance of a Security issued
hereunder each Holder hereby confirms that it is the intention of all such
parties that the guarantee by such Guarantor set forth in the first paragraph
of this Section 10.1 not constitute a fraudulent transfer or conveyance for
purpose of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under its Guarantee
set forth in the first paragraph of this Section 10.1 shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to the
following paragraph of this Section 10.1, result in the obligations of such
Guarantor
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under such Guarantee not constituting such a fraudulent transfer or conveyance.
Each Guarantor that makes any payment or distribution under
the first paragraph of this Section 10.1 shall be entitled to a contribution
from each other Guarantor equal to its Pro Rata Portion of such payment or
distribution. For purposes of the foregoing, the "Pro Rata Portion" of any
Guarantor means the percentage of the net assets of all Guarantors held by such
Guarantor, determined in accordance with GAAP.
It is the intention of each Guarantor and the Company that the
obligations of each Guarantor hereunder shall be joint and several and in, but
not in excess of, the maximum amount permitted by applicable law. Accordingly,
if the obligations in respect of the Guarantee would be annulled, avoided or
subordinated to the creditors of any Guarantor by a court of competent
jurisdiction in a proceeding actually pending before such court as a result of
a determination both that such Guarantee was made without fair consideration
and, immediately after giving effect thereto, such Guarantor was insolvent or
unable to pay its debts as they mature or left with an unreasonably small
capital, then the obligations of such Guarantor under such Guarantee shall be
reduced by such court if and to the extent such reduction would result in the
avoidance of such annulment, avoidance or subordination; provided, however,
that any reduction pursuant to this paragraph shall be made in the smallest
amount as is strictly necessary to reach such result. For purposes of this
paragraph, "fair consideration," "insolvency," "unable to pay its debts as they
mature," "unreasonably small capital," and the effective times of reductions,
if any, required by this paragraph shall be determined in accordance with
applicable law.
SECTION 10.2. Execution and Delivery of Guarantee.
Each Guarantor shall, by virtue of such Guarantor's execution
and delivery of this Indenture or such Guarantor's execution and delivery of an
indenture supplement pursuant to Section 10.3 hereof, be deemed to have signed
on each Security issued hereunder the notation of guarantee set forth on the
form of the Securities attached hereto as Exhibit A to the same extent as if
the signature of such Guarantor appeared on such Security.
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<PAGE> 97
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
guarantee set forth in Section 10.1 on behalf of each Guarantor. The notation
of a guaranty set forth on any Security shall be null and void and of no
further effect with respect to the guaranty of any Guarantor which, pursuant to
Section 10.4 or Section 10.5, is released from such Guarantee.
SECTION 10.3. Future Subsidiary Guarantors.
Upon (i) the acquisition by the Company or Guarantor of the
Capital Stock of any Person, if, as a result of such acquisition, such Person
becomes a Subsidiary of the Company or any Guarantor or (ii) the last day of
any fiscal quarter during which any Subsidiary of the Company that is not a
Guarantor as of such date and has not previously been released as a Guarantor
pursuant to Section 10.4 or Section 10.5 of this Indenture becomes a
Subsidiary, such Subsidiary (hereinafter any such Subsidiary, except any
Excluded Guarantee Subsidiary (as defined below), being called a "Future
Subsidiary Guarantor") shall unconditionally guarantee the obligations of the
Company with respect to payment and performance of the Securities and the other
obligations of the Company under this Indenture to the same extent that such
obligations are guaranteed by the other Guarantors pursuant to Section 10.1
hereof; and, within 60 days of the date of such occurrence, such Future
Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental
indenture, which shall be in a form satisfactory to the Trustee, making such
Future Subsidiary Guarantor a party to this Indenture; provided, however, that
the foregoing provisions shall not apply to (A) any Subsidiary referenced in
clause (i) or clause (ii) above that is prohibited by law or by the terms of
any agreement from making the guarantee set forth in Section 10.1 hereof (an
"Excluded Guarantee Subsidiary") (provided that such Subsidiary will become a
Future Subsidiary Guarantor as of the date such prohibition is removed or
lapses), or (B) a Subsidiary which would have been released from its guarantee,
by virtue of events set forth in Section 10.5 hereof, had such Subsidiary been
a Guarantor at the time such events occurred, or (C) a Subsidiary of any Person
which has been released as a Guarantor pursuant to Section 10.5 hereof, or (D)
Beverly Funding, Beverly Indemnity or any of their respective successors.
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SECTION 10.4. Guarantor May Consolidate, Etc. on Certain
Terms.
Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or
into the Company or any other Guarantor. Upon any such consolidation or
merger, the Guarantees (as set forth in Section 10.1 hereof) of the Guarantor
which is not the survivor of the merger or consolidation, and of any Subsidiary
of such Guarantor that is also a Guarantor, shall be released and shall no
longer have any force or effect.
Nothing contained in this Indenture shall prevent any sale or
conveyance of assets of any Guarantor (whether or not constituting all or
substantially all of the assets of such Guarantor) to any Person, provided that
the Company shall comply with the provisions of Sections 2.15 and 4.10 hereof,
and provided further that, in the event that all or substantially all of the
assets of a Guarantor are sold or conveyed, the Guarantees of such Guarantor
(as set forth in Section 10.1 hereof) shall be released and shall no longer
have any force or effect.
Except as provided in the first paragraph of Section 10.4 or
Section 10.5 hereof, each Guarantor shall not, directly or indirectly,
consolidate with or merge with or into another Person, unless (i) either (a)
the Guarantor is the continuing entity or (b) the resulting or surviving entity
is a corporation organized under the laws of the United States, any state
thereof or the District of Columbia and expressly assumes by supplemental
indenture all of the obligations of the Guarantor in connection with the
Securities and this Indenture; (ii) no Default or Event of Default would occur
as a consequence of (after giving effect, on a pro forma basis, to) such
transaction; and (iii) the Guaran- tor has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation or merger and if a supplemental indenture is required, such
supplemental indenture comply with this Indenture and that all conditions
precedent herein relating to such transaction have been satisfied.
Upon any consolidation or merger of the Guarantor in
accordance with Section 10.4 hereof, the successor corporation formed by such
consolidation or into which the Guarantor is merged shall succeed to, and be
substi-
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tuted for, and may exercise every right and power of, the Guarantor under this
Indenture with the same effect as if such successor corporation had been named
herein as the Guarantor, and when a successor corporation duly assumes all of
the obligations of the Guarantor pursuant hereto and pursuant to the
Securities, the Guarantor shall be released from such obligations.
SECTION 10.5. Release of Guarantors.
Without any further notice or action being required by any
Person, any Guarantor, and each Subsidiary of such Guarantor that is also a
Guarantor, shall be fully and conditionally released and discharged from all
obligations under its Guarantee and this Indenture upon the sale or disposition
(whether by merger, stock purchase, asset sale or otherwise) of a Guarantor (or
all of its assets) to an entity which is not a Subsidiary of the Company, or
upon the dissolution of any Guarantor, which sale, disposition or dissolution
is otherwise in compliance with this Indenture, such Guarantor shall be deemed
released from its obligations under its Guarantee of the Securities; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Guarantor under all of its guarantees of, and under all of
its pledges of assets or other security interests which secure any Indebtedness
of the Company shall also terminate upon such sale, disposition or dissolution.
Notwithstanding the foregoing, if upon consummation of the Spinoff Transaction,
PCA ceases to satisfy the conditions necessary to be a subsidiary of the
Company under the definition of "Subsidiary," PCA shall be deemed released from
its Guarantee of the Securities.
The releases and discharges set forth in the first paragraph
of this Section 10.5 shall be effective on the date of consummation thereof.
At the written request of the Company, the Trustee shall promptly execute and
deliver appropriate instruments in forms reasonably acceptable to the Company
evidencing and further implementing any releases and discharges pursuant to the
foregoing provisions. If the Company desires the instruments evidencing or
implementing any releases or discharges to be executed prior to the
effectiveness of such releases and discharges as set forth above, such
instruments may be made conditional upon the occurrence of the events necessary
to cause the effectiveness of such releases and discharges, as specified in the
first sentence of this Section 10.5.
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Notwithstanding the foregoing provisions of this Article 10,
(i) any Guarantor whose Guarantee would otherwise be released pursuant to the
provisions of this Section 10.5 may elect, by written notice to the Trustee, to
maintain such Guarantee in effect notwithstanding the event or events that
otherwise would cause the release of such Guarantee (which election to maintain
such Guarantee in effect may be conditional or for a limited period of time),
and (ii) any Subsidiary of the Company which is not a Guarantor may elect, by
written notice to the Trustee, to become a Guarantor (which election may be
conditional or for a limited period of time).
SECTION 10.6. Certain Bankruptcy Events.
Each Guarantor hereby covenants and agrees, to the fullest
extent that it may do so under applicable law, that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Guarantor shall not file (or join in any filing of), or otherwise
seek to participate in the filing of, any motion or request seeking to stay or
to prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under the
Bankruptcy Law or otherwise.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. TIA Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 11.2. Notices.
Any notice or communication to the Company or any Guarantor or
the Trustee is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, addressed
as follows:
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<PAGE> 101
If to the Company or to any Guarantor:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-0155
Telecopier No.: (501) 452-3760
Attention: Secretary
With, in the case of notices delivered in connection with
Section 6.1 hereof, a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
Telecopier No.: (213) 891-8763
Attention: Gary Olson
If to the Trustee:
Chemical Bank
Corporate Trust Department - 15th Floor
450 West 33rd Street
New York, New York 10001
Telecopier No.: (212) 946-7799
Attention: Vice President-Corporate Trustee
Administration
The Company or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
Unless otherwise set forth above, any notice or communication
to a Holder shall be mailed by first class mail, certified or registered,
return receipt requested, or by overnight air courier guaranteeing next day
delivery to its address shown on the register kept by the Registrar. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to
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<PAGE> 102
the extent required by the TIA. Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3. Communication by Holders With Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.5 hereof) stating
that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been
satisfied; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 11.5 hereof) stating
that, in the opinion of such counsel, all such
conditions precedent and covenants have been
satisfied.
SECTION 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
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<PAGE> 103
(1) a statement that the person making such certificate
or opinion has read such covenant or condi- tion;
(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 such person, he
has made such examination or investigation as is
necessary to enable him to express an informed
opinion as to whether or not such covenant or
condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been
satisfied; provided, however, that with respect to
matters of fact, an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public
officials.
SECTION 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 11.7. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 11.8. No Personal Liability of Directors, Officers,
Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of
the Company or of any Guarantor, as such, shall have any liability for any
obligations of the Company or of any Guarantor under the Securities, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Securities by accepting a
Security waives
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<PAGE> 104
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Securities.
SECTION 11.9. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
One signed copy is enough to prove this Indenture.
SECTION 11.10. Governing Law.
The internal law of the State of New York, shall govern and be
used to construe this Indenture and the Securities, without regard to the
conflict of laws provisions thereof.
SECTION 11.11. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.12. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.13. Severability.
In case any provision in this Indenture or in the Securities
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, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.
SECTION 11.14. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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<PAGE> 105
SECTION 11.15. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
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SIGNATURES
Executed this ___ day of February, 1996.
BEVERLY ENTERPRISES, INC.
By:
-----------------------------------
Name:
Title:
CHEMICAL BANK, as Trustee
By:
-----------------------------------
Name:
Title:
GUARANTORS LISTED ON SCHEDULE I
HERETO
By:
-----------------------------------
Name:
Title:
-----------------------------
of each Guarantor
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SCHEDULE I
Guarantors
A.B.C. Health Equipment Corp.
AdviNet, Inc.
AGI-Camelot, Inc.
AGI-McDonald County Health Care, Inc.
Alliance Health Services, Inc.
Alliance Home Health Care, Inc.
Amco Medical Service, Inc.
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.
American Transitional Hospitals -- Texas Medical
Center, Inc.
ATH -- Clear Lake, Inc.
ATH Columbus, Inc.
ATH Del Oro, Inc.
ATH Heights, Inc.
ATH Oklahoma City, Inc.
ATH Tucson, Inc.
Beverly Acquisition Corporation
Beverly Assisted Living, Inc.
Beverly Health and Rehabilitation Services, Inc.
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 -- 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 -- Louisiana, Inc.
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<PAGE> 108
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 -- North Carolina, Inc.
Beverly Enterprises -- North Dakota, Inc.
Beverly Enterprises -- Ohio, Inc.
Beverly Enterprises -- Oklahoma, Inc.
Beverly Enterprises -- Oregon, Inc.
Beverly Enterprises -- Pennsylvania, Inc.
Beverly Enterprises -- Rhode Island, Inc.
Beverly Enterprises -- South Carolina, 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 Japan Limited
Beverly Enterprises Medical Equipment Corporation
Beverly Enterprises Rehabilitation Corporation
Beverly Holdings I, Inc.
Beverly Manor Inc. of Hawaii
Beverly Real Estate Holdings, Inc.
Beverly REMIC Depositor, Inc.
Beverly Savana Cay Manor, Inc.
Brownstone Pharmacy, Inc.
Columbia-Valley Nursing Home, Inc.
Commercial Management, Inc.
Computran Systems, Inc.
Continental Care Centers of Council Bluffs, Inc.
DD Wholesale, Inc.
Dunnington Drug, Inc.
Dunnington Rx Services of Rhode Island, Inc.
Dunnington Rx Services of Massachusetts, Inc.
Forest City Building Ltd.
Hallmark Convalescent Homes, Inc.
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Healthcare Prescription Services, Inc.
Home Medical Systems, Inc.
Hospice Preferred Choice, Inc.
Hospital Facilities Corporation
Insta-Care Holdings, Inc.
Insta-Care Pharmacy Services Corporation
Insurance Software Packages, Inc.
Kenwood View Nursing Home, Inc.
Liberty Nursing Homes, Incorporated
Medical Arts Health Facility of Lawrenceville, Inc.
Medical Health Industries, Inc.
MedView Services, Incorporated
Moderncare of Lumberton, Inc.
Nebraska City S-C-H, Inc.
Nursing Home Operators, Inc.
Omni Med B, Inc.
Petersen Health Care, Inc.
Pharmacy Corporation of America
Pharmacy Corporation of America -- Massachusetts, Inc.
Pharmacy Dynamics Group, Inc.
Phymedsco, Inc.
Resource Opportunities, Inc.
Salem No. 1, Inc.
South Alabama Nursing Home, Inc.
South Dakota -- Beverly Enterprises, Inc.
Spectra Rehab Alliance, Inc.
Synergos, Inc.
Synergos -- North Hollywood, Inc.
Synergos -- Pleasant Hill, Inc.
Synergos -- Scottsdale, Inc.
Taylor County Health Facility, Inc.
TMD Disposition Company
Vantage Healthcare Corporation
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EXHIBIT A
(Face of Security)
9% Senior Note due 2006
CUSIP:
No. $___________
BEVERLY ENTERPRISES, INC. promises to pay to _________________
or its registered assigns, the principal sum of________________ Dollars on
February 15, 2006.
Interest Payment Dates: February 15 and August 15,
commencing August 15, 1996
Record Dates: February 1 and August 1
(whether or not a Business Day).
BEVERLY ENTERPRISES, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Dated: ___________, __
(SEAL)
Trustee's Certificate of Authentication:
This is one of the Securities referred
to in the within-mentioned Indenture:
CHEMICAL BANK, as Trustee
By:
-------------------------------
Authorized Officer
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<PAGE> 111
(Back of Security)
9% Senior Note Due 2006
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Beverly Enterprises, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Security at the rate and in the manner specified below.
The Company shall pay interest in cash on the principal amount
of this Security at the rate per annum of 9% until maturity. The Company shall
pay interest semi-annually in arrears on February 15 and August 15 of each
year, commencing August 15, 1996, to Holders of record on the immediately
preceding February 1, and August 1, respectively, or if any such date of
payment is not a Business Day on the next succeeding Business Day (each an
"Interest Payment Date").
Interest shall be computed on the basis of a 360-day year
comprised of twelve 30-day months. Interest shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of the original issuance of the Securities. To the extent lawful, the
Company shall pay interest on overdue principal at the rate of 1% per annum in
excess of the interest rate then applicable to the Securities; it shall pay
interest on overdue installments of interest (without regard to any applicable
grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered
Holders of Securities at the close of business on the record date next
preceding the Interest Payment Date, even if such Securities are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Holder hereof must surrender this Security to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. Principal, premium, if any, and interest shall be
payable at the office or agency of
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<PAGE> 112
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the Holder's registered address. Notwithstanding the foregoing, all
payments with respect to Securities, the Holders of which have given wire
transfer instructions to the Paying Agent on or before the relevant record
date, shall be made by wire transfer of immediately available funds to the
accounts specified by such Holders.
3. Paying Agent and Registrar. Initially, the Trustee shall
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without prior notice to any Holder. The Company and any of its
Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of February 1, 1996 (the "Indenture"), by and among the
Company, the Guarantors named therein and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb) (the "TIA"). The Securities are subject to all
such terms, and Holders are referred to the Indenture and the TIA for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities are
unsecured senior obligations of the Company. The Securities are limited to
$180,000,000 in aggregate principal amount.
5. Optional Redemption. The Securities may be
redeemed, in whole or in part, at any time on or after February 15, 2001, at
the option of the Company, at the Redemption Price (expressed as a percentage
of principal amount) if redeemed during the 12-month period commencing February
1 of the years set forth below, in each case (subject to the right of Holders
of record on a Record Date that is on or prior to such Redemption Date to
receive interest due on the Interest Payment Date to which such Record Date
relates), plus any accrued but unpaid interest to the Redemption Date. The
Securities may not be so redeemed prior to February 15, 2001.
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<PAGE> 113
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
commencing Redemption Price
-------------------- ----------------
<S> <C>
2001 104.5%
2002 103.0
2003 101.5
2004 and thereafter 100.0
</TABLE>
Any such redemption will comply with Article 3 of the
Indenture.
6. Mandatory Redemption. Subject to the Company's obligation
to make an offer to repurchase Securities under certain circumstances pursuant
to Sections 2.15, 4.10 and 4.13 of the Indenture (as described in paragraph 7
below), the Company shall have no mandatory redemption or sinking fund
obligations with respect to the Securities.
7. Repurchase at Option of Holder. (i) If there is a Change
of Control, the Company shall offer to repurchase on the Change of Control
Payment Date all outstanding Securities at 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the Change of
Control Payment Date. Holders that are subject to an offer to purchase shall
receive a Change of Control Offer from the Company prior to any related Change
of Control Payment Date and may elect to have such Securities purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
(ii) If the Company or a Subsidiary consummates an Asset
Sale, within 365 days after the receipt of any Net Proceeds from such Asset
Sale, the Company or such Subsidiary may apply such Net Proceeds (a) to
purchase one or more Nursing Facilities or Related Businesses and/or a
controlling interest in the Capital Stock of a Person owning one or more
Nursing Facilities and/or one or more Related Businesses, (b) to make a capital
expenditure or to acquire other tangible assets, in each case, that are used or
useful in any business in which the Company is permitted to be engaged pursuant
to Section 4.15 of the Indenture, (c) to permanently reduce Indebtedness (other
than Subordinated Indebtedness) of the Company or its Subsidiaries, (d) to
permanently reduce Senior Revolving Debt (and to correspondingly reduce
commitments with respect thereto, except that up to an aggregate of $20 million
of Net Proceeds from Asset Sales may be applied after the date of the Indenture
to reduce Senior Revolving Debt without a corresponding reduction in
commitments with respect thereto) or (e) if such Net Proceeds are derived from
the Spinoff Transaction, use up to $100
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<PAGE> 114
million of the Net Proceeds of such transaction to make Restricted Payments or
for any other purpose not prohibited by the Indenture, in accordance with the
second sentence of the second paragraph of Section 4.10 of the Indenture.
Pending the final application of any such Net Proceeds, the Company or such
Subsidiary may temporarily reduce Senior Revolving Debt or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any
Net Proceeds from any Asset Sale that are not so invested or applied shall be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $25 million, the Company shall make an offer to all Holders of
Securities and holders of any other Indebtedness of the Company ranking on a
parity with the Securities from time to time outstanding with similar
provisions requiring the Company to make an offer to purchase or to redeem such
Indebtedness with the proceeds from any Asset Sales, pro rata in proportion to
the respective principal amounts of the Securities and such other Indebtedness
then outstanding (a "Senior Asset Sale Offer") to purchase the maximum
principal amount of Securities and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the terms of the
Indenture. To the extent that the aggregate amount of Securities and such
other Indebtedness tendered pursuant to a Senior Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes not prohibited at the time under the Indenture. If
the aggregate principal amount of Securities and such other Indebtedness
surrendered by holders pursuant to a Senior Asset Sale Offer exceeds the amount
of Excess Proceeds, the Securities and such other Indebtedness shall be
purchased on a pro rata basis. Holders that are the subject of an offer to
purchase shall receive a Senior Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Securities purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
8. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons, and in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. Neither the Company nor the Registrar shall
be required to register the transfer of or exchange Securities for a period of
A-5
<PAGE> 115
15 days before a selection of Securities to be redeemed (except the unredeemed
portion of any Security being redeemed in part) or during the period between a
record date and the next succeeding Interest Payment Date.
9. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Security, the Trustee, any
Agent and the Company may deem and treat the Person in whose name this Security
is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue (provided that
defaulted interest shall be paid as set forth in Section 2.12 of the
Indenture), and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Security shall
be treated as its owner for all purposes.
10. Amendment, Supplement and Waivers. Except as provided in
the next two succeeding paragraphs, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Securities then outstanding (including consents
obtained in connection with a tender offer or exchange offer for Securities)
and any existing default or compliance with any provision of the Indenture or
the Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents
obtained in connection with a tender offer or exchange offer for Securities).
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Security held by a non-consenting Holder of
Securities): (i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver, (ii) reduce the principal of or
change the fixed maturity of any Security, (iii) reduce the rate of or change
the time for payment of interest on any Security, (iv) waive a Default or Event
of Default in the payment of principal of, or premium, if any, or interest on
the Securities (except a rescission of acceleration of the Securities by the
Holders of at least a majority in aggregate principal amount thereof and a
waiver of the Payment Default that resulted from such acceleration), (v) make
any Security payable in money other than that stated in the Securities, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Securities to receive payments of
principal of, or premium, if any, or
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<PAGE> 116
interest on the Securities, or (vii) make any change in the foregoing amendment
and waiver provisions.
Notwithstanding the foregoing, without the consent of any
Holder of Securities, the Company, the Guarantors and the Trustee may amend or
supplement the Indenture or the Securities to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Securities in addition to or in
place of certificated Securities, to provide for additional Guarantors of the
Securities or the release, in accordance with the Indenture, of any Guarantor,
to provide for the assumption of the Company's or any Guarantor's obligations
to Holders of the Securities in the case of a merger, consolidation or sale of
assets, to make any change that would provide any additional rights or benefits
to the Holders of the Securities or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements
of the Securities and Exchange Commission (the "Commission") in order to effect
or maintain the qualification of the Indenture under the TIA, to evidence and
provide for the acceptance of the appointment of a successor Trustee with
respect to the Securities, or in any other case, pursuant to the provisions of
the Indenture, where a supplemental indenture is required or permitted to be
entered into without the consent of any Holder of Securities.
11. Defaults and Remedies. Events of Default under the
Indenture include: (i) a default for 30 days in the payment when due of
interest on the Securities; (ii) a default in payment when due of the principal
of, or premium, if any, on the Securities, at maturity or otherwise; (iii) a
failure by the Company or any Guarantor to comply with the provisions described
under Section 4.10 or 4.13 of the Indenture; (iv) a failure by the Company or
any Guarantor for 30 days after notice to comply with the provisions of Section
4.7 or 4.9 of the Indenture; (v) a failure by the Company or any Guarantor for
60 days after notice to comply with any of its agreements in the Indenture or
the Securities; (vi) any default that occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Significant Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Significant Subsidiaries) whether such Indebtedness or guarantee
exists on the date of the Indenture, or is created after the date of the
Indenture, which default (a) constitutes a Payment Default or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment
A-7
<PAGE> 117
Default or that has been so accelerated, aggregates in excess of $20 million;
(vii) failure by the Company or any of its Significant Subsidiaries to pay a
final judgment or judgments aggregating in excess of $20 million entered by a
court or courts of competent jurisdiction against the Company or any of its
Significant Subsidiaries which such final judgment or judgments are not paid,
discharged or stayed for a period of 60 days; (viii) any Guarantee shall cease,
for any reason not permitted by the Indenture, to be in full force and effect
or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny
or disaffirm its obligations under its Guarantee; and (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities by written notice to the Company and the Trustee, may
declare all the Securities to be due and payable immediately (plus, in the case
of an Event of Default that is the result of willful actions (or inactions) by
or on behalf of the Company intended to avoid prohibitions on redemptions of
the Securities contained in the Indenture or the Securities, an amount of
premium applicable pursuant to the Indenture). Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, all outstanding Securities shall become
due and payable without further action or notice. Holders of the Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the then outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
the Securities notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in such Holders' interest.
The Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding by written notice to the Trustee may,
on behalf of the Holders of all of the Securities, waive any existing Default
or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Securities.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default
A-8
<PAGE> 118
or Event of Default, to deliver to the Trustee a statement specifying such
Default or Event of Default.
The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety, to the more complete
description thereof contained in the Indenture.
12. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to incur
additional Indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase Equity Interests or Subordinated Indebtedness, create
certain Liens, enter into certain transactions with Affiliates, sell assets of
the Company or its Subsidiaries, issue or sell Equity Interests of the
Company's Subsidiaries and enter into certain mergers and consolidations.
13. Notation of Guarantee. As set forth more fully in the
Indenture, the Persons constituting Guarantors from time to time, in accordance
with the provisions of the Indenture, unconditionally and jointly and severally
Guarantee, on a senior basis, in accordance with Section 10.1 of the Indenture,
to each Holder of Securities and to the Trustee and its successors and assigns,
that, in accordance with the terms of the Indenture and the Securities (i) the
principal of, premium, if any, and interest on the Security will be paid in
full when due, whether at the Maturity Date or Interest Payment Date, by
acceleration, call for redemption or otherwise; (ii) the purchase price for all
Securities properly and timely tendered for acceptance in response to a Change
of Control Offer or a Senior Asset Sale Offer will be timely, or otherwise in
accordance with the provisions of the Indenture, paid in full; (iii) all other
payment obligations of the Company to the Holders or the Trustee under the
Indenture or this Security will be promptly paid in full, all in accordance
with the terms of the Indenture and this Security; and (iv) in the case of any
extension of time of payment or renewal of this Security or any of such other
obligations, they will be paid in full when due or performed in accordance with
the terms of such extension or renewal, whether at the Maturity Date, as so
extended, by acceleration, call for redemption, upon a Change of Control Offer,
upon a Senior Asset Sale Offer or otherwise. Such Guarantees shall cease to
apply, and shall be null and void, with respect to any Guarantor who, pursuant
to Article 10 of the Indenture, is released from its Guarantees, or whose
Guarantees otherwise cease to be applicable pursuant to the terms of the
Indenture.
A-9
<PAGE> 119
14. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were not Trustee.
15. No Personal Liability of Directors, Officers, Employees
and Stockholders. No director, officer, employee, incorporator, stockholder or
other Affiliate of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or other Affiliate under the
Securities, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40-A
Fort Smith, Arkansas 72919-0155
Attention: Secretary
A-10
<PAGE> 120
ASSIGNMENT FORM
To assign this Security, fill in the form below: For value
received (I) or (we) hereby sell, assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and do hereby irrevocably constitute and appoint ______________________________
Attorney to transfer this Security on the books of the Company with full power
of substitution in the premises.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date:
---------------------------
Your Signature:
-------------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee*
___________________
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-11
<PAGE> 121
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.10 or Section 4.13 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.13
(Asset Sale) (Change of Control)
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
amount you elect to have purchased:
$
------------------------
Date:
--------------------
Your Signature:
-------------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee*
___________________
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-12
<PAGE> 1
EXHIBIT 10.6
October 4, 1994
BEVERLY
ENTERPRISES
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919
Dear Mr. Williams:
Congratulations on your designation as a 1994 participant under the Beverly
Enterprises Equity Incentive Plan (the "EIP"). The EIP is a part of Beverly
Enterprises, Inc.'s 1993 Long-Term Incentive Stock Plan (the "Plan") . This
Agreement provides a summary of your rights under the EIP and this "Agreement".
Pursuant to the EIP, "Phantom Units" are awarded to select participants. We
are pleased to advise you of the Phantom Units awarded to you for 1994, (the
"1994 Phantom Units") as well as other details concerning this award, as
follows:
Overview of Your Phantom Units
Number of 1994 Phantom Units Granted: 893
Initial Value of Each 1994 Phantom Unit: $ 14.00
Date of Grant: February 15, 1994
Vesting Date: February 14, 1998
The 1994 Phantom Units awarded to you have an initial per share dollar value as
indicated above. Each 1994 Phantom Unit represents the equivalent of one share
of the Company's common stock. The ultimate value of these 1994 Phantom Units
to you will depend on the value of such Phantom Units on your Vesting Date, as
described below. Your 1994 Phantom Units are nontransferable, other than by
will or by the laws of descent and distribution.
To be eligible to receive an award payment with respect to your 1994 Phantom
Units, you must be actively employed by the company on your Vesting Date.
Should you terminate employment as an eligible participant prior to your
scheduled Vesting Date due to death, total disability, retirement or
involuntary termination due to layoff or job elimination, ("involuntary
termination") you (or your beneficiary) will be eligible for a pro rata portion
of the award payment for your 1994 Phantom Units based on the number of months
of employment since the Grant Date divided by 48 months. In such a case, your
date of termination would be considered to be your "Vesting Date". If you
otherwise
BEVERLY ENTERPRISES, INC.
5111 Rogers Avenue, Suite 40A . Fort Smith, Arkansas 72919 . (501)452-6712
<PAGE> 2
terminate employment before your scheduled Vesting Date for any other reason,
you will forfeit your 1994 Phantom Units award payment.
In the event of a Change in Control of the Company as defined in the Plan,
prior to your Vesting Date, your 1994 Phantom Units will vest and be valued on
the effective date of the Change in Control.
If you become eligible to receive an award payment for your 1994 Phantom Units,
the value of your award payment will be determined by reference to the closing
price of the Company's common stock on your Vesting Date, or on the last
preceding business date on which shares were subject to trading if your Vesting
Date is not a business date. This value calculation is illustrated by the
following example:
Normal Vesting
Your 893 1994 Phantom Units will have a per share value on the Vesting
Date based on the closing price on the Vesting Date. Assume that on
your Vesting Date the closing price of the Company's common stock is
$15.25. In such case, the value of your 1994 Phantom Units would be
$13,618.25 ($15.25 X 893).
Early Vesting
In the event of your termination due to death, total disability,
retirement or involuntary termination 24 months from the Grant Date,
your award payment would be calculated by multiplying the closing
price of the Company's common stock on your termination date by your
893 1994 Phantom Units and then multiplying that result by the
fraction (24/48).
Any award payment you become eligible to receive on your 1994 Phantom Units
will be paid to you as soon as administratively practicable following your
Vesting Date. Award payments will be made in cash, shares of the company's
common stock, or a combination of cash and such shares, to be determined by the
company. All award payments under the EIP are unfunded and are unsecured
obligations of the Company.
The company intends to continue the EIP in the future; however, it has reserved
the right to amend or terminate the EIP at any time. Also, you should not
consider the award to the Phantom Units under the EIP to constitute a contract
of continuing employment.
The Plan document provides important details governing all
2
<PAGE> 3
awards under the Plan. The terms and provisions of the Plan document and the
Plan's administrative provisions are part of this Agreement and shall control
over any conflicting terms in this letter. You may obtain a copy of the Plan
by contacting Carol Johansen.
Please refer any questions you may have regarding your 1994 Phantom Units to
Christine Murray. Once again, congratulations on the award of your 1994
Phantom Units.
Sincerely,
David R. Banks,
Chairman of the Board, President
and Chief Executive Officer
Please acknowledge your agreement to participate in the EIP and this Agreement,
and to abide by the governing terms and provisions thereof, by signing the
following representation:
Agreement to Participate
By signing a copy of this Agreement and returning it to the company, I
acknowledge that I fully understand my rights under the EIP, as well as all of
the terms and conditions which may limit my eligibility to receive an award
payment with respect to the 1994 Phantom Units awarded to me under the EIP and
this Agreement. Without limiting the generality of the preceding sentence, I
understand that my right to receive an award payment with respect to the 1994
Phantom Units awarded to me under the EIP and this Agreement is conditioned
upon my continued employment with the Company.
Participant:
Social Security Number:
3
<PAGE> 1
EXHIBIT 10.7
FIELD(Name)
GRANT #FIELD(Grant #)
BEVERLY ENTERPRISES, INC.
PERFORMANCE SHARES AGREEMENT
ENTERED INTO UNDER THE AMENDED AND RESTATED BEVERLY
ENTERPRISES, INC. 1993 LONG-TERM INCENTIVE STOCK PLAN
Subject to the terms and conditions of the Company's Amended and
Restated 1993 Long- Term Incentive Stock Plan (the "Plan") and of this
Performance Shares Agreement (the "Agreement"), and contingent upon Participant
agreeing to be bound hereby and evidencing such by executing this Agreement and
returning an executed copy of this Agreement to Beverly Enterprises, Inc. (the
"Company"), the Compensation Committee of the Board of Directors (the
"Committee") does hereby grant Participant that number of shares (the "Shares")
of Common Stock set forth in Section 11.
TERMS AND CONDITIONS
The Company and Participant do hereby agree as follows:
1. Issuance of Shares. The Shares shall be issued in the name of
Participant as of February 9, 1996 but, until both the Service Condition and
the Performance Condition (as hereinafter defined) are satisfied, certificates
evidencing the Shares shall be held by the Secretary of the Company. Prior to
the Service Condition and the Performance Condition being satisfied, the Shares
shall be unvested and subject to forfeiture, as provided pursuant to Section 4.
Subject to section 4, upon the Service Condition and the Performance Condition
being satisfied, the Shares shall become fully vested and nonforfeitable and,
subject to the requirements of Section 5, if requested by the Participant,
certificates representing the Shares shall be delivered to the Participant,
free of any legends, other than any legend that the Company's General Counsel
shall determine is necessary or advisable to satisfy any law, securities
exchange rule, or other requirement or regulation that may be applicable.
2. Service Condition. The Service Condition shall be satisfied
upon the earliest to occur of the following events:
(A) Participant shall have remained employed by the Company or one
of its Subsidiaries or Affiliates through the applicable Vesting Date set forth
in Section 11 of this Agreement.
(B) Participant shall have ceased to be employed by the Company,
its Subsidiaries and Affiliates (as applicable) on account of circumstances, if
any, that at the time of such cessation of employment the Committee expressly
determines constitute satisfaction of the Service Condition; and
<PAGE> 2
(C) a Change in Control of the Company.
3. Performance Condition. The Performance Condition shall be
satisfied upon the earliest to occur of the following events:
(A) The closing price of the Company's Common Stock on the New
York Stock Exchange shall have been at least equal to the Target Price for five
(5) consecutive trading days on the New York Stock Exchange during the
Performance Period. Achievement of the Target Price for any Performance Period
shall be deemed to be achievement of the Target Price for any prior Performance
Periods. In addition, achievement of a Target Price related to any Performance
Period, prior to that Performance Period shall be deemed satisfaction of the
Performance Condition for that Performance Period.
(B) A Change in Control of the Company.
4. Forfeiture of Shares. Notwithstanding anything to the contrary
in this Agreement or otherwise, upon Participant's ceasing to be employed by
the Company, its Subsidiaries and Affiliates prior to, or under circumstances
not constituting, satisfaction of the Service Condition, Participant shall
immediately forfeit the Shares and they shall be canceled and returned to the
Company.
5. Taxes. The Participant acknowledges that the vesting of
Shares will give rise to income tax liability to the Participant unless the
Participant has made an election under Section 83 (b) of the Code and
previously paid the appropriate income taxes with respect to the Shares. The
Participant agrees that the Company may utilize any Shares to satisfy its
withholding obligations with respect to such income tax liability of the
Participant if other arrangements acceptable to the Company have not been made
by the Participant and that the Company may hold any Shares until it has been
satisfied that the conditions to its obtaining an appropriate deduction have
been met.
6. Voting Rights; Dividends. Unless and until the Shares are
forfeited pursuant to Section 4, the Participant shall have the right to vote
the Shares. Unless and until the Shares are forfeited pursuant to Section 4,
the Participant shall be entitled to any dividend or distribution with respect
to the Shares; provided, however that in the event any such dividend or
distribution is made in the form of Common Stock or other securities or
property or in the form of rights under which such are issuable, such Common
Stock, securities and/or property shall be subject to the same terms and
conditions, including forfeiture and nontransferability provisions, applicable
to the Shares, as set forth in this Agreement, and for purposes of this
Agreement the term "Shares" shall be deemed to include any such Common Stock,
securities and property.
7. No Assignment or Transfer. Except as may be provided in a
qualified domestic relations order as defined in the Internal Revenue Code
("Code"), prior to satisfaction of the Service Condition and the Performance
Condition, the Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, and any purported attempt to sell,
2
<PAGE> 3
transfer or otherwise alienate or hypothecate the Shares shall be null and
void. Except as may be provided in a qualified domestic relations order as
defined in the Code, all rights with respect to the Shares shall be exercisable
during the Participant's lifetime only by such Participant or his guardian or
legal representative.
8. Status of Shares; Applicability of Plan. The Shares shall be
deemed for all purposes to be Awards of Restricted Stock under and subject to
Article VII of the Plan and such further terms and conditions of the Plan
applicable to such form of Awards. The Shares shall be subject to such
provisions as the Company's General Counsel shall determine to be necessary or
advisable to satisfy any law, securities exchange rule, or other requirement or
regulation that may be applicable. Capitalized terms not defined herein shall
have the meaning set forth in the Plan.
9. Arbitration. Any claim, dispute or other matter in question
of any kind relating to, or arising under, this Agreement shall be settled by
binding arbitration held in Fort Smith, Arkansas and conducted under and in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association before a single arbitrator. Notice of demand for arbitration shall
be made in writing to the opposing party and to the American Arbitration
Association within a reasonable time after the claim, dispute or other matter
in question has arisen. In no event shall a demand for arbitration be made
after the date when the applicable statute of limitations would bar the
institution of a legal or equitable proceeding based on such claim, dispute or
other matter in question. Except as to any matter as to which this Agreement or
the Plan expressly provides that the determination or decision of the Committee
is final and binding, the decision of the arbitrator shall be final and may be
entered as a judgment and enforced in any court of competent jurisdiction. The
parties hereto hereby expressly waive any punitive, exemplary, consequential,
or special damages, and under no circumstances shall an award contain any
amount that in any way reflects any of such types of damages.
10. This Agreement. This Agreement shall be binding upon and
inure to the benefit of the Company and the Participant and their respective
heirs, beneficiaries, legal representatives, successors and assigns. The
captions and headings in this Agreement are provided for reference only and are
not to serve as a basis for interpretation or construction of this Agreement.
This Agreement (together with the Plan) constitutes the entire agreement
between the parties, supersedes any prior agreements, and may only be amended
by an instrument in writing signed by the patties hereto. No waiver of any
breach hereof shall be deemed to constitute a waiver of a future breach. This
Agreement shall be governed by the laws of the State of Delaware, unless
preempted by federal law. This Agreement and any amendment hereto may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11. Definitions. For purposes of this Agreement:
"Participant" shall mean FIELD(Name).
3
<PAGE> 4
"Performance Period" shall mean each of the calendar year beginning
January 1, 1996 and successive calendar years through the calendar year
beginning January 1, 2000.
"Shares" shall mean FIELD(Shares) shares of Common Stock.
"Target Price" shall mean, as to any Performance Period, the price per
share indicated in the Vesting Grid for such Performance Period.
"Vesting Date" shall mean, for any Performance Period, February 10 of
the following calendar year.
"Vesting Grid" shall mean the table below, setting for the Vesting
Date, Target Price and Vesting Percentage of each Performance Period.
"Vesting Percentage" shall mean, as of any Vesting Date, the
cumulative percentage of Shares, indicated in the Vesting Grid, that will vest
upon achievement of the Performance Condition and the Service Condition.
<TABLE>
<CAPTION>
Vesting Grid
Performance Period 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Vesting Date 2/10/97 2/10/98 2/10/99 2/10/00 2/10/01
Target Price $14 $16 1/8 $18 1/2 $21 3/8 $24 1/2
Vesting Percentage 10% 30% 50% 75% 100%
</TABLE>
12. Term. This Agreement will expire and terminate on December 31,
2001. Any remaining unvested Shares shall be cancelled.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have signed this Agreement to be
effective as of February 9, 1996.
PARTICIPANT:
FIELD(Name)
Social Security Number
BEVERLY ENTERPRISES, INC.
By:
---------------------------------
Chairman of the Board and
Chief Executive Officer
ATTEST:
By:
------------------------------------
Executive Vice President, General Counsel
and Secretary
(Seal)
5
<PAGE> 1
EXHIBIT 10.28
EMPLOYMENT CONTRACT
AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and David R. Banks (the
"Executive").
WHEREAS, the Company desires to assure itself of the management
services of the Executive by directly engaging the Executive as the Chairman
and Chief Executive Officer of the Company;
WHEREAS, the Executive currently serves as Chairman of the Company's
Board of Directors;
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 here in and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agrees as follows:
1. Definitions.
(a) "Base Salary" shall mean the Executive's regular
annual rate of base pay, as set forth in Paragraph 4(a), as of the
date in question.
(b) The "Benefit Multiplier" shall be equal to 1.0 except
that if Executive's Termination of Employment is pursuant to
Paragraphs 6(b) or 6(c) it shall be equal to 3.0.
(c) The Benefit Period" shall be the period of years
equal to the Benefit Multiplier which follows the Executive's
Termination of Employment.
(d) "Cause" shall mean the Executive's (i) conviction of
a crime involving moral turpitude or theft or embezzlement of property
from the Company or (ii) willful misconduct or willful failure
substantially to perform the duties of his position, but only if such
has continued after receipt of notice from the Company's Board of
Directors and such reasonable cure period as is set forth in such
notice.
(e) A "Change in 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
<PAGE> 2
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.
(f) The "Change in Control Date" shall mean the date
immediately prior to the effectiveness of the Change in Control.
(g) The "Committee" shall mean the Compensation Committee
of the Company's Board of Directors.
(h) The "Competitive Businesses" shall mean any of the
health care businesses in which the Company is engaged on the
execution date of this Agreement, except that ownership of nursing
homes or other medical facilities (as distinguished from the operation
of said facilities) shall not be deemed to be competitive businesses,
and the Executive's serving on the Board of Directors or as the
Chairman of such Board of Directors of Nationwide Health Properties,
Inc. or of Wellpoint Health Networks, Inc. is specifically excluded
from the definition of competitive businesses.
(i) The Executive shall have "Good Reason" to terminate
employment if: (i) the Executive is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Executive was a director
immediately prior to the Change in Control Date; (ii) the Executive's
duties, responsibilities or authority as an employee are materially
reduced or diminished from those in effect on the Change in Control
Date without the Executive's consent; (iii) the Executive's
compensation or benefits are reduced; (iv) the Company reduces the
potential earnings of the Executive under any performance-based bonus
or incentive plan of the Company in effect immediately prior to the
Change in Control Date; (v) the Company requires that the Executive's
employment be based other than at Fort Smith, Arkansas, without his
consent; (vi) any purchaser, assign, surviving corporation, or
successor of the Company or its business or assets (whether by
acquisition, merger, liquidation, consolidation, reorganization, sale
or transfer of assets or business, or otherwise) fails or refuses to
expressly assume in writing this Agreement and all of the duties and
obligations of the Company hereunder pursuant to Section 16 hereof; or
(vii) the Company breaches any of the provisions of this Agreement.
(j) "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).
(k) "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."
(l) "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.
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<PAGE> 3
2. Term. The initial term of this Agreement shall be for the
period commencing on December 8, 1995 (the "Effective Date") and ending on
December 7, 1998. 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. Position and Duties. During the Term, the Executive shall
serve, as an employee, as the Chairman of the Board of Directors and Chief
Executive Officer of the Company and shall have such duties, functions,
responsibilities and authority as are consistent with the Executive's position
as the senior executive officer in charge of the general management, business
and affairs of the Company.
4. Compensation and Related Matters.
(a) Annual Base Salary. The Executive shall receive a
Base Salary at a rate of $540,000 per annum through December 31, 1994
and thereafter at any such greater rate as is determined by the
Committee.
(b) Benefits. During the Term, the Executive shall be
entitled to all of the following and any other benefits and
prerequisites offered by the Company to executives generally:
(i) Participate in the Company's present and
future stock option, restricted stock, phantom stock and other
similar equity-based incentive plans, pursuant to their terms;
(ii) Participate in the Company's Employee Stock
Purchase Plan, pursuant to its terms;
(iii) Retain his interest in the Company's
terminated Deferred Compensation Plan pursuant to its terms
with the Executive's units 100% vested, locked in at the
Company's stock price on July 17, 1991, and credited with
interest (with quarterly compounding) at a rate to be
determined, from time to time, by the Committee;
(iv) Participate in the Company's Executive
Retirement Plan, pursuant to its terms;
(v) $600,000 of individual life insurance
coverage under the Company's Executive Life Insurance Plan,
which coverage shall be 70% vested as of the date hereof, and
shall vest an additional 10% on January 1, 1995 and each of
the next two annual anniversaries thereof so long as Executive
is employed by the Company on any of such dates;
(vi) $125,000 (or such greater amount as the
Company may make available to its senior executives generally)
of group term life insurance coverage;
(vii) $100,000 (or such greater amount as the
Company may make available to its senior executives generally)
of business travel accident insurance coverage when traveling
on Company business;
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<PAGE> 4
(viii) Participate in the Company's Medical Plan,
and Dental Plan, pursuant to their terms, except that the
premium cost for such shall be treated as a benefit under the
Company's Executive Medical Reimbursement Plan, described
below, (and therefore at the present time, there shall be no
payroll deduction as a condition of coverage in the Medical
Plan and Dental Plan);
(ix) Participate in the Company's Executive
Medical Reimbursement Plan (with a maximum benefit of $11,500
(or such greater amount as the Company may make available to
its senior executives generally), a portion of which shall be
deemed applied to the payment of premiums under the Company's
Medical Plan and Dental Plan as described above), pursuant to
its terms;
(x) Participate in the Company's group Long-Term
Disability Plan, at the maximum benefit level, pursuant to its
terms;
(xi) 4 weeks of paid vacation;
(xii) Participate in or receive benefits under any
other employee benefit plan or other arrangement made
available by the Company to any of its employees, subject to
and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement.
(c) Annual Bonus. As additional compensation for services
rendered, the Executive shall be eligible to receive an annual bonus
in cash pursuant to the Company's Annual Incentive Plan.
(d) Expenses. The Company shall promptly reimburse the
Executive for all reasonable travel and other business expenses
incurred by the Executive in the performance of his duties to the
Company hereunder.
5. Competition.
(a) Executive shall not, at any time during the period of
his employment with the Company, or, if his Termination of Employment
is for Cause or without Good Reason, during the two year period
following his Termination of Employment with the Company ("Non-Compete
Period"), without the prior written consent of the Board, directly or
indirectly engage in, or have any interest in, or manage or operate
any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security
holder, consultant or otherwise) that engages in any of the
Competitive Businesses in any State of the United States or any
foreign country in which the Company is then engaged in any of such
businesses; provided, however, that Executive shall be permitted to
acquire a stock interest in such a corporation provided such stock is
publicly traded and the stock so acquired is not more than one percent
of the outstanding shares of such corporation, and provided further,
that Executive may engage in business that is a non- competitive
supplier to the Company or that is a customer of Company products or
services.
(b) The Executive covenants that a breach of subparagraph
(a) above would immediately and irreparably harm the Company and that
a remedy at law would be inadequate to compensate the Company for its
losses by reason of such breach and therefore that the Company shall,
in addition to any other rights and remedies available under this
Agreement, at law or otherwise, be entitled to an injunction to be
issued by any court of competent jurisdiction enjoining and
restraining the Executive from committing any violation
4
<PAGE> 5
of subparagraph (a) above, and the Executive hereby consents to the
issuance of such injunction.
6. Eligibility for Severance Benefits. The Executive
shall be eligible for the benefits described in Paragraph 7 (the
"Severance Benefits") if:
(a) during the Term, the Executive has a
Termination of Employment initiated (i) by the Company without Cause
or (ii) by the Executive for Good Reason, and, in either case,
subsection (c) does not apply,
(b) during the Term there has been a Change in
Control and 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, or
(c) during the Term there has been a Change in
Control and during the two year period commencing on the Change in
Control Date the Executive has a Termination of Employment which is
initiated by the Company without Cause or by the Executive for Good
Reason.
7. Severance Benefit. Upon satisfaction of the
requirements set forth in Paragraph 6, and subject to Paragraphs 8 and 11, the
Executive shall be entitled to the following Severance Benefits:
(a) Cash Payment. The Executive shaH be entitled
to receive an amount of cash equal to the Benefit Multiplier times the
greater of
(i) the sum of the Executive's Base
Salary as in effect upon the Termination of Employment, and
the greater of
(A) the Executive's Target Bonus as
in effect upon the Termination of Employment or,
(B) the Executive's actual bonus
under the Company's "Annual Incentive Plan" for the
year prior to the year of the Executive's Termination
of Employment,
(ii) the sum of the Executive's Base
Salary as in effect on the Change in Control Date, and the
greater of
(A) the Executive's Target Bonus as
in effect upon the Change in Control Date or,
(B) the Executive's actual bonus
under the Company's "Annual Incentive Plan" for the
year prior to the Change in Control Date.
The payment shall be made in a single lump sum within ten days following the
Executive's Termination of Employment.
(b) Long-Term Incentive Award; Equity-Based
Compensation. The Executive's interest under all of the Company's
long-term incentive plans shall be fully
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<PAGE> 6
vested. Any and all (i) options to purchase Company stock and (ii)
restricted stock of the Company, owned by the Executive shall be fully
vested.
(C) Continuation of Benefits.
(i) For the Benefit Period, or for two (2) years,
whichever is longer, the Executive shall be treated as if he
had continued to be an executive employee for all purposes
under the Company's Medical Plan, Executive Medical
Reimbursement Plan and Dental Plan, as described in Paragraph
4(b). Following this period, the Executive shall be entitled
to receive continuation coverage under Part Six 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 fully vest and maintain in
force, at its own expense, for the remainder of the
Executive's life, the life insurance in effect under the
Company's Executive Life Insurance Plan (as described in
Paragraph 4(b)) as of the Change in Control Date or as of the
date of Termination of Employment, whichever is greater.
(d) Relocation Benefit; Office.
(i) If, within three years after the Executive's
Termination of Employment with the Company, the Executive
gives the Company written notice that he desires to relocate
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 such relocation.
(ii) For the lesser of the Benefit Period or the
date Executive commences such employment which provides an
office to Executive, the Company shall provide Executive with
first-class office space of not more than 800 square feet in a
city to be selected by the Executive and approved by the
Company (with such approval not to be unreasonably withheld).
(e) Executive Retirement Plan. For the year of the
Executive's Termination of Employment, the Company will make the
contribution to the Retirement Plan on behalf of the Executive 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 contributed to the Retirement Plan on behalf of
the Executive immediately upon the Executive's Termination of
Employment and any additional contribution required shall be paid as
soon as the amount is determined.
(f) Disability. For the Benefit Period, the Company shall
provide long-term disability insurance benefits coverage to Executive
equivalent to the coverage that the
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<PAGE> 7
Executive would have had had he remained employed under the Company's
Long-Term Disability Plan as described in Paragraph 4(b) 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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 7 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof, applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
8. Golden Parachute Gross-Up. If, in the written opinion of a Big
6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments under Paragraph 7 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 ("Code"),
then the Company will pay to the Executive an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (i) excise tax on the
payments under Paragraph 7, (ii) federal, state or local income tax on the
Gross- Up Payment, and (iii) excise tax on the Gross-Up Payment, to be equal to
the aggregate remuneration the Executive would have received under Section 7,
excluding such Gross-Up Payment (net of all federal, state and local excise and
income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment
provided for in this Paragraph shall be made within ten (10) days after the
termination of Executive's employment, provided however that if the amount of
the payment cannot be finally determined at the time, the Company shall pay to
Executive an estimate as determined in good faith by the Company of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the date of termination. Any dispute
concerning the application of this Paragraph shall be resolved pursuant to
Paragraph 10, and if Paragraph 11 applies, any reference in this Paragraph to
Paragraph 7 shall also be deemed to include a reference to Paragraph 11 as
well.
9. 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.
10. 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, using a single
arbitrator, 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 arbitrator shall have the
power to order specific performance, mandamus, or other appropriate legal or
equitable relief to enforce the provisions of this Agreement. The Company shall
pay all costs of the arbitration and all reasonable attorney's and accountant's
fees of the Executive in connection therewith.
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<PAGE> 8
11. Additional Payments Due to Dispute. Notwithstanding anything
to the contrary herein, and without limiting the Executive's rights at law or
in equity, if the Company fails or refuses to timely pay to the Executive the
benefits due under Paragraphs 7 and/or 8 hereof, then the benefits under
Paragraph 7(a) shall be increased and the benefits under Paragraphs 7(c)) 7(d),
and 7(f) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 8 shall be increased to take into account any increased
benefits under this Paragraph.
12. No Set-Off. There shall be no right of set-off or counterclaim
in respect of any claim, debt, or obligation against any payment to or benefit
for the Executive provided for in this Agreement.
13. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee dated July 18, 1995, a
copy of which Trust Agreement may be obtained from the Company or the Trustee.
15. Letter of Credit for Legal Fees. In order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides for a credit amount of $250,000 being made available to
the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.
16. Successors; Binding Agreement. (a) 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. The Company shall require any purchaser, assign,
surviving corporation or successor (whether direct or indirect, by purchase,
merger, consolidation, reorganization or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement shall be binding upon and inure to the benefit of the Company and any
purchaser, assign, surviving corporation or successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Company whether by
purchase, merger, consolidation, reorganization, transfer of all or
substantially all of the business or assets of the Company, or otherwise (and
such purchaser, assign, surviving corporation or successor shall
8
<PAGE> 9
thereafter be deemed the "Company" for the purposes of this Agreement), but
this Agreement shall not otherwise be assignable, transferable or delegable by
the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 16. Without
limiting the generality of the foregoing, the Executive's right to
receive payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntarily or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
17. 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 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 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.
18. 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.
19. 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.
20. 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
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<PAGE> 10
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.
21. 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, in a final, nonappealable order 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.
22. 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:
Robert W. Pommerville David R. Banks
Executive Vice President, 3421 Free Ferry Road
General Counsel and Secretary Fort Smith, AR 72903
By;
Christine Murray
Assistant Secretary
5111 Rogers Avenue, Suite 40A
Fort Smith, AR 72919
Attention: Secretary
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<PAGE> 1
EXHIBIT 10.29
EMPLOYMENT CONTRACT
AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and Boyd W. Hendrickson (the
"Executive").
WHEREAS, the Company desires to assure itself of the management
services of the Executive by directly engaging the Executive as the President
and Chief Operating Officer of the Company;
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 set forth in Paragraph 4(a), as of
the date in question.
(b) The "Benefit Multiplier" shall be equal to
1.0 except that if Executive's Termination of Employment is pursuant
to Paragraphs 6(b) or 6(c) it shall be equal to 3.0.
(c) The "Benefit Period" shall be the period of
years equal to the Benefit Multiplier which follows the Executive's
Termination of Employment.
(d) "Cause" shall mean the Executive's (i)
conviction of a crime involving moral turpitude or theft or
embezzlement of property from the Company or (ii) willful misconduct or
willful failure substantially to perform the duties of his position,
but only if such has continued after receipt of notice from the
Company's Board of Directors and such reasonable cure period as is set
forth in such notice.
(e) 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
<PAGE> 2
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.
(f) The "Change in Control Date" shall mean the
date immediately prior to the effectiveness of the Change in Control.
(g) The "Committee" shall mean the Compensation
Committee of the Company's Board of Directors.
(h) The "Competitive Businesses" shall mean any
of the health care businesses in which the Company is engaged on the
execution date of this Agreement.
(i) The Executive shall have "Good Reason" to
terminate employment if: (i) the Executive is not elected, reelected
or otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Executive was a director
immediately prior to the Change in Control Date (ii) the Executive's
duties, responsibilities or authority as an employee are materially
reduced or diminished from those in effect on the Change in Control
Date without the Executive's consent; (iii) the Executive's
compensation or benefits are reduced; or (iv) the Company reduces the
potential earnings of the Executive under any performance-based bonus
or incentive plan of the Company in effect immediately prior to the
Change in Control Date; (v) the Company requires that the Executive's
employment be based other than at Fort Smith, Arkansas, without his
consent; (vi) any purchaser, assign, surviving corporation, or
successor of the Company or its business or assets (whether by
acquisition, merger, liquidation, consolidation, reorganization, sale
or transfer of assets or business, or otherwise) fails or refuses to
expressly assume in writing this Agreement and all of the duties and
obligations of the Company hereunder pursuant to Section 16 hereof, or
(vii) the Company breaches any of the provisions of this Agreement.
(j) "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).
(k) "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."
(l) "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.
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2. Term. Initial term of this Agreement shall be for the
period commencing on December 8, 1995 (the "Effective Date") and ending on
December 7, 1996. 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 first anniversary of the
effective date of such notice).
3. Position and Duties. During the Term, the Executive
shall serve as an employee, as the President and Chief Operating Officer of the
Company and shall have such duties, functions, responsibilities and authority
as are consistent with the Executive's position as the senior executive officer
in charge of the general management, business and affairs of the Company.
Executive also currently serves on the Company's Board of Directors.
4. Compensation and Related Matters.
(a) Annual Base Salary. The Executive shall
receive a Base Salary at a rate of $450,000 per annum through December
31, 1995 and thereafter at any such greater rate as is determined by
the Committee.
(b) Benefits. During the Term, the Executive
shall be entitled to all of the following and any other benefits and
perquisites offered by the Company to executives generally:
(i) Participate in the Company's present
and future stock option, restricted stock, phantom stock and
other similar equity-based incentive plans, pursuant to their
terms;
(ii) Participate in the Company's
Employee Stock Purchase Plan, pursuant to its terms;
(iii) Participate in the Company's
Executive Retirement Plan, pursuant to its terms;
(iv) $500,000 of individual life
insurance coverage under the Company's Executive Life
Insurance Plan, which coverage shall be 0% vested as of the
date hereof, and shall vest 10% on his fiftieth birthday and
shall vest an additional 10% each year thereafter on his
birthday while the Executive is employed by the Company;
(v) $ 100,000 (or such greater amount as
the Company may make available to its senior executives
generally) of group term life insurance coverage;
(vi) $100,000 (or such greater amount as
the Company may make available to its senior executives
generally) of business travel accident insurance coverage when
traveling on Company business;
(vii) Participate in the Company's Medical
Plan, and Dental Plan, pursuant to their terms, except that
the premium cost for such shall be treated as a benefit under
the Company's Executive Medical Reimbursement Plan, described
below, (and
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therefore at the present time, there shall be no-payroll
deduction as a condition of coverage in the Medical Plan and
Dental Plan);
(viii) Participate in the Company's
Executive Medical Reimbursement Plan (with a maximum annual
benefit of $11,500 (or such greater amount as the Company may
make available to its senior executives generally), a portion
of which shall be deemed applied to the payment of premiums
under the Company's Medical Plan and Dental Plan as described
above), pursuant to its terms;
(ix) Participate in the Company's group
Long-Term Disability Plan, at the maximum benefit level,
pursuant to its terms;
(x) 4 weeks of paid vacation;
(xi) Participate in or receive benefits
under any other employee benefit plan or other arrangement
made available by the Company to any of its employees, subject
to and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement.
(c) Annual Bonus. As additional compensation for
services rendered, the Executive shall be eligible to receive an
annual bonus in cash pursuant to the Company's Annual Incentive Plan.
(d) Expenses. The Company shall promptly
reimburse the Executive for all reasonable travel and other business
expenses incurred by the Executive in the performance of his duties to
the Company hereunder.
(e) Reporting. The Executive shall report
directly to the Chief Executive Officer of the Company.
5. Competition.
(a) Executive shall not, at any time during the
period of his employment with the Company, or, if his Termination of
Employment is for Cause, if initiated by the Company, or without Good
Reason, if initiated by the Executive, during the one year period
following his Termination of Employment with the Company ("Non-Compete
Period"), without the prior written consent of the Board, directly or
indirectly engage in, or have any interest in, or manage or operate
any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security
holder, consultant or otherwise) that engages in any of the
Competitive Businesses in any State of the United States or any
foreign country in which the Company is then engaged in any of such
businesses; provided, however, that Executive shall be permitted to
acquire a stock interest in such a corporation provided such stock is
publicly traded and the stock so acquired is not more than one percent
of the outstanding shares of such corporation, and provided further,
that Executive may engage in a business that is a non-competitive
supplier to the Company or that is a customer of Company products or
services.
(b) The Executive covenants that a breach of
subparagraph (a) above would immediately and irreparably harm the
Company and that a remedy at law would be inadequate to
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<PAGE> 5
compensate the Company for its losses by reason of such breach and
therefore that the Company shall, in addition to any other rights and
remedies available under this Agreement, at law or otherwise, be
entitled to an injunction to be issued by any court of competent
jurisdiction enjoining and restraining the Executive from committing
any violation of subparagraph (a) above, and the Executive hereby
consents to the issuance of such injunction.
6. Eligibility for Severance Benefits. The Executive
shall be eligible for the benefits described in Paragraph 7 (the "Severance
Benefits") if:
(a) during the Term, the Executive has a
Termination of Employment initiated (i) by the Company without Cause
or (ii) by the Executive for Good Reason, and, in either case,
subsection (c) does not apply,
(b) during the Term there has been a Change in
Control and 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, or
(c) during the Term there has been a Change in
Control and during the two year period commencing on the Change in
Control Date the Executive has a Termination of Employment which is
initiated by the Company without Cause or by the Executive for Good
Reason.
7. Severance Benefit. Upon satisfaction of the
requirements set forth in Paragraph 6, and subject to Paragraphs 8 and 11, 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 the Benefit Multiplier times the
greater of
(i) the sum of the Executive's Base
Salary as in effect upon the Termination of Employment, and
the greater of
(A) the Executive's Target Bonus
as in effect upon the Termination of Employment or,
(B) the Executive's actual bonus
under the Company's "Annual Incentive Plan" for the
year prior to the year of the Executive's Termination
of Employment,
(ii) the sum of the Executive's Base
Salary as in effect on the Change in Control Date, and the
greater of
(A) the Executive's Target Bonus
as in effect upon the Change in Control Date or,
(B) the Executive's actual bonus
under the Company's "Annual Incentive Plan" for the
year prior to the Change in Control Date.
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The payment shall be made in a single lump sum within ten days
following the Executive's Termination of Employment.
(b) Long-Term Incentive Award; Equity-Based
Compensation. The Executive's interest under all of the Company's
long-term incentive plans shall be fully vested. Any and all (i)
options to purchase Company stock and (ii) restricted stock of the
Company, owned by the Executive shall be fully vested.
(c) Continuation of Benefits.
(i) For the Benefit Period, or for two
(2) years, whichever is longer, the Executive shall be treated
as if he had continued to be an executive employee for all
purposes under the Company's Medical Plan, Executive Medical
Reimbursement Plan and Dental Plan (as described in Paragraph
4(b). Following this period the Executive shall be entitled to
receive continuation coverage under Part Six 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 fully vest and
maintain in force, at its own expense, for the remainder of
the Executive's life, the life insurance in effect under the
Company's Executive Life Insurance Plan (as described in
Paragraph 4(b)) as of the Change in Control Date or as of the
date of Termination of Employment, whichever is greater.
(d) Relocation Benefit. If, within one year after
the Executive's Termination of Employment with the Company, the
Executive gives the Company written notice that he desires to relocate
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 such relocation.
(e) Executive Retirement Plan. For the year of
the Executive's Termination of Employment, the Company will make the
contribution to the Retirement Plan on behalf of the Executive 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 contributed to the Retirement Plan on behalf of
the Executive immediately upon the Executive's Termination of
Employment and any additional contribution required shall be paid as
soon as the amount is determined.
(f) Disability. For the Benefit Period, the
Company shall provide long-term disability insurance benefits coverage
to Executive equivalent to the coverage that the Executive would have
had had he remained employed under the Company's Long-Term Disability
Plan as described in Paragraph 4(b) 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
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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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 7 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof, applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
8. Golden Parachute Gross-Up. If, in the written opinion
of a Big 6 accounting firm engaged by either the Company or the Executive for
this purpose (at the Company's expense), or if so alleged by the Internal
Revenue Service, the aggregate of the benefit payments under Paragraph 7 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
("Code"), then the Company will pay to the Executive an additional amount in
cash (the "Gross-Up Payment") equal to the amount necessary to cause the net
amount retained by the Executive, after deduction of any (i) excise tax on the
payments under Paragraph 7, (ii) federal, state or local income tax on the
Gross-Up Payment, and (iii) excise tax on the Gross-Up Payment, to be equal to
the aggregate remuneration the Executive would have received under Section 7,
excluding such Gross-Up Payment (net of all federal, state and local excise and
income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment
provided for in this Paragraph shall be made within ten (10) days after the
termination of Executive's employment, provided however that if the amount of
the payment cannot be finally determined at the time, the Company shall pay to
Executive an estimate as determined in good faith by the Company of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the date of termination. Any dispute
concerning the application of this Paragraph shall be resolved pursuant to
Paragraph 10, and if Paragraph 11 applies, any reference in this Paragraph to
Paragraph 7 shall also be deemed to include a reference to Paragraph 11 as
well.
9. 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.
10. 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, using a
single arbitrator, 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 arbitrator shall
have the power to order specific performance, mandamus, or other appropriate
legal or equitable relief to enforce the provisions of this Agreement. The
Company shall pay all costs of the arbitration and all reasonable attorney's
and accountant's fees of the Executive in connection therewith.
11. Additional Payments Due to Dispute. Notwithstanding
anything to the contrary herein, and without limiting the Executive's rights at
law or in equity, if the Company fails or refuses to
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timely pay to the Executive the benefits due under Paragraphs 7 and/or 8
hereof, then the benefits under Paragraph 7(a) shall be increased and the
benefits under Paragraphs 7(c), 7(d), and 7(f) shall each be continued by one
additional day for each day of any such failure or refusal of the Company to
pay. in addition, any Gross-Up Payment due under Paragraph 8 shall be increased
to take into account any increased benefits under this Paragraph.
12. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment
to or benefit for the Executive provided for in this Agreement.
13. No Mitigation Obligation. The parties hereto
expressly agree that the payment of the benefits by the Company to the
Executive in accordance with the terms of this Agreement will be liquidated
damages, and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise.
14. Trust. Any payments or installments that may be
required to be made to Executive under this Agreement shall be funded
immediately prior to any Change of Control Date (or, if earlier, within ten
(10) days after any Termination of Employment) by a contribution by the Company
of the necessary amount of cash, as determined by independent actuaries
acceptable to both Executive and the Company, to the irrevocable grantor trust
created for such purpose by the Company, with Chemical Bank as Trustee dated
July 18, 1995, a copy of which Trust Agreement may be obtained from the Company
or the Trustee.
15. Letter of Credit for Legal Fees. In order to ensure
the benefits intended to be provided to the Executive hereunder, immediately
prior to any Change of Control Date the Company shall establish and hereby
agrees to maintain throughout the remaining Term an irrevocable standby Letter
of Credit in favor of the Executive and each other person who is named an
Executive under similar agreements, drawn on a bank selected by the Company
(the "Letter of Credit") which provides for a credit amount of $250,000 being
made available to the Executive against presentation at any time and from time
to time of his clean sight drafts, accompanied by statements of his counsel for
fees and expenses, in an aggregate amount not to exceed $250,000, unless a
larger amount is authorized by either the Chief Executive Officer, General
Counsel, Chief Financial Officer, or a Senior Vice President of the Company.
16. Successors; Binding Agreement. (a) 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. The Company shall require
any purchaser, assign, surviving corporation or successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and any purchaser, assign, surviving corporation or successor to the
Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Company whether by purchase, merger, consolidation, reorganization, transfer of
all or substantially all of the business or assets of the Company, or otherwise
(and such purchaser, assign, surviving corporation or successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but
this Agreement shall not otherwise be assignable, transferable or delegable by
the Company.
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(b) This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees and/or legatees.
(c) This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other,
assign, transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in this Section 16.
Without limiting the generality of the foregoing, the Executive's
right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest or otherwise, or otherwise subject to anticipation,
alienation, sale, encumbrance, charge, hypothecation, or set-off in
respect of any claim, debt, or obligation, or to execution,
attachment, levy or similar process, or assignment by operation of
law, other than by a transfer by his will or by the laws of descent
and distribution. Any attempt, voluntarily or involuntarily, to effect
any action prohibited by this Paragraph shall be null, void, and of no
effect.
17. 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 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 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.
18. 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.
19. 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.
20. 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.
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21. 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, in a final, nonappealable order 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.
22. 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 Boyd W. Hendrickson
Chairman and Chief Executive Officer 3816 Spring Mountain Road
Fort Smith, AR 72903
By: ------------------------------------
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40A
Fort Smith, AR 72919
Attention: Secretary
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EXHIBIT 10.30
AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and Robert D. Woltil (the
"Executive").
WHEREAS, the Company desires to assure itself of the management
services of the Executive by directly engaging the Executive as the Executive
Vice President of the Company;
WHEREAS, the Company further desires the services of the Executive by
directly engaging the Executive as the President and Chief Executive Officer of
Pharmacy Corporation of America ("PCA");
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 set forth in Paragraph 4(a), as of the
date in question.
(b) The "Benefit Multiplier" shall be equal to 1.0 except
that if Executive's Termination of Employment is pursuant to
Paragraphs 6(b) or 6(c) it shall be equal to 3.0.
(c) The "Benefit Period" shall be the period of years
equal to the Benefit Multiplier which follows the Executive's
Termination of Employment.
(d) "Cause" shall mean the Executive's (i) conviction of
a crime involving moral turpitude or theft or embezzlement of property
from the Company or (ii) willful misconduct or willful failure
substantially to perform the duties of his position, but only if such
has continued after receipt of notice from the Company's Board of
Directors and such reasonable cure period as is set forth in such
notice.
(e) 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
<PAGE> 2
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, or (iv) the Company shall sell to any other Person 50% or
more of the outstanding capital stock of PCA or 50% or more of the
assets or earning power of PCA, except a the sale of PCA by the
Company is a sale to the general public in an initial public offering
or a series of public offerings, or b the Company declares dividends
to the Company shareholders consisting of all or a substantial portion
of the outstanding capital stock of PCA.
(f) The "Change in Control Date" shall mean the date
immediately prior to the effectiveness of the Change in Control.
(g) The "Committee" shall mean the Compensation Committee
of the Company's Board of Directors.
(h) The "Competitive Businesses" shall mean any of the
health care businesses in which the Company is engaged on the
execution date of this Agreement.
(i) The Executive shall have "Good Reason" to terminate
employment if: (i) the Executive is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date; (ii) the Executive's duties, responsibilities or authority as an
employee are materially reduced or diminished from those in effect on
the Change in Control Date without the Executive's consent; (iii) the
Executive's compensation or benefits are reduced; (iv) the Company
reduces the potential earnings of the Executive under any
performance-based bonus or incentive plan of the Company in effect
immediately prior to the Change in Control Date; (v) the Company
requires that the Executive's employment be based other than at
Longmont, Colorado or Tampa, Florida, without his consent; (vi) any
purchaser, assign, surviving corporation, or successor of the Company
or its business or assets (whether by acquisition, merger,
liquidation, consolidation, reorganization, sale or transfer of assets
or business, or otherwise) fails or refuses to expressly assume in
writing this Agreement and all of the duties and obligations of the
Company hereunder pursuant to Section 16 hereof; or (vii) the Company
breaches any of the provisions of this Agreement.
(i) "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).
(j) "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."
(k) "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
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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 December 8, 1995 (the "Effective Date") and (i) ending on
December 7, 1996, or (ii) upon the sale of the outstanding stock of PCA to the
general public in an initial public offering or series of public offerings, or
(iii) the Company declares dividends to the Company shareholders consisting of
all or a substantial portion of the outstanding capital stock of PCA, whichever
first occurs. 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 first anniversary of the
effective date of such notice). It is contemplated by the Company that if this
Agreement is terminated as a result of the occurrence of (ii) or (iii) herein
that a new Agreement incorporating all of the benefits which are developed for
PCA will be entered into between PCA and the Executive immediately prior to or
concurrent with the said transfer of shares.
3. Position and Duties. During the Term, the Executive shall
serve as an employee, as Executive Vice President of the Company and as the
President and Chief Executive Officer of PCA and shall have such duties,
functions, responsibilities and authority as are consistent with the
Executive's position as the senior executive officer in charge of the general
management, business and affairs of PCA.
4. Compensation and Related Matters.
(a) Annual Base Salary. The Executive shall receive a
Base Salary at a rate of $307,500 per annum through December 31, 1995
and thereafter at any such greater rate as is determined by the
Committee.
(b) Benefits. During the Term, the Executive shall be
entitled to all of the following and any other benefits and
perquisites offered by the Company to executives generally:
(i) Participate in the Company's present and
future stock option, restricted stock, phantom stock and other
similar equity-based incentive plans, pursuant to their terms;
(ii) Participate in the Company's Employee Stock
Purchase Plan, pursuant to its terms;
(iii) Participate in the Company's Executive
Retirement Plan, pursuant to its terms;
(iv) $300,000 of individual life insurance coverage
under the Company's Executive Life Insurance Plan, which
coverage shall be 0% vested as of the date hereof, and shall
vest 10% on his fiftieth birthday and shall vest an additional
10% each year thereafter on his birthday while the Executive
is employed by the Company;
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(v) $ 100,000 (or such greater amount as the
Company may make available to its senior executives generally)
of group term life insurance coverage;
(vi) $100,000 (or such greater amount as the
Company may make available to its senior executives generally)
of business travel accident insurance coverage when traveling
on Company business;
(vii) Participate in the Company's Medical Plan, and
Dental Plan, pursuant to their terms, except that the premium
cost for such shall be treated as a benefit under the
Company's Executive Medical Reimbursement Plan, described
below, (and therefore at the present time, there shall be no
payroll deduction as a condition of coverage in the Medical
Plan and Dental Plan);
(viii) Participate in the Company's Executive
Medical Reimbursement Plan (with a maximum annual benefit of
$11,500 (or such greater amount as the Company may make
available to its senior executives generally), a portion of
which shall be deemed applied to the payment of premiums under
the Company's Medical Plan and Dental Plan as described
above), pursuant to its terms;
(ix) Participate in the Company's group Long-Term
Disability Plan, at the maximum benefit level, pursuant to its
terms;
(x) 4 weeks of paid vacation;
(xi) Participate in or receive benefits under any
other employee benefit plan or other arrangement made
available by the Company to any of its employees, subject to
and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement.
(c) Annual Bonus. As additional compensation for services
rendered, the Executive shall be eligible to receive an annual bonus
in cash pursuant to the Company's Annual Incentive Plan.
(d) Expenses. The Company shall promptly reimburse the
Executive for all reasonable travel and other business expenses
incurred by the Executive in the performance of his duties to the
Company hereunder.
(e) Reporting. The Executive shall report directly to the
President and Chief Operating Officer of the Company.
5. Competition.
(a) Executive shall not, at any time during the period of
his employment with the Company, or, if his Termination of Employment
is for Cause, if initiated by the Company, or without Good Reason, if
initiated by the Executive, during the one year period following his
Termination of Employment with the Company ("Non-Compete Period"),
without the prior written consent of the Board, directly or indirectly
engage in, or have any interest in, or manage or operate any person,
firm, corporation, partnership or business (whether as director,
officer, employee, agent,
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representative, partner, security holder, consultant or otherwise)
that engages in any of the Competitive Businesses in any State of the
United States or any foreign country in which the Company is then
engaged in any of such businesses; provided, however, that Executive
shall be permitted to acquire a stock interest in such a corporation
provided such stock is publicly traded and the stock so acquired is
not more than one percent of the outstanding shares of such
corporation, and provided further, that Executive may engage in a
business that is a non-competitive supplier to the Company or that is
a customer of Company products or services.
(b) The Executive covenants that a breach of subparagraph
(a) above would immediately and irreparably harm the Company and that
a remedy at law would be inadequate to compensate the Company for its
losses by reason of such breach and therefore that the Company shall,
in addition to any other rights and remedies available under this
Agreement, at law or otherwise, be entitled to an injunction to be
issued by any court of competent jurisdiction enjoining and
restraining the Executive from committing any violation of
subparagraph (a) above, and the Executive hereby consents to the
issuance of such injunction.
6. Eligibility for Severance Benefits. The Executive shall be
eligible for tile benefits described in Paragraph 7 (the "Severance Benefits")
if:
(a) during the Term, the Executive has a Termination of
Employment initiated (i) by the Company without Cause or (ii) by the
Executive for Good Reason, and, in either case, subsection (c) does
not apply,
(b) during the Term there has been a Change in Control
and 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, or
(c) during the Term there has been a Change in Control
and during the two year period commencing on the Change in Control
Date the Executive has a Termination of Employment which is initiated
by the Company without Cause or by the Executive for Good Reason.
7. Severance Benefit. Upon satisfaction of the requirements set
forth in Paragraph 6, and subject to Paragraphs 8 and 11, 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 the Benefit Multiplier times the
greater of
(i) the sum of the Executive's Base Salary as in
effect upon the Termination of Employment, and the greater of
(A) the Executive's Target Bonus as in
effect upon the Termination of Employment or,
(B) the Executive's actual bonus under
the Company's "Annual Incentive Plan" for the year
prior to the year of the Executive's Termination of
Employment,
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(ii) the sum of the Executive's Base Salary as in
effect on the Change in Control Date, and the greater of
(A) the Executive's Target Bonus as in
effect upon the Change in Control Date or,
(B) the Executive's actual bonus under
the Company's "Annual Incentive Plan" for the year
prior to the Change in Control Date.
The payment shall be made in a single lump sum within ten days
following the Executive's Termination of Employment.
(b) Long-Term Incentive Award; Equity-Based Compensation.
The Executive's interest under all of the Company's long-term
incentive plans shall be fully vested. Any and ail (i) options to
purchase Company stock and (ii) restricted stock of the Company, owned
by the Executive shall be fully vested.
(c) Continuation of Benefits.
(i) For the Benefit Period, or for two (2) years,
whichever is longer, the Executive shall be treated as if he
had continued to be an executive employee for all purposes
under the Company's Medical Plan, Executive Medical
Reimbursement Plan and Dental Plan (as described in Paragraph
4(b). Following this period the Executive shall be entitled to
receive continuation coverage under Part Six 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 fully vest and maintain in
force, at its own expense, for the remainder of the
Executive's life, the life insurance in effect under the
Company's Executive Life Insurance Plan (as described in
Paragraph 4(b)) as of the Change in Control Date or as of the
date of Termination of Employment, whichever is greater.
(d) Relocation Benefit. If, within one year after the
Executive's Termination of Employment with the Company, the Executive
gives the Company written notice that he desires to relocate 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 such relocation.
(e) Executive Retirement Plan. For the year of the
Executive's Termination of Employment, the Company will make the
contribution to the Retirement Plan on behalf of the Executive 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 contributed to the Retirement
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Plan on behalf of the Executive immediately upon the Executive's
Termination of Employment and any additional contribution required
shall be paid as soon as the amount is determined.
(f) Disability. For the Benefit Period, the Company shall
provide long-term disability insurance benefits coverage to Executive
equivalent to the coverage that the Executive would have had had he
remained employed under the Company's Long-Term Disability Plan as
described in Paragraph 4(b) 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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 7 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof, applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
8. Golden Parachute Gross-Up. If, in the written opinion of a Big
6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments under Paragraph 7 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 ("Code"),
then the Company will pay to the Executive an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (i) excise tax on the
payments under Paragraph 7, (ii) federal, state or local income tax on the
Gross-Up Payment, and (iii) excise tax on the Gross-Up Payment, to be equal to
the aggregate remuneration the Executive would have received under Section 7,
excluding such Gross-Up Payment (net of all federal, state and local excise and
income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment
provided for in this Paragraph shall be made within ten (10) days after the
termination of Executive's employment, provided however that if the amount of
the payment cannot be finally determined at the time, the Company shall pay to
Executive an estimate as determined in good faith by the Company of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the date of termination. Any dispute
concerning the application of this Paragraph shall be resolved pursuant to
Paragraph 10, and if Paragraph 11 applies, any reference in this Paragraph to
Paragraph 7 shall also be deemed to include a reference to Paragraph II as
well.
9. 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.
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10. 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 Tampa, Florida, using a single arbitrator,
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 arbitrator shall have the power to order
specific performance, mandamus, or other appropriate legal or equitable relief
to enforce the provisions of this Agreement. The Company shall pay all costs of
the arbitration and all reasonable attorney's and accountant's fees of the
Executive in connection therewith.
11. Additional Payments Due to Dispute. Notwithstanding anything
to the contrary herein, and without limiting the Executive's rights at law or
in equity, if the Company fails or refuses to timely pay to the Executive the
benefits due under Paragraphs 7 and/or 8 hereof, then the benefits under
Paragraph 7(a) shall be increased and the benefits under Paragraphs 7(c), 7(d),
and 7(f) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 8 shall be increased to take into account any increased
benefits under this Paragraph.
12. No Set-Off. There shall be no right of set-off or counterclaim
in respect of any claim, debt, or obligation against any payment to or benefit
for the Executive provided for in this Agreement.
13. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee dated July 18, 1995, a
copy of which Trust Agreement may be obtained from the Company or the Trustee.
15. Letter of Credit for Legal Fees. In order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides for a credit amount of $250,000 being made available to
the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.
16. Successors; Binding Agreement. (a) 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. The Company shall require any purchaser, assign,
surviving corporation or
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successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement shall be binding upon and
inure to the benefit of the Company and any purchaser, assign, surviving
corporation or successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization, transfer of all or substantially all of the
business or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation or successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but this Agreement shall not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 16. Without
limiting the generality of the foregoing, the Executive's right to
receive payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntarily or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
17. 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 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 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.
18. 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.
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19. 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.
20. 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.
21. 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, in a final, nonappealable order 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.
22. Governing Law. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of Florida,
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:
Boyd W. Hendrickson Robert D. Woltil
President and Chief Operating Officer 316 Crestwood Lane
Largo, Florida 34640
By:
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40A
Fort Smith, AR 72919
Attention; Secretary
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EXHIBIT 10.31
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
[NC., 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 or merge with any other Person and the
Company shall not be the continuing or surviving corporation, b any
Person shall consolidate 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 is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Executive was a director
immediately prior to the Change in Control Date; (ii) 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; (iii) the Executive's compensation or
benefits are reduced; (iv) the Company reduces the potential earnings
of the Executive under any performance- based bonus or incentive plan
of the Company in effect immediately prior to the Change in Control
Date; (v) the Company requires that the Executive's employment be
based at a location other than the location at the Change in Control
Date; (vi) any purchaser, assign, surviving corporation, or successor
of the Company or its business or assets (whether by acquisition,
merger, liquidation, consolidation, reorganization, sale or transfer
of assets or business, or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations
of the Company hereunder pursuant to Section 14 hereof; or (vii) the
Company breaches any of the provisions of this Agreement.
(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 the later of December 8, 1995 or the Executive's
employment commencement date with the Company or any of its subsidiaries (the
"Effective Date") and ending on December 7, 1998. 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 either:
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(a) there has been a Change in Control and 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) there has been a Change of Control and 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 Paragraphs 5 and 9, 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.
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
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<PAGE> 4
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 serv ice), 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 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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 4 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof; applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
5. Golden Parachute Gross-Up. It, in the written opinion of a Big
6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, 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 ("Code"),
then the Company will pay to the Executive an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (i) excise tax on the
payments under Paragraph 4, (ii) federal, state
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<PAGE> 5
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration the Executive would
have received under Section 4, excluding such Gross-Up Payment (net of all
federal, state and local excise and income taxes), as if Sections 280G and 4999
of the Code (and any successor provisions thereto) had not been enacted into
law. The Gross-Up Payment provided for in this Paragraph shall be made within
ten (10) days after the termination of Executive's employment, provided however
that if the amount of the payment cannot be finally determined at the time, the
Company shall pay to Executive an estimate as determined in good faith by the
Company of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after the date
of termination. Any dispute concerning the application of this Paragraph shall
be resolved pursuant to Paragraph 8, and if Paragraph 9 applies, any reference
in this Paragraph to Paragraph 4 shall also be deemed to include a reference to
Paragraph 9 as well.
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, using a single
arbitrator, 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 arbitrator shall have the
power to order specific performance, mandamus, or other appropriate legal or
equitable relief to enforce the provisions of this Agreement. 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. Additional Payments Due to Dispute. Notwithstanding anything
to the contrary herein, and without limiting the Executive's rights at law or
in equity, if the Company fails or refuses to timely pay to the Executive the
benefits due under Paragraphs 4 and/or 5 hereof, then the benefits under
Paragraph 4(a) shall be increased and the benefits under Paragraphs 4(c), 4(d),
and 4(f) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 5 shall be increased to take into account any increased
benefits under this Paragraph.
10. No Set-Off. There shall be no right of set-off or counterclaim
in respect of any claim, debt, or obligation against any payment to or benefit
for the Executive provided for in this Agreement.
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<PAGE> 6
11. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
12. Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee, dated July 18, 1995, a
copy of which may be obtained from the Company or the Trustee.
13. Letter of Credit for Legal Fees. In order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides for a credit amount of $250,000 being made available to
the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.
14. Successors; Binding Agreement.
(a) 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. The Company shall require any
purchaser, assign, surviving corporation or successor (whether direct
or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or assets
of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any
purchaser, assign, surviving corporation, or successor to the Company,
including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of
the Company whether by purchase, merger, consolidation,
reorganization, transfer of all or substantially all of the business
or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation, or successor shall thereafter be deemed the
"Company" for the purposes of this Agreement), but this Agreement
shall not otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
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<PAGE> 7
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 14. Without
limiting the generality of the foregoing, the Executive's right to
receive payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntarily or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
15. 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) [f 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.
16. 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 Company. 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.
17. 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.
18. 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.
19. 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
7
<PAGE> 8
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, in a final,
nonappealable order, 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.
20. 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 incorporated by reference. None of
the benefits hereunder may be assigned in any way.
21. 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 and Chief Executive Officer FIELD(ADDRESS)
FIELD(CITYSTZP)
By;
----------------------------------
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919
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.
FIELD(NAME1)
8
<PAGE> 1
EXHIBIT 10.32
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of December 8, 1995 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 or merge with any other Person and the
Company shall not be the continuing or surviving corporation, b any
Person shall consolidate 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 is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Executive was a director
immediately prior to the Change in Control Date; (ii) 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; (iii) the Executive's compensation or
benefits are reduced; (iv) the Company reduces the potential earnings
of the Executive under any performance- based bonus or incentive plan
of the Company in effect immediately prior to the Change in Control
Date; (v) the Company requires that the Executive's employment be
based at a location other than the location at the Change in Control
Date; (vi) any purchaser, assign, surviving corporation, or successor
of the Company or its business or assets (whether by acquisition,
merger, liquidation, consolidation, reorganization, sale or transfer
of assets or business, or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations
of the Company hereunder pursuant to Section 14 hereof; or (vii) the
Company breaches any of the provisions of this Agreement.
(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 the later of December 8, 1995 or the Executive's
employment commencement date with the Company or any of its subsidiaries (the
"Effective Date") and ending on December 7, 1998. 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 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.
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<PAGE> 3
4. Severance Benefit. Upon satisfaction of the requirements set
forth in Paragraph 3, and subject to Paragraphs 5 and 9, 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 FIELD(TIMES) 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.
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 FIELD(TIMES) 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 FIELD(TIMES) 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
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<PAGE> 4
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 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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 4 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof, applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
5. Golden Parachute Gross-Up. If, in the written opinion of a Big
6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, 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 ("Code"),
then the Company will pay to the Executive an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (i) excise tax on the
payments under Paragraph 4, (ii) federal, state or local income tax on the
Gross-Up Payment, and (iii) excise tax on the Gross-Up Payment, to be equal to
the aggregate remuneration the Executive would have received under Section 4,
excluding such Gross-Up Payment (net of all federal, state and local excise and
income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment
provided for in this Paragraph shall be made within ten (10) days after the
termination of Executive's employment, provided however that if the amount of
the payment cannot be finally determined at the time, the Company shall pay to
Executive an estimate as determined in good faith by the Company of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the date of termination. Any dispute
concerning the application of this Paragraph shall be resolved pursuant to
Paragraph 8, and if Paragraph 9 applies, any reference in this Paragraph to
Paragraph 4 shall also be deemed to include a reference to Paragraph 9 as well.
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<PAGE> 5
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, using a single
arbitrator, 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 arbitrator shall have the
power to order specific performance, mandamus, or other appropriate legal or
equitable relief to enforce the provisions of this Agreement. 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. Additional Payments Due to Dispute. Notwithstanding anything
to the contrary herein, and without limiting the Executive's rights at law or
in equity, if the Company fails or refuses to timely pay to the Executive the
benefits due under Paragraphs 4 and/or 5 hereof, then the benefits under
Paragraph 4(a) shall be increased and the benefits under Paragraphs 4(c), 4(d),
and 4(f) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 5 shall be increased to take into account any increased
benefits under this Paragraph.
10. No Set-Off. There shall be no right of set-off or counterclaim
in respect of any claim, debt, or obligation against any payment to or benefit
for the Executive provided for in this Agreement.
11. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
12. Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee, dated July 18, 1995, a
copy of which Trust Agreement may he obtained from the Company or the Trustee.
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13. Letter of Credit for Legal Fees. In order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides for a credit amount of $250,000 being made available to
the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.
14. Successors; Binding Agreement.
(a) 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. The Company shall require any
purchaser, assign, surviving corporation, or successor (whether direct
or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or assets
of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any
purchaser, assign, surviving corporation or successor to the Company,
including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of
the Company whether by purchase, merger, consolidation,
reorganization, transfer of all or substantially all of the business
or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation or successor shall thereafter be deemed the
"Company" for the purposes of this Agreement), but this Agreement
shall not otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 14. Without
limiting the generality of the foregoing, the Executive's right to
receive payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntarily or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
15. 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:
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(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.
16. 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 Company. 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.
17. 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.
18. 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.
19. 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, in a final, nonappealable order, 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.
20. 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 incorporated by reference. None of
the benefits hereunder may be assigned in any way.
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21. 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 and Chief Executive Officer FIELD(ADDRESS)
FIELD(CITYSTZP)
By:
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919
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.
FIELD(NAME1)
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<PAGE> 1
EXHIBIT 10.33
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and DAVID L. REDMOND (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) 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 or merge with any other Person and the
Company shall not be the continuing or surviving corporation, b any
Person shall consolidate 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 is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Executive was a director
immediately prior to the Change in Control Date; (ii) 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; (iii) the Executive's compensation or
benefits are reduced; (iv) the Company reduces the potential earnings
of the Executive under any performance- based bonus or incentive plan
of the Company in effect immediately prior to the Change in Control
Date; (v) the Company requires that the Executive's employment be
based at a location other than the location at the Change in Control
Date; (vi) any purchaser, assign, surviving corporation, or successor
of the Company or its business or assets (whether by acquisition,
merger, liquidation, consolidation, reorganization, sale or transfer
of assets or business, or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations
of the Company hereunder pursuant to Section 14 hereof; or (vii) the
Company breaches any of the provisions of this Agreement.
(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 the later of December 8, 1995 or the Executive's
employment commencement date with the Company or any of its subsidiaries (the
"Effective Date") and ending on December 7, 1998. 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 either:
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<PAGE> 3
(a) there has been a Change in Control and 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) there has been a Change of Control and 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 Paragraphs 5 and 9, 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.
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).
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(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 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 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 and insurance policies as are
necessary to effectuate the provisions of this Agreement. If and to
the extent any benefits under this Paragraph 4 are not paid or payable
or otherwise provided to the Executive or his dependents or
beneficiaries under any such plan or policy (whether due to the terms
of the plan or policy, the termination thereof, applicable law, or
otherwise), then the Company itself shall pay or provide for such
benefits.
5. Golden Parachute Gross-Up. If, in the written opinion of a Big
6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, 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
4
<PAGE> 5
280G(b) of the Internal Revenue Code ("Code"), then the Company will pay to the
Executive an additional amount in cash (the "Gross-Up Payment") equal to the
amount necessary to cause the net amount retained by the Executive, after
deduction of any (I) excise tax on the payments under Paragraph 4, (ii)
federal, state or local income tax on the Gross-Up Payment, and (iii) excise
tax on the Gross-Up Payment, to be equal to the aggregate remuneration the
Executive would have received under Section 4, excluding such Gross-Up Payment
(net of all federal, state and local excise and income taxes), as if Sections
280G and 4999 of the Code (and any successor provisions thereto) had not been
enacted into law. The Gross-Up Payment provided for in this Paragraph shall be
made within ten (10) days after the termination of Executive's employment,
provided however that if the amount of the payment cannot be finally determined
at the time, the Company shall pay to Executive an estimate as determined in
good faith by the Company of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
date of termination. Any dispute concerning the application of this Paragraph
shall be resolved pursuant to Paragraph 8, and if Paragraph 9 applies, any
reference in this Paragraph to Paragraph 4 shall also he deemed to include a
reference to Paragraph 9 as well.
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, using a single
arbitrator, 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 arbitrator shall have the
power to order specific performance, mandamus, or other appropriate legal or
equitable relief to enforce the provisions of this Agreement. 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. Additional Payments Due to Dispute. Notwithstanding anything
to the contrary here in, and without limiting the Executive's rights at law or
in equity, if the Company fails or refuses to timely pay to the Executive the
benefits due under Paragraphs 4 and/or 5 hereof, then the benefits under
Paragraph 4(a) shall be increased and the benefits under Paragraphs 4(c), 4(d),
and 4(f) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 5 shall be increased to take into account any increased
benefits under this Paragraph.
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<PAGE> 6
10. No Set-Off. There shall be no right of set-off or counterclaim
in respect of any claim, debt, or obligation against any payment to or benefit
for the Executive provided for in this Agreement.
11. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this Agreement will be liquidated damages, and that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
12. Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee, dated July 18, 1995, a
copy of which may be obtained from the Company or the Trustee.
13. Letter of Credit for Legal Fees. [n order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides. for a credit amount of $250,000 being made available
to the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.
14. Successors; Binding Agreement.
(a) 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. The Company shall require any
purchaser, assign, surviving corporation or successor (whether direct
or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or assets
of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any
purchaser, assign, surviving corporation, or successor to the Company,
including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of
the Company whether by purchase, merger, consolidation,
reorganization, transfer of all or substantially all of the business
or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation, or successor shall thereafter be deemed the
"Company" for the purposes of this Agreement), but this Agreement
shall not otherwise be assignable, transferable or delegable by the
Company.
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<PAGE> 7
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and/or
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in this Section 14. Without
limiting the generality of the foregoing, the Executive's right to
receive payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest or
otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy or
similar process, or assignment by operation of law, other than by a
transfer by his will or by the laws of descent and distribution. Any
attempt, voluntarily or involuntarily, to effect any action prohibited
by this Paragraph shall be null, void, and of no effect.
15. 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.
16. 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 Company. 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.
17. 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.
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18. 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.
19. 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, in a final, nonappealable order, 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.
20. 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 he 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.
21. 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:
Boyd W. Hendrickson David L. Redmond
President and Chief Operating Officer 2514 Prospect Road
Tampa, FL 33629
By:
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919
Attention: Secretary
8
<PAGE> 9
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.
David L. Redmond
9
<PAGE> 1
EXHIBIT 10.34
FIRST AMENDMENT TO CHANGE IN CONTROL SEVERANCE AGREEMENT
This First Amendment to Change in Control Severance Agreement (the
"Amendment") is executed by David L. Redmond (the "Executive") and Beverly
Enterprises, Inc., a Delaware corporation (the "Company" or "Beverly"), to
amend the Change in Control Agreement dated as of December 8, 1995, between
the Executive and the Company (the "Agreement"). The Executive and the
Company hereby agree as follows:
1. Definitions. Unless expressly defined in this Amendment, the
capitalized terms used in this Amendment have the definitions attributed to
them in the Agreement, and the definitions of those terms in the Agreement are
incorporated herein by reference.
2. Employer. Executive is employed by Pharmacy Corporation of
America ("PCA"), a subsidiary of the Company. Accordingly, all references to
"the Company" in Paragraphs 1(b), 1(e), 1(g), 1(h), and 4(d) of the Agreement
shall mean PCA and not Beverly. The parties agree that all references to the
Company in paragraphs 2, 3(a), 3(b), 6, 7, 8, 11, 12, 13 and 19 shall include
PCA and Beverly. The parties further agree that all references to "the Company"
in paragraphs 1(c), 4(b), 4(c) (i) and (ii), 4(e), (f), (g), 5, 14, and 20 shall
mean only Beverly.
3. Termination of Employment.
Section 1(h) of the Agreement is amended to add the following:
Termination of employment shall mean the termination of the
Executive's employment by Beverly, or by PCA if PCA terminates the
Executive as a result of the Change in Control of Beverly, other than
such a termination in connection with an offer of immediate
reemployment by a successor or assign of Beverly or purchaser of
Beverly or its assets under terms and conditions which would not
permit the Executive to terminate his employment for Good Reason.
4. Eligibility for Severance Benefits.
Section 3 of the Agreement is amended to add the following:
The Executive shall be eligible for the Severance Benefits
described in Paragraph 4 of the Agreement, except that Executive shall
be entitled to those benefits for a one (1) year period only, if (a)
the Company does not, by December 31, 1996 (i) sell some or all of the
capital stock of Pharmacy Corporation of America ("PCA") to the
general public in an initial public offering or series of public
offerings or (ii) distribute to the Company's shareholders some or all
of the outstanding capital stock of PCA, and if Executive as a result
of either of the above, terminates his employment with PCA within
thirty-one (31) days of that date and in no event later than February
1, 1997; or (b) the Executive has a Termination of Employment
initiated (i) by the Company or PCA without Cause, or (ii) by the
Executive for Good Reason.
5. Relocation Benefit.
Section 4(d) of the Agreement is amended by replacing Fort Smith,
Arkansas with Tampa, Florida.
6. Excise Tax Indemnification.
Section 5 of the Agreement is amended to add the following paragraph:
If, in the written opinion of a Big 6 accounting firm engaged
by either the Company or the Exeuctive for this purpose (at the
Company's expense), or if so alleged by the Internal Revenue Service,
unless the Company by written notice to the Executive elects to contest
the allegation by the Internal Revenue Serviece (at the Company's
expense), in which case no payment hereunder shall be paid and the
Company shall prosecute its position to any conclusion it chooses, the
aggregate of the benefit payments received by the Executive pursuant to
the Employment Agreement executed on August 1, 1993 by the Executive
and Pharmacy Management Services, Inc. ("PMSI") and any and all
Addenda, including the Severance Agreement executed by the Executive
and PMSI as amended on February 15, 1995, (the "Payments"), would
constitute an "excess parachute payment" as defined in Section 280G(b)
of the Internal Revenue Code (the "Code"), then the Company will pay to
the Executive an additional amount in cash (the "Gross-Up Payment")
equal to the amount necessary to cause the net amount of Payments
retained by the Executive, after deduction of any (i) excise tax on the
payments provided for in this paragraph; (ii) federal, state or local
income tax on Gross-Up Payment, and (iii) excise tax on the Gross-Up
Payment, to be equal to the aggregate remuneration the Executive would
have received pursuant to the Payments, excluding such Gross-Up Payment
(net of all federal, state and local excise and income taxes), as if
Section 280G(b) and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. The Gross-Up Payment provided
for in this Paragraph shall be made within thirty (30) days after such
final determination by the Internal Revenue Service. Any payments
under this Paragraph shall be in lieu of any gross-up payments
otherwise due Executive under any agreement with PMSI, PCA, or the
Company relating to said Payments.
7. Disputes.
Section 8 of the Agreement is amended by replacing Fort Smith,
Arkansas with Tampa, Florida.
<PAGE> 2
8. Entire Agreement.
Section 18 of the Agreement is amended by replacing it with the
following Paragraph:
This Agreement, together with the Indemnification Agreement
attached hereto as Exhibit A (the "Beverly Indemnification Agreement")
sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and therein, 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, including the
Employment Agreement executed on August 1, 1993 by the Executive and
Pharmacy Management Services, Inc. ("PMSI") and any and all Addenda
including the Severance Agreement executed by the Executive and PMSI
as amended on February 16, 1995, and the Indemnity Agreement executed
by the Executive and PMSI and dated as of 1993, except for Section
3.12 of the Agreement and Plan of Merger dated December 26, 1994, as
amended May 19, 1995, between PMSI and Beverly. The parties further
intend that this Agreement and the Beverly Indemnification Agreement
shall constitute the complete and exclusive statement of their
respective terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative, or other legal proceeding
involving this Agreement or the Beverly Indemnification Agreement.
9. Continued Effectiveness. Except as amended by this Amendment,
the Agreement continues in full force and effect. The Amendment will become
effective when executed by the Executive and the Company.
BEVERLY ENTERPRISES, INC. EXECUTIVE
By:
Boyd W. Hendrickson David L. Redmond
President and Chief Operating Officer 2514 Prospect Road
5111 Rogers Avenue, Suite 40-A Tampa, FL 33629
Fort Smith, AR 72919
By:
Robert W. Pommerville
Executive Vice President,
General Counsel and Secretary
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919
Attention: Secretary
2
<PAGE> 1
EXHIBIT 10.35
AGREEMENT
DATE: ___________ _____, 19___
PARTIES: First Party: BEVERLY ENTERPRISES, INC., a Delaware
corporation, and PHARMACY CORPORATION OF
AMERICA, a California corporation, and its
consolidated subsidiaries, hereinafter
collectively referred to as "Company"; and
Second Party: RONALD C. KAYNE, hereinafter referred to as
"KAYNE."
AGREEMENT:
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, the parties hereto do agree between themselves as follows:
Section 1. DEFINITIONS.
(a) As used herein, "KAYNE" shall mean Ronald C. Kayne, his
successors-in-interest, predecessors-in-interest, assigns, administrators and
executors.
(b) As used herein, the term the Company" shall mean Beverly
Enterprises, Inc. and Pharmacy Corporation of America, their affiliates,
subsidiaries, divisions, agents, assigns, pension plans, compensation plans,
other benefit plans, predecessors-in-interest, successors-in-interest, and any
officer, director, employee, agent or other representative of any of the
foregoing
Section 2. RESIGNATION.
(a) KAYNE hereby tenders his resignation from the offices of
President of Pharmacy Corporation of America ("PCA") and as Executive Vice
President of Beverly Enterprises, Inc. ("Beverly") effective May 31, 1995.
KAYNE further tenders his resignation as an employee of the Company effective
May 31, 1995. The Company hereby accepts such resignations effective on such
<PAGE> 2
dates. All duties and obligations of KAYNE in those positions are ended as of
that date, and all obligations of the Company to KAYNE with respect to those
positions or otherwise are terminated as of that date, except as otherwise
provided herein.
(b) The Parties enter into this Agreement solely to avoid
expensive, burdensome and protracted litigation. Nothing in this Agreement
constitutes or is intended to constitute any finding of fact, admission of
liability, or assessment of liability of the Company with respect to any claim
that KAYNE has asserted or could assert against the Company. This Agreement and
the Company's actions performed pursuant hereto shall not be deemed to be or
construed as an admission of any allegation of KAYNE'S, nor shall they
constitute any admission of any fact, liability or fault as to any claim or
proceeding which has been, is now being or may be pursued by any person, agency
or entity, including without limitation, KAYNE or any other past or present
employee of the Company. This Agreement shall not be used and is not intended
to be used as evidence or for any other purpose in any action or proceeding,
other than as evidence of the Parties' compromise of their disputes and
discharge of KAYNE's claims.
Section 3. PAYMENTS. The Company agrees to pay KAYNE the following
sums in consideration of his voluntary resignation:
(a) Vacation. The sum of Seventeen Thousand Three
Hundred Seven and 69/100 Dollars ($17,307.69), which shall be subject
to all normal withholding taxes, in full payment for three (3) weeks
of vacation pay due to KAYNE, which shall be payable on June 1, 1995,
or as soon thereafter as this Agreement becomes effective;
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<PAGE> 3
(b) Severance Payments. KAYNE will receive a severance
payment equal to fifty-two (52) weeks pay pursuant to the Agreement
Concerning Benefits Upon Severance dated September 1, 1990, as amended
April 25, 1993, attached hereto as Exhibit "A" and incorporated herein
by this reference, in the aggregate sum of Three Hundred Thousand and
No/100 Dollars ($300,000.00) payable in full on June 1, 1995, or as
soon thereafter as this Agreement is completed, fully-executed by the
Parties and becomes effective. Lump sum federal and state withholding
taxes will be withheld.
Section 4. BONUS AND CAR ALLOWANCE. KAYNE will receive Fourteen
Thousand Six Hundred Fifty-Eight and 75/100 ($14,658.75) which is the cash
value as of the close of market on June 1, 1995 of the twenty percent (20%) of
his 1994 bonus that was used to purchase One Thousand Three Hundred and Three
(1,303) shares of stock on February 2, 1995 at $13.75 per share which shares
are hereby cancelled effective May 31, 1995, and all right, title and interest
in and to said shares in KAYNE's name as of such date shall be and hereby is
declared null and void and cancelled. Lump sum federal and state withholding
will be withheld. It is understood and agreed between the parties hereto that
KAYNE shall not be entitled to any bonus from the Company for 1995 performance.
It is further understood and agreed between the parties hereto that KAYNE'S car
allowance shall terminate effective May 31, 1995.
Section 5. CONSULTING AGREEMENT. The Company and KAYNE shall enter
into a Consulting Agreement simultaneously herewith which Consulting Agreement
shall be in the form and substance of Exhibit "B" attached hereto and
incorporated herein by this reference. Said Consulting Agreement shall
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<PAGE> 4
provide that KAYNE shall be required to be available to the Company for up to
twenty (20) hours each week on a cumulative basis, annually, and shall be paid
at the rate of Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) per
month for such consulting services which shall extend over a three-year period
commencing on June 1, 1995 and ending on May 31, 1998 (the "Consulting
Period").
Section 6. MEDICAL COVERAGE. The Company will pay COBRA conversion
costs for continued coverage of KAYNE and his spouse and dependents under its
executive medical and dental plans during the Consulting Period or until such
time as KAYNE commences other employment and is eligible for benefits in that
other employment, whichever first occurs. KAYNE shall present any claims for
reimbursement under the Company's Executive medical and dental plans for
processing in accordance with the Company's current policy at the time any such
claims are made. If coverage is desired by KAYNE after the Consulting Period
ends all costs shall be paid by KAYNE as required by the insurer if such
continued coverage is in tact available. KAYNE shall have no COBRA conversion
privilege following the end of the Consulting Period.
Section 7. LIFE AND DISABILITY INSURANCE. The executive life insurance
policy on KAYNE is Sixty Percent (60%) vested and shall terminate on May 31,
1995. The Company will continue to provide term life insurance coverage to
KAYNE in accordance with the executive life insurance plan in the total amount
of One Hundred Eighty Thousand Dollars ($180,000). The premiums on this
benefit are taxable to KAYNE, who shall be solely responsible for any tax. The
remaining unvested portion of the executive life insurance policy of One
Hundred Twenty Thousand Dollars ($120,000) may be converted at the sole cost
and expense of KAYNE in accordance with the existing policy, or it will
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<PAGE> 5
terminate as of said date. The basic group life insurance policy in the amount
Three Hundred Thousand Dollars ($300,000) insuring KAYNE may be converted by
KAYNE at his sole cost and expense in accordance with the existing policy, or
it will terminate as of said date.
The long term disability policy will terminate on effective May 31,
1995 and may be converted to an individual policy at KAYNE's sole cost and
expense in accordance with the existing policy.
Section 8. OPTIONS AND RESTRICTED STOCK. KAYNE understands and agrees
that all vested and exercisable option grants and restricted Stock awarded
under any of the Company's stock option plans (i.e., the Company's Amended and
Restated 1981 Beverly Incentive Stock Option Plan, or the Amended and Restated
1981 and 1985 Non-qualified Stock Option Plans, or the Amended and Restated
Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, all of such
plans together hereinafter referred to as the "Stock Plans") must be exercised,
if at all, no later than ninety (90) days following May 31, 1995, and if KAYNE
does not exercise Said stock options within said ninety (90) day period, said
stock options Shall be and are hereby cancelled effective the close of business
on August 29, 1995 and all rights, title and interest in and to said stock in
KAYNE's name as of such date shall be and hereby is declared null and void and
cancelled. KAYNE further understands and agrees that unvested or unexercisable
option grants and restricted stock awarded under any of the Company's Stock
Plans shall be and hereby are cancelled effective May 31, 1995 and all right,
title and interest in and to any unvested or undelivered restricted Stock in
KAYNE'S name as of such date shall be and hereby is declared null and void and
cancelled. KAYNE was granted the following stock options:
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<PAGE> 6
<TABLE>
<CAPTION>
GRANT DATE OF TYPE SHARES PRICE OF VESTED VESTED VESTED NOT
NUMBER GRANT OR UNITS GRANT--$ AND AND NOT VESTED
GRANTED EXERCISED EXERCISED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06737 12/08/94 ISO 12,000 14.000 0 0 0 12,000
06703 12/09/93 ISO 15,000 12.500 3,750 0 3,750 11,250
060006 2/15/94 NQ- 2,464 14.000 0 0 0 2,464
Phantom
060032 2/15/95 NQ- 3,258 13.750 0 0 0 3,258
Phantom
075019 2/15/95 NQ-Other 1,303 13.750 0 0 0 1,303*
Units
090160 3/21/90 NonQual 40,000 4.375 40,000 32,000 8,000 0
090190 3/21/90 NonQual 12,500 4.375 12,500 10,000 2,500 0
090191 3/21/90 NonQual 17,500 4.375 17,500 14,000 3,500 0
090209 5/11/90 NonQual 60,000 4.500 60,000 48,000 12,000 0
091008 12/09/93 NonQual 35,000 12.500 8,750 0 8,750 26,250
091040 12/08/94 NonQual 18,000 14.000 0 0 0 18,000
TOTALS 217,025 142,500 104,000 38,500 74,525
</TABLE>
LEGENDS
. ISO = Incentive Stock Option
. NQ-Phantom = Nonqualified Phantom Stock Option
. NQ-Other Units = Nonqualified "Other Unit" Stock Option
. NonQual = Nonqualified Stock Option
* Twenty percent (20%) of 1994 bonus. See Section 4. Bonus and Car
Allowance.
Section 9. DEFERRED COMPENSATION. The Company has accrued a total of
One Hundred Ninety-Four Thousand Eight Hundred Fifty and 97/100 Dollars
($194,850.97) in KAYNE'S Special Ledger account pursuant to the applicable
provisions of the Company's Deferred Compensation Plan, and as more fully
calculated in Exhibit "C" attached to this Agreement. The Special Ledger
account shall be paid to KAYNE as provided for in the Deferred Compensation
Plan in periodic payments commencing June 30, 1995.
Section 10. CONFIDENTIALITY. The company and KAYNE each agree to keep
the terms of this Agreement confidential and that neither of them nor their
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<PAGE> 7
respective employees, agents, officers, representatives, heirs or assigns will
publicize the terms of this Agreement in any way nor will they issue,
distribute, or make available any bulletin or written statement of any kind
concerning the subject matter of this Agreement or KAYNE'S termination except,
however, as required by legal process, or as they both may otherwise agree in
writing.
Section 11. NON-COMPETITION AND NON-SOLICITATION AGREEMENT.
(a) KAYNE hereby covenants that during the Consulting Period as
set forth in the Consulting Agreement, he will not, directly or indirectly,
own, manage, operate, control, engage in, participate in or be connected in any
manner with the ownership, management, operation or control of any
institutional pharmacy business operations, which are similar to the Company's
present operations, any home infusion therapy business operations, or any home
health care business operations within a 100 mile radius of any of the existing
operations of the Company listed on Exhibit 1 attached to the Consulting
Agreement. The foregoing shall not prohibit KAYNE from (1) serving on the Park
Hospital District Board; (2) from being employed in any retail pharmacy
provided that the retail pharmacy does not engage in the nursing home pharmacy
business (except incidentally) or in the home IV infusion business, and to the
extent it does that KAYNE does not directly or indirectly engage in such
businesses; (3) from being employed by any retail drug chain provided the chain
does not engage in nursing home pharmacy (except incidentally) or in the home
IV infusion business (except incidentally), and to the extent it does that
KAYNE does not directly or indirectly engage in such businesses; (4) from being
employed by an acute care general hospital provided the hospital does not
engage in the nursing home pharmacy business off its licensed premises, or
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<PAGE> 8
in the home IV infusion business except in the care of its own on-site
patients, and to the extent it does that KAYNE does not directly or indirectly
engage in such businesses; (S) from being employed by any pharmaceutical
manufacturer provided the manufacturer does not operate nursing home pharmacies
(except incidentally) or home IV infusion pharmacies, and to the extent it does
that KAYNE does not directly or indirectly engage in such businesses, or (6)
from being employed by any Health Maintenance Organization (HMO), Pharmacy
Benefit Management Plan, School of Pharmacy and/or its affiliated teaching
hospital(s) or by a Pharmacy Trade Association or Professional Society so long
as any such organization or institution does not engage in the nursing home
pharmacy business (except incidentally) or in the home IV infusion business
(except incidentally), and to the extent it does that KAYNE does not directly
or indirectly engage in such businesses.
(b) KAYNE shall not during the Consulting Period, as set forth in
the Consulting Agreement, or at any time thereafter make, use for his own
purposes or divulge to any person, firm or corporation (except under the
authority of the Company or if ordered to do so by a court of competent
jurisdiction) any information or fact relating to the management, business
(including prospective business), finances, its customers or the terms of any
of the contracts of the Company which has heretofore or may hereafter come to
the knowledge of KAYNE which is not freely available to the public.
(c) KAYNE hereby covenants with the Company that he will not for
any reason whatsoever and whether directly or indirectly, either alone or
jointly with any person, firm or corporation and whether as principal, servant
or agent:
(i) During the Consulting Period, as set forth in
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<PAGE> 9
the Consulting Agreement, solicit or endeavor to entice away, offer
employment to or employ, or offer or conclude any contract for
services with any person who is employed by the Company as of the date
of this Agreement so as to affect adversely the goodwill or business
of the Company;
(ii) At any time, in any way defame the Company or disparage
its business capabilities, products, plans or management to any
customer, potential customer, vendor, supplier, contractor,
subcontractor of the Company so as to affect adversely the goodwill or
business of the Company; and
(iii) At any time, use to the detriment of the Company
any confidential information of a technical, trade, financial or
other character which constitutes a legally protectable trade
secret and which KAYNE has acquired or may acquire in the course of or
as a result of his employment by the Company or his consulting to the
Company.
(d) The parties agree that the geographical areas and time period
referred to in this Section 11 are divisible and severable and that if the
restrictions in subsections 11 (a) and (c) are held by any court to be
unenforceable with respect to a specific geographical area and/or time
interval, the restrictions shall remain applicable to all other geographical
areas and terms and to that portion of any reduced geographical area and time
interval designated by the court.
(e) The parties recognize that, in the event of a breach of the
covenant contained in subsections 11 (a) through (c) above, the Company's
remedy at law alone would be inadequate and, accordingly, the Company shall be
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<PAGE> 10
entitled to an order or injunction restraining KAYNE from violating the
covenant herein contained.
(f) For purposes of this Section 11 and in consideration of this
Agreement, this non-competition and non-solicitation agreement has been
separately negotiated and bargained for, and constitutes a substantial portion
of the consideration for this Agreement.
Section 12. LITIGATION. KAYNE recognizes that as a key member of the
staff of the Company, KAYNE has occupied a position of trust and confidence
with respect to information of a secret or confidential nature which is or will
become the property of the Company, including but not limited to information
concerning various claims and lawsuits that have arisen or may arise out of the
Company's operations in which KAYNE was indirectly involved (collectively, the
"Litigation"). KAYNE agrees that KAYNE will not at any time for so long as any
such information shall remain confidential or otherwise remain wholly or
partially protectable, use, divulge, furnish, or make accessible such
information to anyone outside of the Company, the Company's agents or
representatives, except as required by legal process.
For purposes of this Section 12, the term "information of a secret or
confidential nature" shall mean any information of any nature in any form which
at the time or times concerned is not generally known to or which could not be
obtained by persons engaged in a business similar to that conducted or
contemplated by Company and which relates to any one or more of the aspects of
the present or past businesses of the Company. For purposes hereof any such
confidential information which is disclosed to any third party by a present or
past employee or representative of the Company not authorized to make such
disclosures shall be deemed to remain confidential and protected. KAYNE
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<PAGE> 11
further agrees that KAYNE shall continue to cooperate with the Company and its
attorneys concerning all aspects of the Litigation, including but not limited
to making himself available for a sufficient and reasonable period of time for
reviews, conferences, meetings, depositions, and testimony until such time as
the Litigation has been finally resolved to the Company's satisfaction.
For purposes of this Section 12, KAYNE acknowledges that the
Litigation consists or may consist of several lawsuits of a complex nature such
that it is difficult to estimate the exact number of hours that KAYNE will be
needed to devote to the Litigation. KAYNE therefore agrees to make himself
available to the Company in compliance with this Section 12, for sufficient
periods of time as is required for lawsuits of a complexity similar to those
comprising (or which may in the future comprise) the Litigation. The Company
agrees that its attorneys shall work with KAYNE to insure that, to the extent
possible, the time that KAYNE shall be required to devote to the Litigation
shall be scheduled in accordance with KAYNE'S preferences. During the
Consulting Period, KAYNE agrees that he will provide his services (including
actual travel time) required in connection with the Litigation at no cost to
the Company provided, however, the Company shall reimburse KAYNE for the costs
and expenses reasonably incurred by KAYNE in connection with the provision of
such services, and provided further that all services provided pursuant to this
Section 12 shall be treated as meeting KAYNE's obligation under Section 5 of
the Consulting Agreement. After the end of the Consulting Period, KAYNE will
continue to be obligated to provide the services called for by this Section 12,
and in such circumstances, he will be compensated at the rate of Seventy- Five
Dollars ($75.00) per hour, and the Company will reimburse KAYNE for the costs
and expenses reasonably incurred by KAYNE in connection with the
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<PAGE> 12
provision of such services.
Section 13. RELEASES. In consideration of the provisions of this
Agreement and for other good and sufficient consideration, receipt whereof is
hereby acknowledged, the Company and KAYNE do each hereby release and discharge
the other, from all actions, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, attorneys' fees, costs, disbursements, bonds,
bills, covenants, contracts, controversies, agreements, promises, and demands
whatsoever, at law or in equity, present and future, known or unknown, in any
manner arising out of the employment relationship between the Company and
KAYNE, and the termination thereof, and all said actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, attorneys' fees,
costs, disbursements, bonds, bills, covenants, contracts, controversies,
agreements, promises, and demands whatsoever, at law or in equity, are hereby
satisfied in full, terminated and forever discharged. No further action
whatsoever shall be taken before any tribunal and forum regarding said actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
attorneys' fees, costs, disbursements, bonds, bills, covenants, contracts,
controversies, agreements, promises, and demands whatsoever, at law or in
equity.
Other than arising out of this Agreement, KAYNE further agrees not to
file or lodge or bring any charges, complaints, grievances or other claims in
any forum including, but not limited to judicial, administrative or arbitral
forums against the Company arising out of his employment with the Company or
his resignation and severance therefrom.
KAYNE affirms that there is no administrative or judicial proceeding
against the Company to which KAYNE is a party or which has been filed on his
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<PAGE> 13
behalf. In the event that there is outstanding any such proceeding, KAYNE
agrees to cause the immediate withdrawal and dismissal with prejudice of that
proceeding. In the event that any agency, court or other forum does not
dismiss with prejudice such proceeding, KAYNE agrees that he will not give
testimony or evidence voluntarily against the Company in such proceeding. The
prohibition contained herein shall not apply with respect to information or
testimony provided by KAYNE pursuant to a subpoena enforced by order of the
court.
Section 14. INDEMNIFICATION. The Company will indemnify KAYNE to the
fullest extent permitted (including payment of expenses in advance of final
disposition of a proceeding) by the Certificate of Incorporation and By-Laws of
the Company, as in effect at such time or on the effective date of this
Agreement, whichever affords or afforded greater protection to KAYNE, and KAYNE
shall be entitled to the protection of any insurance policies the Company may
elect to maintain generally for the benefit of its directors and officers,
against all costs, charges and expenses whatsoever incurred or sustained by him
in connection with any action, suit or proceeding to which he may be made a
party by reason of his being or having been an officer or employee of the
Company or any of its subsidiaries or affiliates or his serving or having
served any other enterprises as an officer or employee at the request of the
Company. The Indemnification Agreement between Beverly Enterprises, Inc. and
KAYNE dated January 20, 1992 shall remain in full force and effect for the
period up to and including May 31, 1995.
Section 15. POSITIVE RECOMMENDATION. The Company shall respond,
verbally, to inquiries from a potential employer of KAYNE with a positive
recommendation, and upon request of either KAYNE or any such potential
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<PAGE> 14
employers, shall provide a positive letter of recommendation, provided KAYNE
shall inform any such potential employers to direct their inquiries to the
attention of David R. Banks, Chairman of the Board of Directors, President and
Chief Executive Officer of the Company.
Section 16. THE COMPANY'S RIGHT OF SET-OFF. In the event the Company,
in its reasonable discretion, believes that KAYNE has breached any material
obligation under this Agreement and/or the Consulting Agreement attached hereto
as Exhibit "A", then, in addition to any other legal or equitable remedies it
may have, the Company may suspend making the payments to KAYNE provided for in
Section 3 hereof and Section 4 of the Consulting Agreement and, instead shall
place such payments in an interest bearing account to be held in escrow by the
Company pending judicial resolution of the issue of whether KAYNE has breached
this Agreement and/or the Consulting Agreement. Within a reasonable time of
suspending such payments, the Company shall commence an action in any court of
competent jurisdiction seeking, in addition to whatever other remedies may be
available to it, an order that KAYNE has breached any provision of the this
Agreement and/or the Consulting Agreement. Upon the entry of a final judgment
to that effect (and after any appeals, if any) , then any damages to the
Company resulting from said breach, including but not limited to liquidated
damages, may be set-off by the Company from the amounts it holds in escrow
under this Section. Upon entry of any final judgment that KAYNE has not
breached any provision of this Agreement and/or the Consulting Agreement (and
after any appeals, if any) then all funds held in escrow, including interest
thereon, shall be released to KAYNE
Section 17. AUTHORITY OF COMPANY TO ENTER INTO THIS AGREEMENT. The
Company is a corporation duly organized, validly existing and in good standing
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<PAGE> 15
under the laws of the State of Delaware and qualified to transact business in
the State of Arkansas as a foreign corporation. In addition, the execution and
delivery of this Agreement and the performance by it of its obligations under
this Agreement have been duly authorized by all necessary corporate action of
the Company and do not violate or conflict with: (a) any provision of the
Company's Articles of Incorporation or By-laws; (b) any law or any order, writ,
injunction, decree, rule, regulation of any Court, administrative agency or any
other governmental authority; or (c} any agreement to which the Company is a
party or by which the Company is bound.
Section 18. EXPERTS. Each of the parties declares that prior to the
execution of this Agreement, it apprised itself of sufficient relevant data,
either through experts or through other sources of its own selection, including
without limitation full legal review by attorneys chosen by each party, in
order that it might intelligently exercise its own judgment in deciding whether
to execute this Agreement.
Section 19. NOTICE. All notices and other communications to be given
pursuant to this Agreement shall be in writing and shall be delivered,
telegraphed or mailed by first class registered or certified mail, postage
prepaid and return receipt requested to the other party, as set forth below:
If to KAYNE:
Ronald C. Kayne
3000 Puma
Estes Park, CO 80517
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<PAGE> 16
If to the COMPANY:
Beverly Enterprises, Inc.
Attn: Chairman or President
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155
Communications which are delivered or telegraphed shall be deemed to
have been given when delivered or telegraphed. Communications which are mailed
shall be deemed to have been given 72 hours after deposit in the U.S. Postal
Service as required in this Section 19.
Section 20. CHOICE OF LAW. The parties agree that the laws of the
State of Arkansas shall govern the enforcement and construction of the
provisions of this Agreement.
Section 21. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto, and any and all prior agreements, whether oral
or written, on the subject matter contained herein, are superseded by this
Agreement. This Agreement may only be modified by a later agreement in writing
duly executed by each of the parties hereto. In the event of the commencement
of any litigation for the enforcement of any rights under this Agreement, the
prevailing party in such litigation shall be entitled to receive from the
unsuccessful party, all costs incurred in connection with such litigation,
including a reasonable amount as attorneys' fees.
Section 22. DISCLAIMER. KAYNE understands and agrees that he:
(a) Has had a full twenty-one (21) days within which to consider
this Agreement before executing it;
(b) Has carefully read and fully understands all of the provisions
of this Agreement;
(c) Is, through this Agreement, releasing the Company from any and
all claims he may have against the Company;
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<PAGE> 17
(d) Knowingly and voluntarily agrees to all of the terms set forth
in this Agreement;
(e) Knowingly and voluntarily intends to be legally bound by the
same;
(f) Was advised and hereby is advised in writing to consider the
terms of this Agreement and consult with an attorney of his choice prior to
executing this Agreement;
(g) Has a full seven (7) days following the execution of this
Agreement to revoke this Agreement and has been and hereby is advised in
writing that this Agreement shall not become effective or enforceable until the
revocation period has expired; and KAYNE understands that rights or claims
under the Age Discrimination in Employment Act of 1967 (29 U.S.C. SC 621, et
seq.) that may arise after the date this Agreement is executed are not waived
or released.
IN WITNESS WHEREOF, the undersigned, having read the foregoing
Agreement, and understanding all of its terms, execute it voluntarily, on the
date first set forth above, with full knowledge of its significance.
FIRST PARTY
BEVERLY ENTERPRISES, INC.
By
David R. Banks
Chairman, President and Chief
Executive Officer
SECOND PARTY
Ronald C. Kayne
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<PAGE> 1
EXHIBIT 10.36
CONSULTING AGREEMENT
This CONSULTING AGREEMENT is entered into as of the 1st day of
June, 1995, by and between BEVERLY ENTERPRISES, INC., a Delaware corporation
(the "Company"), and RONALD C. KAYNE ("Consultant").
WHEREAS, the Company, through its wholly-owned subsidiary,
Pharmacy Corporation of America ("PCA") , is engaged in the ownership and
operation of institutional pharmacies and businesses throughout the United
States; and
WHEREAS, Consultant is in a position to provide knowledge and
expertise in connection with services necessary to assist in the management,
administration, and operation of a business such as the business of PCA; and
WHEREAS, the parties hereto desire that a consulting
relationship be established between the Company and Consultant.
NOW, THEREFORE, in consideration of the promises, covenants,
and conditions herein contained, the parties mutually agree as follows:
1. DEFINITIONS.
A. As used herein, the term "Consultant" shall mean
Ronald C. Kayne, permitted assigns, administrators and executors.
B. As used herein, the term the "Company" shall mean
Beverly Enterprises, Inc., its affiliates, subsidiaries, divisions, agents,
assigns, pension plans, compensation plans, other benefit plans,
predecessors-in-interest, successors-in-interest, and any officer, director,
employee, agent or other representative of any of the foregoing.
2. CONSULTING AGREEMENT.
The Company hereby engages Consultant to perform, and
Consultant accepts such engagement and agrees to perform, services as a
consultant in connection with services relating to the business of the Company
for a three (3) year term commencing on the date hereof and ending on May 31,
1998 (the "Consulting Period") .
3. COMPENSATION.
The Company agrees to pay Consultant, and Consultant agrees to
accept as full compensation for the performance of consulting services
hereunder, compensation at the rate of Twelve Thousand Five Hundred and No/l00
Dollars ($12,500.00) per month, payable on the first day of each month,
commencing June 1, 1995 and ending on May 31, 1998, for a total payment of Four
Hundred Fifty Thousand and No/l00 Dollars ($450,000.00) during the Consulting
Period.
4. CHANGE OF CONTROL
A. The remaining unpaid balances of the amount in
paragraph 3 shall accelerate and be immediately due and payable to the
Consultant upon the occurrence of any of the following events: (i) a "Change
of Control" of the Company; (ii) the Company shall become insolvent or make a
general assignment for
<PAGE> 2
the benefit of creditors or if a petition under any bankruptcy act or similar
statute is filed against the Company; or (iii) the Company shall not have paid
the Consultant within ninety (90) days of an installment becoming due. A
"Change of Control" shall be defined to have occurred where (i) a single entity
or group of affiliated entities acquires more than 50 percent of the Company's
then outstanding (excluding treasury shares) common stock; (ii) with
shareholder approval the Company is involved in a merger or a sale of all or
substantially all of its assets so that its shareholders before the merger or
sale own less than 50 percent of the voting power of the surviving or acquiring
corporation; or (iii) a change in the majority of the Board of Directors during
any 12-month period occurs without the approval of a majority of directors in
office at the beginning of such period.
B. In the event of the death of the Consultant prior to
full payment of the amount in paragraph 3, the payment or payments remaining
shall, within ninety (90) days of the Company's receipt of a certified copy of
the Consultant's death certificate, be paid in one (1) lump sum payment to the
Consultant's surviving spouse, or if the spouse shall not be living, then first
to the Consultant's Family Trust, if said Trust shall be in existence, if not,
then to the Consultant's estate.
5. DUTIES.
In consideration of the payment to be made hereunder,
Consultant agrees to make himself available, at reasonable times and upon the
reasonable advance request of either the Chairman of the Board of Directors or
the President of PCA, for up to a half-time commitment to consult with and
advise the Company with respect to business or professional matters pertaining
to its business. Consultant shall continue to be responsible for providing
advice and consultation with respect to special projects given to him by the
Company and for such additional projects or responsibilities as may be mutually
agreed. Consultant shall be entitled to be reimbursed for reasonable business
expenses incurred by him in connection with out-of-town travel required in the
rendering of consulting services hereunder.
6. INDEPENDENT CONTRACTOR STATUS.
A. In the performance hereunder, Consultant is an
independent contractor. Consultant shall perform all services hereunder
according to his own means and methods of work to the best of his abilities,
which shall be in his exclusive charge and control and shall not be subject to
the control or supervision of the Company excepting as to the results of the
work. Consultant shall be entirely and solely responsible for his acts while
engaged in the performance of services hereunder.
The parties hereto agree that payments to be made by the
Company to Consultant are for services as an independent contractor. The
Company shall not make any deduction from the fees to be paid Consultant,
including but not limited to social security, withholding taxes, unemployment
insurance, and other such deductions. Consultant assumes full responsibility,
on an independent contractor basis, for all such taxes, contributions, and
assessments and for workers' compensation insurance, agrees to indemnify the
Company with respect thereto and agrees to meet all requirements which may be
specified under applicable
2
<PAGE> 3
regulations of administrative officials or bodies charged with enforcement of
any relevant state or federal act or regulation. Consultant also agrees to
furnish the Company, upon request, a certificate or other evidence of
compliance with the state or federal laws governing contributions, taxes, and
assessments on payrolls.
B. The Consultant agrees to use his best efforts and to act in
the best interests of the Company while acting as a consultant for the Company
and in performing his duties as Consultant. The Company recognizes, however,
that while he is serving as Consultant the Consultant may look for and accept
other employment or business opportunities consistent with and subject to the
provisions and restrictions hereof.
C. The Consultant shall have no power or authority to incur or
create any obligation or liability of any kind for or on behalf of the Company
except as shall be expressly authorized in writing by the Chairman of the Board
of Directors or the President of PCA. The Consultant shall not at any time
enter into any contract with any person or entity that shall purport to bind
the Company in any manner whatsoever without specific written authority
obtained as set forth herein from the Company, and any such contract entered
into by the Consultant without such written authority shall not be binding upon
the Company.
7. NON-COMPETE AND NON-SOLICITATION AGREEMENT.
A. Consultant hereby covenants that during the
Consulting Period, he will not, directly or indirectly, own, manage, operate,
control, engage in, participate in or be connected in any manner with the
ownership, management, operation or control of any institutional pharmacy
business operations, any home infusion therapy business operations, or any home
health care business operations, which are similar to the Company's present
operations, within a 100 mile radius of any of the existing operations of the
Company listed on Exhibit 1 attached hereto. The foregoing shall not prohibit
Consultant from (1) serving on the Park Hospital District Board; (2) from being
employed in any retail pharmacy provided that the retail pharmacy does not
engage in the nursing home pharmacy business (except incidentally) or in the
home IV infusion business, and to the extent it does that Consultant does not
directly or indirectly engage in such businesses; (3) from being employed by
any retail drug chain provided the chain does not engage in nursing home
pharmacy (except incidentally) or in the home IV infusion business, and to the
extent it does that Consultant does not directly or indirectly engage in such
businesses; (4) from being employed by an acute care general hospital provided
the hospital does not engage in the nursing home pharmacy business off its
licensed premises, or in the home IV infusion business except in the care of
its own on-site patients, and to the extent it does that Consultant does not
directly or indirectly engage in such businesses; (5) from being employed by
any pharmaceutical manufacturer provided the manufacturer does not operate
nursing home pharmacies (except incidentally) or home IV infusion pharmacies,
and to the extent it does that Consultant does not directly or indirectly
engage in such businesses, or (6) from being employed by any Health Maintenance
Organization (HMO), Pharmacy Benefit Management Plan, School of Pharmacy and/or
its affiliated teaching hospital(s) or by a Pharmacy Trade Association or
Professional Society so long as any such organization or institution does not
engage in the nursing home pharmacy business (except
3
<PAGE> 4
incidentally) or in the home IV infusion business (except incidentally), and to
the extent it does that Consultant does not directly or indirectly engage in
such businesses.
B. The Consultant shall not during the Consulting Period
or at any time thereafter make, use for his own purposes or divulge to any
person, firm or corporation (except under the authority of the Company or if
ordered to do so by a court of competent jurisdiction) any information or fact
relating to the management, business (including prospective business),
finances, its customers or the terms of any of the contracts of the Company has
heretofore or may hereafter come to the knowledge of the Consultant which is
not freely available to the public.
C. The Consultant hereby covenants with the Company that
he will not for any reason whatsoever and whether directly or indirectly,
either alone or jointly with any person, firm or corporation and whether as
principal, servant or agent:
(i) During the Consulting Period, solicit or
endeavor to entice away, offer employment to or employ, or offer or
conclude any contract for services with any person who is employed by
the Company as of the date of this Agreement so as to affect adversely
the goodwill or business of the Company;
(ii) At any time, in any way defame the Company or
disparage its business capabilities, products, plans or management to
any customer, potential customer, vendor, supplier, contractor,
subcontractor of the Company so as to affect adversely the goodwill or
business of the Company; and
(iii) At any time, use to the detriment of the
Company any confidential information of a technical, trade, financial
or other character which constitutes a legally protectable trade
secret and which the Consultant has acquired or may acquire in the
course of or as a result of his employment by the Company or his
consulting to the Company.
D. The parties agree that the geographical areas and time period
referred to in this paragraph 7 are divisible and severable and that if the
restrictions in subparagraphs 7 A and C are held by any court to be
unenforceable with respect to a specific geographical area and/or time
interval, the restrictions shall remain applicable to all other geographical
areas and terms and to that portion of any reduced geographical area and time
interval designated by the court.
4
<PAGE> 5
E. The parties recognize that, in the event of a breach of the
covenant contained in subparagraphs 7 A through C above, the Company's remedy
at law alone would be inadequate and, accordingly, the Company shall be
entitled to an order or injunction restraining Consultant from violating the
covenant herein contained.
F. For purposes of this paragraph 7 and in consideration of this
Consulting Agreement, this non-competition and non-solicitation agreement has
been separately negotiated and bargained for, and constitutes a substantial
portion of the consideration for this Consulting Agreement.
8. MISCELLANEOUS.
8.1 Successors, Etc. Unaccrued obligations under this
Agreement shall not bind or inure to the benefit of the successors, assigns,
personal representatives, heirs, or legatees of the respective parties.
8.2 Further Agreements. Each party agrees to perform any
further reasonable acts and execute and deliver any documents which may be
necessary to carry out the provisions of this Agreement.
8.3 Amendment. This Agreement may be amended or modified
at any time only by the written agreement of the Company and Consultant.
8.4 Number and Gender. Throughout this Agreement,
whenever the context so requires, the singular shall include the plural, and
the masculine gender shall include the feminine and neuter genders.
8.5 Governing Law. The parties hereby agree that this
Agreement has been executed and delivered in the state of Arkansas and shall be
construed, enforced, and governed by the laws thereof.
8.6 Attorney's Fees. In the event of any action, suit,
or proceeding brought under or in connection with this Agreement, the
prevailing party therein shall be entitled to recover, and the nonprevailing
party thereto agrees to pay, the prevailing party's reasonable costs and
expenses in connection therewith, including reasonable attorneys' fees.
8.7 Notices. All notices and demands between the parties
hereto shall be in writing and shall be ser'ved personally or by registered or
certified mail, and said notices or demands shall be deemed given and made when
personally served or seventy-two (72) hours after the deposit thereof in the
United States mail, postage prepaid, addressed to the party to whom said notice
or demand is to be given or made, and the issuance of the registry receipt
therefor. If served by telegraph, said notice or demand shall be deemed given
and made at the time the telegraph agency shall confirm to the sender delivery
thereof to the addressee.
All notices and demands to the Company or Consultant may be
given to them at:
5
<PAGE> 6
THE COMPANY: BEVERLY ENTERPRISES, INC.
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155
Attention: Chairman of the Board,
President and Chief Executive
Officer
CONSULTANT: RONALD C. KAYNE
3000 Puma
Estes Park, CO 80517
Any party may designate in writing from time to time such other place or places
that said notices and demands may be given.
8.8 Personal Services Agreement. This Agreement may
not be assigned by Consultant and is personal to him. Any attempted assignment
by Consultant shall be void.
8.9 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto pertaining to the subject matter
hereof. Such agreements supersede all prior agreements, written or oral, and
all contemporaneous oral agreements and understanding of the parties, and there
are no warranties, representations, or other agreements between the parties in
connection with the subject matter hereof except as set forth or referred to
herein. No waiver of any of the provisions of this Agreement shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.
8.10 Venue. Suit hereon may be brought only in a court
sitting in Fort Smith, Arkansas.
IN WITNESS WHEREOF, the parties have signed this Consulting Agreement
as of the date first written above.
"COMPANY"
BEVERLY ENTERPRISES, INC.
a Delaware corporation
By:
David R. Banks
Chairman of the Board, President
and Chief Executive Officer
"CONSULTANT"
By:
Ronald C. Kayne
6
<PAGE> 1
EXHIBIT 10.51
TWELFTH 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 BAND OF JAPAN, LTD.
LOS ANGELES AGENCY, AS AGENT
Dated as of October 23, 1995
THIS TWELFTH AMENDMENT dated as of October 23, 1995 (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 10.6 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, as further
amended by that Tenth Amendment to Credit Agreement dated as of December 6,
1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further
amended by that Eleventh Amendment to Credit Agreement dated as of March 27,
1995 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 1.1 OF THE CREDIT AGREEMENT
Subsection 1.1 of the Credit Agreement is hereby amended by
adding the phrase "one, two," immediately before the phrase "three or six
months" appearing in the eleventh line of the definition of "Interest Period."
SECTION 2. REPRESENTATIONS AND WARRANTIES
In order to induce Agent, Co-Agent and Lenders to enter into
this Amendment each of BEI and Borrowers 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
2
<PAGE> 3
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 Eleventh Amendment Effective date ( hereinafter defined), will be
duly authorized by all necessary corporate action on the part of each Loan
Party and this Amendment, as of the Eleventh 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 Eleventh 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,k 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
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<PAGE> 4
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 on the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Twelfth
Amendment Effective Date");
A. On or before the Twelfth 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 Twelfth 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 Twelfth 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.
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
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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 Twelfth
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 aspects 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 as 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 an 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 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.
5
<PAGE> 6
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:
-----------------------------------
Title: Sr. Vice President and Treasurer
--------------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By:
----------------------------------
Title: Sr. Vice President and Treasurer
--------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
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:
---------------------------------
Title:
-------------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By:
----------------------------------
Title:
-------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title: Deputy General Manager
---------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
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.
By:
---------------------------------
Title:
-------------------------------
Borrower:
BEVERLY CALIFORNIA CORPORATION
By:
----------------------------------
Title:
-------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By:
-----------------------------------
Title: Director
--------------------------------
9
<PAGE> 10
Lenders:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
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.
10
<PAGE> 11
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.
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.
11
<PAGE> 12
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.
12
<PAGE> 13
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.
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:
-------------------------------------
Title: Sr. Vice President and Treasurer
---------------------------------
13
<PAGE> 1
EXHIBIT 10.52
THIRTEENTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
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 September 29, 1995
THIS THIRTEENTH AMENDMENT dated as of September 29, 1995 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as 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
<PAGE> 2
November 1, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further 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,
as further amended by that Tenth Amendment to Credit Agreement dated as of
December 6, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Eleventh Amendment to Credit Agreement dated as of
March 27, 1995 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Twelfth Amendment to Credit Agreement dated as of
October 23, 1995 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 1.1 OF THE CREDIT AGREEMENT
Subsection 1.1 of the Credit Agreement is hereby amended by deleting
each of the definitions of "Adjusted Eurodollar Rate" and "Eurodollar Margin"
therefrom in their entirety and substituting the following therefor:
"'Adjusted Eurodollar Rate' means for each Interest Period for any
Eurodollar Rate Loan, (i) the rate per annum that appears on the display
page designated as "LIBO Page" on the Reuter Monitor Money Rates Services
(or such other page as may replace the "LIBO Page" on that service or any
successor service) for U.S. dollar deposits of amounts comparable to
the outstanding principal amount of such Eurodollar Rate Loan and with
2
<PAGE> 3
maturities comparable to the Interest Period to be applicable to such
Eurodollar Rate Loan, determined as of 11:00 A.M. (London time) on the
date which is two Business Days prior to the first day of such Interest
Period divided by (ii) a number equal to 1.00 minus the maximum rate or
rates (expressed as a decimal fraction) of reserve requirements in effect
on the day that is two Business Days prior to the beginning of such
Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as now and from time
to time in effect) for Eurocurrency funding (currently referred to as
'Eurocurrency liabilities' in Regulation D of such Board) that are
required to be maintained by a member bank of such System (such rate to be
rounded upward, if necessary, to the next higher 1/16 of 1%)."
"'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:
<TABLE>
<CAPTION>
EURODOLLAR
RATIO MARGIN
<S> <C>
ACD/CC Ratio less than 0.68;
and 0.750%
Cash Coverage Ratio greater than or equal to
1.66
ACD/CC Ratio greater than or equal to 0.68 and
less than 0.72;
and 0.875%
Cash Coverage Ratio greater than or equal to
1.56 and less than 1.66
ACD/CC Ratio greater than or equal to 0.68 and
less than 0.72;
and
Cash Coverage Ratio greater than or equal to 1.125%
1.45 and less than 1.56
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
ACD/CC Ratio greater than or equal to 0.72 and
less than 0.74;
and
Cash Coverage Ratio greater than or equal to 1.500%
1.40 and less than 1.45
ACD/CC Ratio greater than or equal to 0.74;
or
Cash Coverage Ratio less than 1.40 2.000%
</TABLE>
provided, however, that with respect to the period during
which the Eurodollar Margin is determined on the basis of a
Compliance Certificate delivered in respect of a fiscal
quarter ending during the period from and including September
30, 1995 through and including June 30, 1996, which period
shall in any event not extend beyond July 15, 1996 (the
'Relevant Period'), for any day during the Relevant Period,
'Eurodollar Margin' means 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:
<TABLE>
<CAPTION>
EURODOLLAR
RATIO MARGIN
<S> <C>
ACD/CC Ratio Less than 0.68;
and 0.750%
Cash Coverage Ratio greater than or equal to
1.66
ACD/CC Ratio greater than or equal to 0.68 and
less than 0.72;
and 0.875%
Cash Coverage Ratio greater than or equal to
1.56 and less than 1.66
ACD/CC Ratio greater than or equal to 0.68 and
less than 0.72;
and
Cash Coverage Ratio greater than or equal to 1.000%
1.50 and less than 1.56
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
ACD/CC Ratio greater than or equal to 0.68 and
less than 0.72;
and
Cash Coverage Ratio greater than or equal to 1.125%
1.45 and less than 1.50
ACD/CC Ratio greater than or equal to 0.72 and
less than 0.74;
and
Cash Coverage Ratio greater than or equal to 1.500%
1.40 and less than 1.45
ACD/CC Ratio greater than or equal to 0.74;
or
Cash Coverage Ratio less than 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."
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;
5
<PAGE> 6
(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 Thirteenth 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 Thirteenth 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 Thirteenth 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; and
(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.
6
<PAGE> 7
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 "Thirteenth
Amendment Effective Date"):
A. On or before the Thirteenth 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 Thirteenth Amendment Effective Date:
(i) Signature and incumbency certificates of its officers
executing this Amendment certified by its secretary or an assist ant
secretary; and
(ii) Executed counterparts of this Amendment.
B. On or before the Thirteenth Amendment Effective Date, all
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.
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
7
<PAGE> 8
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 Thirteenth 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 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 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.
8
<PAGE> 9
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.
9
<PAGE> 10
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:
Title Sr. Vice President
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as
Beverly California Corporation)
By:
----------------------------------
Title:
Agent, Co-Agent and Lenders.
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
----------------------------------
Title:
-------------------------------
BANK OF MONTREAL,
as Co-Agent and as a Lender
By:
Title:
-------------------------------
S-1
<PAGE> 11
Lenders:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:
----------------------------------
Title:
-------------------------------
U.S. NATIONAL BANK OF OREGON
By:
----------------------------------
Title: Jonathan A. Horton
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.
Beverly Enterprises - Nebraska, Inc.
Beverly Enterprises - North Carolina, Inc.
Beverly Enterprises - Oregon
Beverly Enterprises - Wisconsin, Inc.
S-2
<PAGE> 12
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.
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.
S-3
<PAGE> 13
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> 14
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:
Title:
S-5
<PAGE> 1
EXHIBIT 10.53
EXECUTION COPY
FOURTEENTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
-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 7, 1995
THIS FOURTEENTH AMENDMENT dated as of December 7, 1995 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as 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 amended by that Ninth
Amendment to Credit Agreement dated as of November 9, 1994 by and
<PAGE> 2
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Tenth Amendment to Credit Agreement dated as of December 6, 1994 by and
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Eleventh Amendment to Credit Agreement dated as of March 27, 1995 by and
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Twelfth Amendment to Credit Agreement dated as of October 23, 1995 by and
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Thirteenth Amendment to Credit Agreement dated as of September 29, 1995 by
and among BEI, Borrower, Co-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 5.14 OF THE CREDIT AGREEMENT
A. Subsection 5.14(l) of the Credit Agreement is hereby amended by
deleting the word "and" appearing at the end thereof.
B. Subsection 5.14(m) of the Credit Agreement is hereby amended by
deleting the "." at end thereof and substituting "; and" therefor.
C. Subsection 5.14 of the Credit Agreement is hereby amended by
adding the following clause at the end thereof:
"(n) Contingent obligations incurred by Subsidiaries of BEI to guaranty
BEI's $150,000,000 Senior Notes due 2005 issued in the fourth quarter of
1995 substantially in accordance with the terms and conditions set forth
in the draft Prospectus relating thereto dated as of November
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21, 1995 ("Unsecured Senior Notes"); provided, that $142, 000,000 of
the aggregate amount of the proceeds of the Unsecured Senior Notes is used
on the date of issuance thereof to repay or reimburse the Borrower for
paying (1) the Morgan Term Loans in an amount not less than $87,500,000;
(2) the Notes in an amount not less than $28,000,000; (3) the Senior Notes
in an amount not less than $17,750,000; and (4) the Nippon Notes in an
amount not less than $8,750,000."
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
Fourteenth 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 Fourteenth 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 Fourteenth 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
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limiting creditors' right 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; and
(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 "Fourteenth
Amendment Effective Date"):
A. On or before the Fourteenth 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 Fourteenth 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 Fourteenth 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.
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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 then 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 then payment and performance of all Obligations,
Guarantied Obligations (as defined in then 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 then 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
Fourteenth 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 sent 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 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
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<PAGE> 6
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.
[Remainder of page intentionally left blank]
6
<PAGE> 7
WITNESS the due execution hereof by then respective duly authorized
officers of the undersigned as of then date first written above.
BEI:
BEVERLY ENTERPRISES, INC.
By:
Title:
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as
Beverly California Corporation)
By:
Title:
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
Title:
BANK OF MONTREAL,
as Co-Agent and as a Lender
By:
Title:
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<PAGE> 8
Lenders:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:
Title:
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.
Commercial Management, Inc.
Hallmark Convalescent Homes, Inc.
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<PAGE> 9
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.
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.
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<PAGE> 10
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.
American Transitional Hospitals of
Indiana, Inc.
American Transitional Hospitals of
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Oklahoma, Inc.
American Transitional Hospitals of
Tennessee, Inc.
ATH Del Oro, Inc.
ATH Heights, Inc.
ATH Tuscon, Inc.
Beverly Enterprises Japan Limited
AdviNent, 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:
Title:
11
<PAGE> 1
EXHIBIT 10.54
FIFTEENTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
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 February 12, 1996
THIS FIFTEENTH AMENDMENT dated as of February 12, 1996 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as Beverly California Corporation), a California corporation
("Borrower"), the SUBSIDIARY GUARANTORS listed o 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 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,
as further amended by that Tenth Amendment to Credit Agreement dated as of
<PAGE> 2
December 6, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Eleventh Amendment to Credit Agreement dated as of
March 27, 1995 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Twelfth Amendment to Credit Agreement dated as of
October 23, 1995 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Thirteenth Amendment to Credit Agreement dated as of
September 29, 1995 and among BEI, Borrower, Co-Agent, Agent and the Lenders, as
further amended by that Fourteenth Amendment to Credit Agreement dated s of
December 7, 1995 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 5.14 OF THE CREDIT AGREEMENT
Subsection 5.14 of the Credit Agreement is hereby amended by
restating clause (n) thereof in its entirety as follows:
"(n) Contingent obligations incurred by Subsidiaries of BEI to
guaranty BEI's $180,000,000 Senior Notes due 2006 issued in the first
quarter of 1996 substantially in accordance with the terms and
conditions set forth in the Prospectus relating thereto dated February
9, 1996 ("Unsecured Senior Notes")'; provided, that $170,000,000 of
the aggregate amount of the proceeds of the Unsecured Senior Notes is
used on the date of issuance thereof to repay or reimburse the
Borrower for paying (1) the Morgan Term Loans in an amount not less
than $87,500,000; (2) revolving loans under the Morgan Credit
Agreement in an amount not less than $45,750,000; (3) the Notes in an
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amount not less than $28,000,000 (4) the Nippon Notes in an
amount not less than $8,750,000."
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 Fifteenth 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 Fifteenth 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 loss 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 Fifteenth 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 (1) violate any provision of any
law or any governmental rule or
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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; and
(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 "Fifteenth
Amendment Effective Date")'
A. On or before the Fifteenth 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 Fifteenth 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 Fifteenth 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 of by telex or
telephonic confirmation.
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
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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 materials respects on and as of the Fifteenth
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 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.
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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.
(Remainder of page intentionally left blank)
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:
-----------------------------------
Title:
--------------------------------
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as Beverly
California Corporation)
By:
----------------------------------
Title:
-------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
BANK OF MONTREAL,
as Co-Agent as a Lender
By:
-----------------------------------
Title:
--------------------------------
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:
-----------------------------------
Title:
--------------------------------
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as Beverly
California Corporation)
By:
----------------------------------
Title:
-------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title: Deputy General Manager
--------------------------------
BANK OF MONTREAL,
as Co-Agent as a Lender
By:
-----------------------------------
Title:
--------------------------------
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.
By:
-----------------------------------
Title:
--------------------------------
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as Beverly
California Corporation)
By:
----------------------------------
Title:
-------------------------------
Agent, Co-Agent and Lenders:
THE LONG-TERM CREDIT BANK OF JAPAN,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-----------------------------------
Title:
--------------------------------
BANK OF MONTREAL,
as Co-Agent as a Lender
By:
-----------------------------------
Title: Director
--------------------------------
9
<PAGE> 10
Lenders:
INTERNATIONAL NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
U.S. NATIONAL BANK OF OREGON
By:
-----------------------------------
Title:
--------------------------------
The Subsidiary Guarantors:
A.B.C. Health Equipment Corp.
Alliance Health Services, Inc.
Alliance Home Health Care, Inc.
Amco Medical Service, Inc.
American Transitional Hospitals
-- Texas Medical Center, Inc.
ATH Clear Lake, Inc.
ATH Columbus, Inc.
ATH Oklahoma City, Inc.
Beverly Assisted Living, Inc.
Beverly Enterprises - Alabama, Inc.
Beverly Enterprises - Arkansas, Inc.
Beverly Enterprises - Delaware, Inc.
10
<PAGE> 11
Beverly Enterprises - District of
Columbia, Inc.
Beverly Enterprises - Florida, Inc.
Beverly Enterprises - Georgia, Inc.
Beverly Enterprises - Iowa, Inc.
Beverly Enterprises - Maine, Inc.
Beverly Enterprises - Maryland, Inc.
Beverly Enterprises - Massachusetts, 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 Mexico, Inc.
Beverly Enterprises - North Carolina, Inc.
Beverly Enterprises - North Dakota, Inc.
Beverly Enterprises - Oklahoma, Inc.
Beverly Enterprises - Oregon
Beverly Enterprises - Rhode Island, Inc.
Beverly Enterprises - Vermont, Inc.
Beverly Enterprises - Wisconsin, Inc.
Beverly Enterprises - Wyoming, Inc.
Beverly Enterprises Medical Equipment
Corporation
11
<PAGE> 12
Beverly Enterprises Rehabilitation
Corporation
Beverly Holdings I, Inc.
Beverly Real Estate Holdings, Inc.
Beverly Remic Depositor, Inc.
Brownstone Pharmacy, Inc.
Commercial Management, Inc.
DD Wholesale, inc.
Dunnington Drug, Inc.
Dunnington RX Services of Rhode Island,
Inc.
Dunnington RX Services of Massachusetts,
Inc.
Hallmark Convalescent Homes, Inc.
Healthcare Prescription Services, Inc.
Hospital Facilities Corporation
Insta-Care Holdings, Inc.
Insta-Care Pharmacy Services Corporation
Insurance Software Packages, Inc.
Medical Health Industries, Inc.
Medview Services, Incorporated
Moderncare of Lumberton, Inc.
Nebraska City S-C-H, Inc.
Omni Med B, Inc.
Pharmacy Corporation of America --
Massachusetts, Inc.
Pharmacy Dynamics Group, Inc.
Phymedsco, Inc.
12
<PAGE> 13
Resources Opportunities, Inc.
Spectra Rehab Alliance, Inc.
South Dakota - Beverly Enterprises, Inc.
TMD Disposition Company
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 - 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.
13
<PAGE> 14
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, Inc.
Home Medical Systems, Inc.
Kenwood View Nursing Homes, Incorporated
Liberty Nursing Homes, Incorporated
Medical Arts Health Facility of
Lawrenceville, Inc.
Nursing Home Operators, Inc.
Peterson 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.
American Transitional Hospitals of
Indiana, Inc.
American Transitional Hospitals of
14
<PAGE> 15
Oklahoma, Inc.
American Transitional Hospitals of
Tennessee, Inc.
ATH Del Oro, Inc.
ATH Heights, Inc.
ATH Tucson, 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:
------------------------------
Title:
---------------------------
15
<PAGE> 1
EXHIBIT 10.63
EXECUTION VERSION
SIXTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
(FORMERLY KNOWN AS 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 July 25, 1995
THIS SIXTH AMENDMENT dated as of July 25, 1995 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as 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, as
further amended by that certain Third Amendment to Credit Agreement dated as of
November 1, 1994, as further amended by that certain Fourth Amendment to Credit
Agreement dated as of November 9, 1994, and as further amended by that certain
Fifth Amendment to Credit Agreement dated as of December 30, 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;
<PAGE> 2
WHEREAS, the Obligations of the Borrower under the Credit
Agreement are secured by the Collateral Documents, including inter alia, that
certain Mortgage, Assignment of Leases and Rents, Security Agreement, Financing
Statement and Fixture Filing dated March 2, 1993 and filed on March 8, 1993,
now appearing of record at Page 837 of Book 808 in the office of the Recorder
of Crittenden County, Arkansas in favor of Nippon Credit Trust Company, as
Collateral Agent (the "Collateral Agent") from Beverly Enterprises - Arkansas
Inc., a Wholly-Owned Subsidiary of the Borrower (the "Arkansas Mortgage");
WHEREAS, the Borrower has requested the Lenders and the Agent
to authorize the release by the Collateral Agent of the Arkansas Mortgage;
WHEREAS, the Lenders and the Agent are willing so to authorize
the release of the Arkansas Mortgage upon the terms and subject to the
conditions set forth herein, including the amendment of the Credit Agreement in
certain respects and the grant by Beverly Enterprises - Arkansas Inc. in favor
of the Collateral Agent of a first priority Lien in all the right, title and
interest of Beverly Enterprises - Arkansas Inc. in and to that certain real
property known as West Memphis Nursing and Rehabilitation, 800 West Broadway,
West Memphis, Arkansas 72301 and more described in Annex "A" attached hereto
(the "Replacement Arkansas Property");
WHEREAS, Guarantors desire to reaffirm the effectiveness
respectively of the Subsidiary Guaranty Agreement and the BEI Guaranty
Agreement;
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 Agreement 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 Agreement. Subject to conditions set forth
in paragraph 5 hereof, the Credit Agreement is hereby amended as follows:
(a) The introductory paragraph is amended by deleting
"BEVERLY CALIFORNIA CORPORATION" appearing in the third line
2
<PAGE> 3
thereof and replacing it with "BEVERLY HEALTH AND REHABILITATION
SERVICES, INC. (formerly known as Beverly California Corporation)."
(b) Subsection 1.1 is amended by changing the
definition of "Borrower" set forth therein to read in its
entirety as follows:
"Borrower" means Beverly Health and Rehabilitation
Services, Inc. (formerly known as Beverly California
Corporation), a California corporation.
(c) Subsection 5.11(c) is amended by deleting such
subsection in its entirety and replacing it with the following:
(c) Capital contributions to Beverly Funding Corp.,
if, after giving effect thereto, the aggregate capital of
Beverly Funding Corp. does not exceed 25% of the maximum
amount of Permitted Receivables Financing Securities that
Beverly Funding Corp. is able to issue under its Receivables
Financing Program as it may exist from time to time;
(d) Subsection 5.13 C. is amended by deleting such
subsection in its entirety and replacing it with the following:
C. Neither BEI nor any of its Subsidiaries will
create, assume or suffer to exist any Lien on any patient
accounts receivable of BEI or any of its Subsidiaries that
are rights to payment for goods sold or services rendered at
any facility that constitutes a portion of the Collateral,
except for Liens on patient accounts receivable of BEI and its
Subsidiaries 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 a Permitted Receivables Financing
Securities shall not exceed at any time 175% of the aggregate
principal amount of all Permitted Receivables Financing
Securities then outstanding.
3
<PAGE> 4
(e) Section 5.24 is amended by deleting such section in
its entirety and replacing it with the following:
5.24 Permitted Receivables Financing Securities
The aggregate principal amount of all Permitted
Receivables Financing Securities outstanding at any time
shall not exceed $100,000,000.
(f) Schedule C is amended by deleting such schedule in
its entirety and replacing it with the new Schedule C set forth in
Annex "B" attached hereto.
3. RELEASE AND REPLACEMENT OF THE ARKANSAS MORTGAGE.
Upon the satisfaction of the conditions set forth in
Section 5, and upon the concurrent delivery by Beverly Enterprises - Arkansas
Inc. to the Collateral Agent of a Mortgage in substantially the form of Annex
"C" attached hereto the effect of which is to grant to the Collateral Agent a
first priority Lien on the Replacement Arkansas Property (the "Replacement
Arkansas Mortgage"), the Agent shall execute and deliver to the Collateral
Agent a Collateral Release Request in the form of Annex "D" attached hereto.
4. 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;
(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, the Replacement Arkansas Mortgage, 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 Sixth
Amendment Effective Date (as hereinafter defined), will be
4
<PAGE> 5
duly authorized by all necessary corporate action on the part
of each Loan Party, and this Amendment as of the Sixth
Amendment Effective Date, 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 or limiting creditors' rights
generally or by equitable principles relating to
enforceability. The Credit Agreement constitutes and, as of
the Sixth Amendment Effective Date, the Credit Agreement, as
amended by this Amendment, and the Replacement Arkansas
Mortgage will constitute, a valid and binding agreement of
each applicable Loan Party, enforceable against each
applicable Loan Party in accordance with their respective
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 Replacement Arkansas
Mortgage, and the performance by each such Loan Party of the
Credit Agreement as amended by this Amendment, and the
Replacement Arkansas Mortgage, 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 the Replacement Arkansas Mortgage and any of the other
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 Replacement Arkansas
Mortgage, and the performance by each such Loan Party of the
Credit Agreement as amended by this Amendment, and the
Replacement Arkansas Mortgage, 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.
5
<PAGE> 6
(g) The Replacement Arkansas Mortgage and the other
Collateral Documents, when executed and delivered in accordance with
this Amendment, will create valid security interests in and mortgage
liens on the Collateral purported to be covered thereby, which
security interests and mortgage liens, when recorded or filed pursuant
to the requirements hereof and in the credit Agreement, will remain
perfected security interests and mortgage leins, prior to all Liens
other than Permitted Liens.
5. 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 "Sixth Amendment Effective Date"):
(a) On or before the Sixth 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 Sixth Amendment Effective Date, duly executed and delivered
by the parties thereto:
(i) Signature and incumbency certificates of each
of BEI, Borrower, Beverly Enterprises - Arkansas Inc. and
each Subsidiary Guarantor of its respective officers
executing this Amendment and/or the Replacement Arkansas
Mortgage certified by such party's respective secretary or
assistant secretary; and
(ii) Executed counterparts of this Amendment.
(b) On or before the Sixth Amendment Effective Date,
the Borrower shall have delivered to the Agent the Replacement
Arkansas Mortgage, duly executed by Beverly Enterprises - Arkansas
Inc., together with the following:
(i) evidence satisfactory to the Agent of the
filing of proper financing statements and fixture filings
duly filed under the Uniform Commercial Code (or any
equivalent or similar legislation) in form and substance
satisfactory to the Agent in each jurisdiction as may be
reasonably necessary or desirable, in each case to
effectively perfect the first priority security interests
in the Replacement Arkansas Mortgage and any other
Collateral created by the Replacement Arkansas Mortgage;
(ii) evidence satisfactory to the Agent of
the filing of amendments to that certain UCC-1 financing
statement number 840810 filed with the Secretary of State
of the State of Arkansas amending such financing statement
to (a) release the security interest in the
6
<PAGE> 7
Collateral created by the Arkansas Mortgage and (b) include a
first priority security interest in the Collateral created by the
Replacement Arkansas Mortgage;
(iii) evidence that a counterpart of the Replacement
Arkansas Mortgage has been duly recorded in all places that are
reasonably necessary effectively to create a valid and
enforceable first priority Lien on the Replacement Arkansas
Property in favor of the Agent or the Collateral Agent subject
only to Permitted Liens;
(iv) a title insurance policy with respect to the
Replacement Arkansas Property in the form of an American Land
Title Association Standard Loan Policy Form 1970, with ALTA
Endorsement Form 1 coverage, insuring that on the Sixth Amendment
Effective Date, Beverly Enterprises - Arkansas Inc. owns fee
simple title to such real property and that the Replacement
Arkansas Mortgage is a valid first priority Lien on such
Replacement Arkansas Property in an amount equal to at least
$2,400,000. Such title insurance policy shall contain CLTA
Endorsements 100, 104, 110.9, 111.5, 116, 116.1 (for properties
for which surveys presently exist), 116.4 and 123.2 (or ALTA
Endorsements corresponding thereto) and CLTA Endorsements or ALTA
Endorsements relating to usury, subdivisions, mortgagee's alien
status, morgagee's conduct of business and tie-in provisions, to
the extent available or applicable. Except as approved by the
Agent in writing prior to the Sixth Amendment Effective Date, no
such title insurance policy shall contain any survey exceptions,
exceptions for rights of parties in possession, easements not of
record or installments of taxes or special assessments (other
than taxes and special assessments not then payable), or any
other exceptions to coverage not approved by the Agent. Each such
title insurance policy shall contain such reinsurance agreements
as the Agent may reasonably require; and
(v) evidence of the insurance required by the terms of
the Replacement Arkansas Mortgage.
(c) On or before the Sixth 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
7
<PAGE> 8
have received all such counterpart originals or certified
copies of such documents as the Agent may reasonably request.
(d) On or before the Sixth Amendment Effective Date,
the 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.
6. Acknowledgment and Agreement 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 Sixth 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 in addition to all the
other waivers agreed to and made by Guarantor as set forth in the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound, and pursuant to the provisions of California Civil Code Section 2856,
"Guarantor waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Guarantor's rights of subrogation and reimbursement against
the principal by the
8
<PAGE> 9
operation of Section 580d of the Code of Civil Procedure or otherwise."
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.
7. APPRAISAL OF REPLACEMENT ARKANSAS PROPERTY. Within fifteen (15)
days after the Sixth Amendment Effective Date, Borrower shall obtain and
deliver to Agent an appraisal of the Replacement Arkansas Property in form,
scope and substance satisfactory to Agent, to be conducted by an independent
appraisal firm approved by Agent showing that the appraisal value of the
Replacement Arkansas Property equals or exceeds the appraisal value of the real
property on which the Agent had a first priority Lien pursuant to the Arkansas
Mortgage.
8. 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 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.
9. 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.
10. 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.
11. 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.
9
<PAGE> 10
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:
-------------------------------------
Title:
----------------------------------
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC.
By:
-------------------------------------
Title:
----------------------------------
Agent:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-1
<PAGE> 11
Lenders:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as Agent and as a Lender
By:
------------------------------------
Title:
---------------------------------
TORONTO-DOMINION (TEXAS), INC.
as a Lender
By:
------------------------------------
Title:
---------------------------------
[Signatures Continued]
S-2
<PAGE> 12
The Subsidiary Guarantors:
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.
Beverly Enterprises -
Alabama, Inc.
Beverly Enterprises -
Arkansas, Inc.
Beverly Enterprises -
Florida, Inc.
Beverly Enterprises -
Georgia, Inc.
Beverly Enterprises
Japan Limited
Beverly Enterprises -
Maryland, Inc.
Beverly Enterprises -
Massachusetts, Inc.
Beverly Enterprises -
Minnesota, Inc.
S-3
<PAGE> 13
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.
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.
S-4
<PAGE> 14
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.
Beverly Enterprises -
Virginia, Inc.
Beverly Enterprises -
Washington, Inc.
S-5
<PAGE> 15
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.
S-6
<PAGE> 16
Taylor County Health
Facility, Incorporated
Alliance Health Services,
Inc.
Healthcare Prescription
Services, Inc.
Dunnington Drugs, Inc.
Insta-Care Holdings, Inc.
By: /s/ [ILLEGIBLE]
------------------------------------
Title: Sr. Vice President and Treasurer
---------------------------------
S-7
<PAGE> 1
EXHIBIT 10.65
EXECUTION COPY
EIGHTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
(FORMERLY KNOWN AS 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 February 14, 1996
THIS EIGHTH AMENDMENT dated as of February 14, 1996 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as 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, as
further amended by that certain Third Amendment to Credit Agreement dated as of
November 1, 1994, as further amended by that certain Fourth Amendment to Credit
Agreement dated as of November 9, 1994, as further amended by that certain
Fifth Amendment to Credit Agreement dated as of December 30, 1994, as further
amended by that certain Sixth Amendment to Credit Agreement dated as of July
25, 1995 and as further amended by that certain Seventh Amendment to Credit
Agreement dated as of September 29, 1995 (as so amended, the "Credit
Agreement"), as set forth herein.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
<PAGE> 2
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;
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 Agreement 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 Agreement. Subject to conditions set forth in
paragraph 4 hereof, the Credit Agreement is hereby amended as follows:
(a) Subsection 5.15(l) of the Credit Agreement is hereby amended by
deleting the word "and" appearing at the end thereof.
(b) Subsection 5.15(m) of the Credit Agreement is hereby amended by
deleting the "." appearing at the end thereof and substituting "; and"
therefor.
(c) Subsection 5.15 of the Credit Agreement is hereby amended by
adding the following clause at the end thereof:
(n) Contingent obligations incurred by Subsidiaries of BEI to
guaranty BEI's $180,000,000 Senior Notes due 2006 issued in the
first quarter of 1996 substantially in accordance with the terms
and conditions set forth in the Prospectus relating thereto
dated as of February 9, 1996 ("Unsecured Senior Notes");
provided, that $170,000,000 of the aggregate amount of the
proceeds of the Unsecured Senior Notes is used on the date of
issuance thereof to repay or reimburse the Borrower for repaying
(1) the Morgan Term Loans in an amount not less than
$87,500,000; (2) the LTCB Notes in an amount not less than
$28,000,000; (3) the Notes in an amount not less than
$8,750,000; and (4) the remaining balance to
2
<PAGE> 3
repay a portion of the revolving loans outstanding under the
Morgan Credit Agreement.
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;
(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 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, 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 Eighth Amendment Effective Date, the
Credit Agreement, as amended by this Amendment, will constitute, a valid
and binding agreement of each applicable Loan Party, enforceable against
each applicable Loan Party in accordance with their respective 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.
3
<PAGE> 4
(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, 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 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.
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 "Eighth Amendment Effective Date"):
(a) On or before the Eighth 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 Eighth
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; and
(ii) Executed counterparts of this Amendment.
(b) 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 the Agent, acting on behalf of the Lenders,
and its counsel shall be satisfactory in form and substance to the
4
<PAGE> 5
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
(c) On or before the Eighth Amendment Effective Date, 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. and Synergos-North Hollywood, Inc. 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.
(d) On or before the Eighth Amendment Effective Date, the 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.
5. Acknowledgment and Agreement 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 Eighth 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.
5
<PAGE> 6
Each Guarantor acknowledges and agrees that in addition to all the
other waivers agreed to and made by Guarantor as set forth in the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound, and pursuant to the provisions of California Civil Code Section 2856,
"Guarantor waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Guarantor's rights of subrogation and. reimbursement against
the principal by the operation of Section 580d of the Code of Civil Procedure
or otherwise. "
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 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.
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:
Title:
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC.
By:
Title:
Agent:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as Agent
By:
Title:
7
<PAGE> 8
Lenders:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as a Lender
By:
Title:
TORONTO-DOMINION (TEXAS), INC.,
as a Lender
By:
Title:
[Signatures Continued]
8
<PAGE> 9
The Subsidiary Guarantors:
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.
Beverly Enterprises -
Alabama, Inc.
Beverly Enterprises -
Arkansas, Inc.
Beverly Enterprises -
Florida, Inc.
Beverly Enterprises -
Georgia, Inc.
Beverly Enterprises
Japan Limited
Beverly Enterprises-
Maryland, Inc.
Beverly Enterprises -
Massachusetts, Inc.
Beverly Enterprises -
Minnesota, Inc.
9
<PAGE> 10
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.
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.
10
<PAGE> 11
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.
Beverly Enterprises -
Virginia, Inc.
Beverly Enterprises -
Washington, Inc.
11
<PAGE> 12
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.
12
<PAGE> 13
Taylor County Health
Facility, Incorporated
Alliance Health Services,
Inc.
Healthcare Prescription
Services, Inc.
Dunnington Drugs, Inc.
Insta-Care Holdings, Inc.
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:
Title:
13
<PAGE> 1
EXHIBIT 10.65
EXECUTION COPY
EIGHTH AMENDMENT
TO CREDIT AGREEMENT
AMONG
BEVERLY ENTERPRISES, INC.,
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
(FORMERLY KNOWN AS 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 February 14, 1996
THIS EIGHTH AMENDMENT dated as of February 14, 1996 (this
"Amendment"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as 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, as
further amended by that certain Third Amendment to Credit Agreement dated as of
November 1, 1994, as further amended by that certain Fourth Amendment to Credit
Agreement dated as of November 9, 1994, as further amended by that certain
Fifth Amendment to Credit Agreement dated as of December 30, 1994, as further
amended by that certain Sixth Amendment to Credit Agreement dated as of July
25, 1995 and as further amended by that certain Seventh Amendment to Credit
Agreement dated as of September 29, 1995 (as so amended, the "Credit
Agreement"), as set forth herein.
RECITALS
WHEREAS, Borrower desires to amend the Credit Agreement in certain
respects;
<PAGE> 2
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;
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 Agreement 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 Agreement. Subject to conditions set forth in
paragraph 4 hereof, the Credit Agreement is hereby amended as follows:
(a) Subsection 5.15(l) of the Credit Agreement is hereby amended by
deleting the word "and" appearing at the end thereof.
(b) Subsection 5.15(m) of the Credit Agreement is hereby amended by
deleting the "." appearing at the end thereof and substituting "; and"
therefor.
(c) Subsection 5.15 of the Credit Agreement is hereby amended by
adding the following clause at the end thereof:
(n) Contingent obligations incurred by Subsidiaries of BEI to
guaranty BEI's $180,000,000 Senior Notes due 2006 issued in the
first quarter of 1996 substantially in accordance with the terms
and conditions set forth in the Prospectus relating thereto
dated as of February 9, 1996 ("Unsecured Senior Notes");
provided, that $170,000,000 of the aggregate amount of the
proceeds of the Unsecured Senior Notes is used on the date of
issuance thereof to repay or reimburse the Borrower for repaying
(1) the Morgan Term Loans in an amount not less than
$87,500,000; (2) the LTCB Notes in an amount not less than
$28,000,000; (3) the Notes in an amount not less than
$8,750,000; and (4) the remaining balance to
2
<PAGE> 3
repay a portion of the revolving loans outstanding under the
Morgan Credit Agreement.
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;
(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 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, 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 Eighth Amendment Effective Date, the
Credit Agreement, as amended by this Amendment, will constitute, a valid
and binding agreement of each applicable Loan Party, enforceable against
each applicable Loan Party in accordance with their respective 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.
3
<PAGE> 4
(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, 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 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.
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 "Eighth Amendment Effective Date"):
(a) On or before the Eighth 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 Eighth
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; and
(ii) Executed counterparts of this Amendment.
(b) 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 the Agent, acting on behalf of the Lenders,
and its counsel shall be satisfactory in form and substance to the
4
<PAGE> 5
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
(c) On or before the Eighth Amendment Effective Date, 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. and Synergos-North Hollywood, Inc. 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.
(d) On or before the Eighth Amendment Effective Date, the 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.
5. Acknowledgment and Agreement 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 Eighth 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.
5
<PAGE> 6
Each Guarantor acknowledges and agrees that in addition to all the
other waivers agreed to and made by Guarantor as set forth in the Guaranty
Agreement and the Collateral Documents to which it is a party or otherwise
bound, and pursuant to the provisions of California Civil Code Section 2856,
"Guarantor waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Guarantor's rights of subrogation and. reimbursement against
the principal by the operation of Section 580d of the Code of Civil Procedure
or otherwise. "
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 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.
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:
Title:
Borrower:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC.
By:
Title:
Agent:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as Agent
By:
Title:
7
<PAGE> 8
Lenders:
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as a Lender
By:
Title:
TORONTO-DOMINION (TEXAS), INC.,
as a Lender
By:
Title:
[Signatures Continued]
8
<PAGE> 9
The Subsidiary Guarantors:
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.
Beverly Enterprises -
Alabama, Inc.
Beverly Enterprises -
Arkansas, Inc.
Beverly Enterprises -
Florida, Inc.
Beverly Enterprises -
Georgia, Inc.
Beverly Enterprises
Japan Limited
Beverly Enterprises-
Maryland, Inc.
Beverly Enterprises -
Massachusetts, Inc.
Beverly Enterprises -
Minnesota, Inc.
9
<PAGE> 10
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.
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.
10
<PAGE> 11
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.
Beverly Enterprises -
Virginia, Inc.
Beverly Enterprises -
Washington, Inc.
11
<PAGE> 12
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.
12
<PAGE> 13
Taylor County Health
Facility, Incorporated
Alliance Health Services,
Inc.
Healthcare Prescription
Services, Inc.
Dunnington Drugs, Inc.
Insta-Care Holdings, Inc.
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:
Title:
13
<PAGE> 1
EXHIBIT 10.68
[EXECUTION COPY]
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of September 29, 1995 among BEVERLY HEALTH &
REHABILITATION SERVICES, INC., 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.
WITNESSETH :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of November 1, 1994 (as amended, 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 2.12(d) of the Credit Agreement.
Section 2.12(d) of the Credit Agreement is hereby amended by adding at the end
thereof:
"; provided that any such prepayment made after October 1, 1995 and
prior to December 31, 1997 shall be applied to such remaining scheduled
prepayments, first, in chronological order to prepayments scheduled to be
made after the date hereof and on or prior to December 31, 1997 and,
second, as otherwise provided in this subsection (d)."
<PAGE> 2
SECTION 3. Amendment to Schedule I to the Credit Agreement.
Schedule I to the Credit Agreement is hereby amended by amending the definition
of "Level II Pricing" contained therein by adding, following the expression
"1.56 to 1.0" on the eleventh line thereof, the expression "(or, at any time
that the Pricing Level is determined on the basis of a certificate in respect
of a fiscal quarter ending during the period from and including September 30,
1995 through and including June 30, 1996, 1.50 to 1.0)".
SECTION 4. Amendment of Section 5.13(a) of the Credit Agreement.
Section 5.13(a) of the Credit Agreement is hereby amended by:
(a) deleting the word "and" at the end of clause (xiv) thereof;
(b) renumbering clause (xv) thereof as clause (xvi); and
(c) adding, following clause (xiv) thereof, a new clause (xv) to
read in its entirety as follows:
"(xv) Debt in respect of the Guarantor's $150,000,000 Senior
Notes due 2005 issued in the fourth quarter of 1995; provided that
not less than $140,000,000 of the proceeds of such Debt are used to
repay (or reimburse the Borrower for repaying after the date hereof)
Term Loans and Debt permitted under clause (viii) of this subsection
(a); and".
SECTION 5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 6. 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); provided that Section 3
hereof shall be effective only when the Agent shall have
2
<PAGE> 3
received such counterparts or confirmation from all of the Banks.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
THE BORROWER
BEVERLY HEALTH & REHABILITATION
SERVICES, INC.
By
Title:
THE GUARANTOR
BEVERLY ENTERPRISES, INC.
By:
Title:
BANKS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
Title:
CHEMICAL BANK
By
Title:
3
<PAGE> 4
THE BANK OF NEW YORK
By:
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.,
LOS ANGELES AGENCY
By
Title:
NATIONSBANK OF TEXAS, N.A.
By
----------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
Title:
4
<PAGE> 5
BANK OF AMERICA
By
Title: Ruth Z. Edwards
Vice President
BANK OF MONTREAL
By
-----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By
Title:
BHF-BANK AKTIENGESELLSCHAFT
By
Title:
THE NIPPON CREDIT BANK, LTD.
By
-----------------------------------
Title:
5
<PAGE> 6
THE NIPPON CREDIT BANK, LTD.
Los Angeles Agency
By
-------------------------------------
Title: Bernardo E. Correa-Henschke
Vice President & Manager
BANK OF HAWAII
By
Title:
AGENT AND ISSUING BANK
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent and Issuing
Bank
By
Title:
6
<PAGE> 7
BANK OF HAWAII
By
Title:
AGENT AND ISSUING BANK
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent and Issuing
Bank
By
Title:
7
<PAGE> 1
EXHIBIT 10.69
[EXECUTION COPY]
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT dated as of February 12, 1996 among BEVERLY HEALTH &
REHABILITATION SERVICES, INC., 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.
WITNESSETH :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of November 1, 1994 (as amended, 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 5.13(a) of the Credit Agreement.
Section 5.13(a) of the Credit Agreement is hereby amended by restating clause
(xv) in its entirety as follows:
"(xv) Debt in respect of the Guarantor's $180,000,000 Senior Notes
due 2006 issued in the first quarter of 1996; provided that not less than
$170,000,000 of the proceeds of such Debt are used to repay (or reimburse
the Borrower for repaying after the date hereof) Term Loans, Revolving
Loans and Debt
<PAGE> 2
permitted under clause (viii) of this subsection (a) with respect to the
LTCB Financing Documents and the Nippon Financing Documents; and".
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).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
THE BORROWER
BEVERLY HEALTH & REHABILITATION
SERVICES, INC.
By
Title:
THE GUARANTOR
BEVERLY ENTERPRISES, INC.
By
Title:
2
<PAGE> 3
BANKS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
Title:
CHEMICAL BANK
By
Title:
THE BANK OF NEW YORK
By
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.,
LOS ANGELES AGENCY
By
Title:
3
<PAGE> 4
NATIONSBANK OF TEXAS, N.A.
By
Title: Vice President
Michael B. Hobbs
PNC BANK, NATIONAL ASSOCIATION
By
Title:
BANK OF AMERICA
By
Title:
BANK OF MONTREAL
By
Title:
THE BANK OF NOVA SCOTIA
By
Title:
4
<PAGE> 5
BHF-BANK AKTIENGESELLSCHAFT
By
Title:
THE NIPPON CREDIT BANK, LTD.
By
Title:
BANK OF HAWAII
By
Title:
AGENT AND ISSUING BANK
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent and Issuing
Bank
By
Title:
5
<PAGE> 1
BEVERLY ENTERPRISES, INC.
EXHIBIT 11.1
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
PRIMARY:
Income (loss) before redemption premium on preferred stock,
extraordinary
charge and cumulative effect of change in accounting for income
taxes.......................................................... $ (8,123) $76,913 $57,956 $ 1,945 $29,238
Redemption premium on preferred stock............................ -- -- (20,000) -- --
-------- ------- ------- -------- -------
Income (loss) before extraordinary charge and cumulative effect
of change
in accounting for income taxes................................. (8,123) 76,913 37,956 1,945 29,238
Extraordinary charge............................................. -- (2,412) (2,345) (8,835) --
Cumulative effect of change in accounting for income taxes....... -- -- -- (5,454) --
-------- ------- ------- -------- -------
Net income (loss)................................................ (8,123) 74,501 35,611 (12,344) 29,238
Preferred stock dividends........................................ (6,875) (8,250) (4,438) (1,000) --
-------- ------- ------- -------- -------
Net income (loss) applicable to common shares.................... $(14,998) $66,251 $31,173 $(13,344) $29,238
======== ======= ======= ======== =======
Applicable common shares:
Weighted average outstanding shares during the period.......... 92,233 85,430 79,735 76,224 73,972
Assumed conversion of preferred stock.......................... -- --(b) --(a) --(a) 5,300
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options) using the
"treasury stock" method...................................... --(a) 1,657 1,472 1,461 1,946
-------- ------- ------- -------- -------
Total.......................................................... 92,233 87,087 81,207 77,685 81,218
======== ======= ======= ======== =======
Income (loss) per share of common stock:
Before redemption premium on preferred stock, extraordinary
charge and
cumulative effect of change in accounting for income taxes... $ (.16) $ .79 $ .66 $ .01 .36
Redemption premium on preferred stock.......................... -- -- (.25) -- --
-------- ------- ------- -------- -------
Before extraordinary charge and cumulative effect of change in
accounting
for income taxes............................................. (.16) .79 .41 .01 .36
Extraordinary charge........................................... -- (.03) (.03) (.11) --
Cumulative effect of change in accounting for income taxes..... -- -- -- (.07) --
-------- ------- ------- -------- -------
Net income (loss) per share of common stock.................... $ (.16) $ .76 $ .38 $ (.17) .36
======== ======= ======= ======== =======
FULLY DILUTED:
Income (loss) before redemption premium on preferred stock,
extraordinary
charge and cumulative effect of change in accounting for income
taxes.......................................................... $ (8,123) $76,913 $57,956 $ 1,945 $29,238
Reduction of interest and amortization expenses resulting from
assumed
conversion of 7 5/8% convertible subordinated debentures....... --(a) --(a) --(a) --(a) --(a)
Reduction of interest and amortization expenses resulting from
assumed
conversion of 5 1/2% convertible subordinated debentures....... --(a) -- -- -- --
Reduction of interest and amortization expenses resulting from
assumed
conversion of 9% convertible subordinated debentures........... -- --(c) 2,711 --(a) --(a)
Reduction of interest and amortization expenses resulting from
assumed
conversion of zero coupon and other notes...................... --(a) --(a) 116 --(a) 63
Less applicable income taxes..................................... -- -- (933) -- (19)
-------- ------- ------- -------- -------
Adjusted income (loss) before redemption premium on preferred
stock, extraordinary charge and cumulative effect of change in
accounting for income taxes.................................... (8,123) 76,913 59,850 1,945 29,282
Redemption premium on preferred stock............................ -- -- (20,000) -- --
-------- ------- ------- -------- -------
Adjusted income (loss) before extraordinary charge and cumulative
effect of
change in accounting for income taxes.......................... (8,123) 76,913 39,850 1,945 29,282
Extraordinary charge............................................. -- (2,412) (2,345) (8,835) --
Cumulative effect of change in accounting for income taxes....... -- -- -- (5,454) --
-------- ------- ------- -------- -------
Adjusted net income (loss)....................................... (8,123) 74,501 37,505 (12,344) 29,282
Preferred stock dividends........................................ (6,875) -- (4,438) (1,000) --
-------- ------- ------- -------- -------
Adjusted net income (loss) applicable to common shares........... $(14,998) $74,501 $33,067 $(13,344) $29,282
======== ======= ======= ======== =======
Applicable common shares:
Weighted average outstanding shares during the period.......... 92,233 85,430 79,735 76,224 73,972
Assumed conversion of preferred stock.......................... -- --(b) --(a) --(a) 5,300
Assumed conversion of Preferred Stock.......................... --(d) 11,253 --(a) -- --
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options) using the
"treasury stock" method...................................... --(a) 1,745 1,678 1,791 2,095
Assumed conversion of 7 5/8% convertible subordinated
debentures................................................... --(a) --(a) --(a) --(a) --(a)
Assumed conversion of 5 1/2% convertible subordinated
debentures................................................... --(a) -- -- -- --
Assumed conversion of 9% convertible subordinated debentures... -- --(c) 4,322 --(a) --(a)
Assumed conversion of zero coupon and other notes.............. --(a) --(a) 19 --(a) 70
-------- ------- ------- -------- -------
Total.......................................................... 92,233 98,428 85,754 78,015 81,437
======== ======= ======= ======== =======
Income (loss) per share of common stock:
Before redemption premium on preferred stock, extraordinary
charge and
cumulative effect of change in accounting for income taxes... $ (.16) $ .78 $ .65 $ .01 $ .36
Redemption premium on preferred stock.......................... -- -- (.24) -- --
-------- ------- ------- -------- -------
Before extraordinary charge and cumulative effect of change in
accounting
for income taxes............................................. (.16) .78 .41 .01 .36
Extraordinary charge........................................... -- (.02) (.02) (.11) --
Cumulative effect of change in accounting for income taxes..... -- -- -- (.07) --
-------- ------- ------- -------- -------
Net income (loss) per share of common stock.................... $ (.16) $ .76 $ .39 $ (.17) .36
======== ======= ======= ======== =======
</TABLE>
- ---------------
(a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of earnings per share of common stock.
(b) The cumulative convertible preferred stock (the "preferred stock") was
redeemed in January 1994.
(c) The 9% convertible subordinated debentures were converted to common stock
during the third quarter of 1993.
(d) The $2.75 Cumulative Convertible Exchangeable Preferred Stock (the
"Preferred Stock") was exchanged into 5 1/2% convertible subordinated
debentures during the fourth quarter of 1995.
<PAGE> 1
EXHIBIT 21.1
BEVERLY ENTERPRISES, INC. AND SUBSIDIARIES
SUBSIDIARY SCHEDULE
JANUARY 29, 1996
<TABLE>
<CAPTION>
STATE OF
CORPORATION INCORPORATION
- ----------------------------------------------------------------------------- --------------
<S> <C>
A.B.C. Health Equipment Corp. ............................................... New York
AdviNet, Inc. ............................................................... Delaware
AGI-Camelot, Inc. ........................................................... Missouri
AGI-McDonald County Health Care, Inc. ....................................... Missouri
Alliance Health Services, Inc. .............................................. Delaware
Alliance Home Health Care, Inc. ............................................. Connecticut
Amco Medical Service, Inc. .................................................. Texas
American Transitional Care Centers of Texas, Inc. ........................... Texas
American Transitional Care Dallas-Fort Worth, Inc. .......................... Texas
American Transitional Health Care, Inc. ..................................... Delaware
American Transitional Hospitals, Inc. ....................................... Delaware
American Transitional Hospitals of Indiana, Inc. ............................ Indiana
American Transitional Hospitals of Oklahoma, Inc. ........................... Oklahoma
American Transitional Hospitals of Tennessee, Inc. .......................... Tennessee
American Transitional Hospitals -- Texas Medical Center, Inc. ............... Delaware
ATH -- Clear Lake, Inc. ..................................................... Delaware
ATH -- Columbus, Inc. ....................................................... Delaware
ATH Del Oro, Inc. ........................................................... Texas
ATH Heights, Inc. ........................................................... Texas
ATH Oklahoma City, Inc. ..................................................... Oklahoma
ATH Tucson, Inc. ............................................................ Arizona
Beverly Acquisition Corporation.............................................. Delaware
Beverly Assisted Living, Inc. ............................................... Delaware
Beverly Health and Rehabilitation Services, Inc. ............................ California
Beverly Enterprises -- Alabama, Inc. ........................................ California
Beverly Enterprises -- Arizona, Inc. ........................................ California
Beverly Enterprises -- Arkansas, Inc. ....................................... California
Beverly Enterprises -- California, Inc. ..................................... California
Beverly Enterprises -- Colorado, Inc. ....................................... California
Beverly Enterprises -- Connecticut, Inc. .................................... California
Beverly Enterprises -- Delaware, Inc. ....................................... California
Beverly Enterprises -- Distribution Services, Inc. .......................... California
Beverly Enterprises -- District of Columbia, Inc. ........................... California
Beverly Enterprises -- Florida, Inc. ........................................ California
Beverly Enterprises -- Garden Terrace, Inc. ................................. California
Beverly Enterprises -- Georgia, Inc. ........................................ California
Beverly Enterprises -- Hawaii, Inc. ......................................... California
Beverly Enterprises -- Idaho, Inc. .......................................... California
Beverly Enterprises -- Illinois, Inc. ....................................... California
Beverly Enterprises -- Indiana, Inc. ........................................ California
Beverly Enterprises -- Iowa, Inc. ........................................... California
Beverly Enterprises -- Kansas, Inc. ......................................... California
Beverly Enterprises -- Kentucky, Inc. ....................................... California
Beverly Enterprises -- Louisiana, Inc. ...................................... California
Beverly Enterprises -- Maine, Inc. .......................................... California
</TABLE>
<PAGE> 2
EXHIBIT 21.1
BEVERLY ENTERPRISES, INC. AND SUBSIDIARIES
SUBSIDIARY SCHEDULE -- (CONTINUED)
JANUARY 29, 1996
<TABLE>
<CAPTION>
STATE OF
CORPORATION INCORPORATION
- ----------------------------------------------------------------------------- --------------
<S> <C>
Beverly Enterprises -- Maryland, Inc. ....................................... California
Beverly Enterprises -- Massachusetts, Inc. .................................. California
Beverly Enterprises -- Michigan, Inc. ....................................... California
Beverly Enterprises -- Minnesota, Inc. ...................................... California
Beverly Enterprises -- Mississippi, Inc. .................................... California
Beverly Enterprises -- Missouri, Inc. ....................................... California
Beverly Enterprises -- Montana, Inc. ........................................ California
Beverly Enterprises -- Nebraska, Inc. ....................................... California
Beverly Enterprises -- Nevada, Inc. ......................................... California
Beverly Enterprises -- New Hampshire, Inc. .................................. California
Beverly Enterprises -- New Jersey, Inc. ..................................... California
Beverly Enterprises -- New Mexico, Inc. ..................................... California
Beverly Enterprises -- North Carolina, Inc. ................................. California
Beverly Enterprises -- North Dakota, Inc. ................................... California
Beverly Enterprises -- Ohio, Inc. ........................................... California
Beverly Enterprises -- Oklahoma, Inc. ....................................... California
Beverly Enterprises -- Oregon, Inc. ......................................... California
Beverly Enterprises -- Pennsylvania, Inc. ................................... California
Beverly Enterprises -- Rhode Island, Inc. ................................... California
Beverly Enterprises -- South Carolina, Inc. ................................. California
Beverly Enterprises -- Tennessee, Inc. ...................................... California
Beverly Enterprises -- Texas, Inc. .......................................... California
Beverly Enterprises -- Utah, Inc. ........................................... California
Beverly Enterprises -- Vermont, Inc. ........................................ California
Beverly Enterprises -- Virginia, Inc. ....................................... California
Beverly Enterprises -- Washington, Inc. ..................................... California
Beverly Enterprises -- West Virginia, Inc. .................................. California
Beverly Enterprises -- Wisconsin, Inc. ...................................... California
Beverly Enterprises -- Wyoming, Inc. ........................................ California
Beverly Enterprises Japan Limited............................................ California
Beverly Enterprises Medical Equipment Corporation............................ California
Beverly Enterprises Rehabilitation Corporation............................... California
Beverly Holdings I, Inc. .................................................... Delaware
Beverly Manor Inc. of Hawaii................................................. California
Beverly Real Estate Holdings, Inc. .......................................... Delaware
Beverly REMIC Depositor, Inc. ............................................... California
Beverly Savana Cay Manor, Inc. .............................................. California
Brownstone Pharmacy, Inc. ................................................... Connecticut
Columbia-Valley Nursing Home, Inc. .......................................... Ohio
Commercial Management, Inc. ................................................. Iowa
Computran Systems, Inc. ..................................................... Oregon
Continental Care Centers of Council Bluffs, Inc. ............................ Iowa
DD Wholesale, Inc. .......................................................... Massachusetts
Dunnington Drug, Inc. ....................................................... Delaware
Dunnington Rx Services of Rhode Island, Inc. ................................ Rhode Island
</TABLE>
<PAGE> 3
EXHIBIT 21.1
BEVERLY ENTERPRISES, INC. AND SUBSIDIARIES
SUBSIDIARY SCHEDULE -- (CONTINUED)
JANUARY 29, 1996
<TABLE>
<CAPTION>
STATE OF
CORPORATION INCORPORATION
- ----------------------------------------------------------------------------- --------------
<S> <C>
Dunnington Rx Services of Massachusetts, Inc. ............................... Massachusetts
Forest City Building Ltd..................................................... Missouri
Hallmark Convalescent Homes, Inc. ........................................... Michigan
Healthcare Prescription Services, Inc. ...................................... Indiana
Home Medical Systems, Inc. .................................................. Delaware
Hospice Preferred Choice, Inc. .............................................. Delaware
Hospital Facilities Corporation.............................................. California
Insta-Care Holdings, Inc. ................................................... Florida
Insta-Care Pharmacy Services Corporation..................................... Texas
Insurance Software Packages, Inc. ........................................... Florida
Kenwood View Nursing Home, Inc. ............................................. Kansas
Liberty Nursing Homes, Incorporated.......................................... Virginia
Medical Arts Health Facility of Lawrenceville, Inc. ......................... Georgia
Medical Health Industries, Inc. ............................................. Delaware
Medview Services, Incorporated............................................... Florida
Moderncare of Lumberton, Inc. ............................................... North Carolina
Nebraska City S-C-H, Inc. ................................................... Nebraska
Nursing Home Operators, Inc. ................................................ Ohio
Omni Med B, Inc. ............................................................ Connecticut
Peterson Health Care, Inc. .................................................. Florida
Pharmacy Corporation of America.............................................. California
Pharmacy Corporation of America -- Massachusetts, Inc. ...................... Delaware
Pharmacy Dynamics Group, Inc. ............................................... Florida
Phymedsco, Inc. ............................................................. West Virginia
Resource Opportunities, Inc. ................................................ Florida
Salem No. 1, Inc. ........................................................... Missouri
South Alabama Nursing Home, Inc. ............................................ Alabama
South Dakota -- Beverly Enterprises, Inc. ................................... California
Spectra Rehab Alliance, Inc. ................................................ Delaware
Synergos, Inc. .............................................................. California
Synergos -- North Hollywood, Inc. ........................................... California
Synergos -- Pleasant Hill, Inc. ............................................. California
Synergos -- Scottsdale, Inc. ................................................ Arizona
Taylor County Health Facility, Inc. ......................................... Florida
TMD Disposition Company...................................................... Florida
Vantage Healthcare Corporation............................................... Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
and amendments thereto:
<TABLE>
<S> <C>
Form S-8 No. 33-61269 PMSI and Insta-Care Stock Option Plans
Form S-8 No. 33-55571 Nonemployee Directors' Stock Option Plan and
Certain ATH Option Plans
Form S-8 No. 33-21505 Employee Stock Purchase Plan
Form S-4 No. 33-13243 1985 Beverly Nonqualified Stock Option Plan
Form S-8 No. 33-65242 1993 Long-Term Incentive Plan
Form S-3 No. 33-50965 Debt Securities of Beverly Enterprises, Inc.
</TABLE>
and in the related Prospectuses of our report dated February 2, 1996, except for
Note 4, paragraph 5 and Note 5, paragraph 5, as to which the date is March 21,
1996, with respect to the consolidated financial statements and schedule of
Beverly Enterprises, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1995.
ERNST & YOUNG LLP
Little Rock, Arkansas
March 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITS ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 56,303
<SECURITIES> 0
<RECEIVABLES> 561,632<F1>
<ALLOWANCES> 23,357<F2>
<INVENTORY> 59,109
<CURRENT-ASSETS> 716,592
<PP&E> 1,771,010
<DEPRECIATION> 581,025
<TOTAL-ASSETS> 2,506,461
<CURRENT-LIABILITIES> 551,545
<BONDS> 988,909
<COMMON> 10,262
0
0
<OTHER-SE> 810,071
<TOTAL-LIABILITY-AND-EQUITY> 2,506,461
<SALES> 3,228,553
<TOTAL-REVENUES> 3,242,781
<CGS> 0
<TOTAL-COSTS> 2,960,832
<OTHER-EXPENSES> 203,858
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 84,245
<INCOME-PRETAX> (6,154)
<INCOME-TAX> 1,969
<INCOME-CONTINUING> (8,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,123)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
<FN>
<F1>Excludes $46,868 of long-term notes receivable.
<F2>Excludes $4,953 of allowance for long-term notes receivable.
<F3>Included in Total costs and expenses line.
</FN>
</TABLE>
