<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
BEVERLY ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
BEVERLY ENTERPRISES, INC.
5111 ROGERS AVENUE,
SUITE 40-A
FORT SMITH, ARKANSAS 72919-0155
(501) 452-6712
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
To the Stockholders:
The Annual Meeting of Stockholders of Beverly Enterprises, Inc., will be
held at the Holiday Inn, 700 Rogers Avenue, Fort Smith, Arkansas, on Thursday,
May 29, 1997, at 10:00 a.m., local time for the following purposes:
1. To elect eight members of the Board of Directors;
2. To approve the Beverly Enterprises, Inc. Non-Employee Director Deferred
Compensation Plan;
3. To consider a stockholder proposal concerning executive compensation;
4. To ratify the appointment of Ernst & Young LLP as independent auditors
for 1997;
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Nominees for election as directors at the Annual Meeting and any
adjournments thereof (the "Annual Meeting") are Beryl F. Anthony, Jr., David R.
Banks, James R. Greene, Boyd W. Hendrickson, Edith E. Holiday, Jon E. M. Jacoby,
Risa J. Lavizzo-Mourey, M.D., and Marilyn R. Seymann, all of whom are presently
serving as directors of the Company. Louis Menk, a current director is not
standing for election at the Annual Meeting.
The Board of Directors has fixed the close of business on March 31, 1997,
as the record date for the determination of stockholders who are entitled to
notice of and to vote at the Annual Meeting. A list of stockholders entitled to
vote at the Annual Meeting will be open to the examination of any stockholder
for any purpose germane to the Annual Meeting at the offices of Beverly
Enterprises, Inc., 5111 Rogers Avenue, Suite 155, Fort Smith, Arkansas, during
ordinary business hours for 10 days prior to the Annual Meeting.
We encourage you to attend the Annual Meeting. Whether you are able to
attend or not, we urge you to indicate your vote on the enclosed proxy card FOR
the election of directors named in the attached Proxy Statement; FOR the
approval of the Beverly Enterprises, Inc. Non-Employee Director Deferred
Compensation Plan; AGAINST the stockholder proposal concerning executive
compensation; and FOR ratification of the appointment of Ernst & Young LLP as
independent auditors for 1997. Please sign, date and return the proxy card
promptly in the enclosed envelope. If you attend the Annual Meeting, you may
vote in person even if you have previously mailed a proxy card.
By Order of the Board of Directors
ROBERT W. POMMERVILLE
Secretary
April 29, 1997
Fort Smith, Arkansas
<PAGE> 3
BEVERLY ENTERPRISES, INC.
5111 ROGERS AVENUE,
SUITE 40-A
FORT SMITH, ARKANSAS 72919-0155
(501) 452-6712
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
The accompanying proxy is solicited by the Board of Directors of Beverly
Enterprises, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders to be held May 29, 1997, and any adjournments of the meeting (the
"Annual Meeting"). It is anticipated that this proxy material will be mailed on
or about April 29, 1997, to stockholders of record on March 31, 1997.
A copy of the annual report of the Company for the year ended December 31,
1996, including consolidated financial statements, is enclosed herewith. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE
WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1996, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO ROBERT W. POMMERVILLE,
SECRETARY OF THE COMPANY, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES, 5111
ROGERS AVENUE, SUITE 40-A, FORT SMITH, ARKANSAS 72919-0155, (501) 452-6712.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with the Secretary of the
Company (i) a signed instrument revoking the proxy, or (ii) a duly executed
proxy bearing a later date. A proxy may also be revoked if the person executing
the proxy is present at the meeting and elects to vote in person. If the proxy
is not revoked, it will be voted by those therein named.
VOTING PROCEDURES
The close of business on March 31, 1997 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. As of the close of business on such date, the Company had
outstanding and entitled to vote 99,171,864 shares of Common Stock, par value
$.10 per share (the "Common Stock"). Each holder of shares of Common Stock is
entitled to one vote per share on each matter to be considered. Stockholders are
not permitted to cumulate votes for the purpose of electing directors or
otherwise.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote will constitute a quorum for the transaction of business
at the Annual Meeting.
A plurality of the shares voted in person or by proxy at the Annual Meeting
is required for the election of directors. The affirmative vote of the holders
of shares of Common Stock representing a majority of the shares voted at the
Annual Meeting is required for the approval of the Beverly Enterprises, Inc.
Non-Employee Director Deferred Compensation Plan, the approval of the
stockholder proposal concerning executive compensation, the ratification of the
appointment of Ernst & Young LLP as independent auditors for 1997 and the
approval of such other matters (other than the election of directors) as may
properly come before the Annual Meeting.
Under the Company's by-laws and Delaware law: (i) shares at the Annual
Meeting which are represented by proxies that reflect abstentions or broker
non-votes (i.e., shares held by a broker or nominee which are represented at the
meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of
<PAGE> 4
determining the presence of a quorum; (ii) there is no cumulative voting and the
director nominees receiving the highest number of votes, up to the number of
directors to be elected, are elected and, accordingly, abstentions, broker
non-votes and withholding of authority to vote will not affect the election of
directors; and (iii) proxies that reflect abstentions as to a particular
proposal will be treated as voted for purposes of determining whether the
proposal is approved or rejected and will have the same effect as a vote against
that proposal, while proxies that reflect broker non-votes will be treated as
unvoted for purposes of determining approval of that proposal and will not be
counted as votes for or against that proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 31, 1997, relating
to the beneficial ownership of Common Stock by each person known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock,
based solely upon filings made by such persons with the Securities and Exchange
Commission. Percentages in the table were calculated based on the number of
shares of Common Stock outstanding at March 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF TOTAL
NAME COMMON STOCK COMMON STOCK
---- ------------ ------------
<S> <C> <C>
FMR Corp.................................................. 7,894,799(1) 8.0%
("FMR")
82 Devonshire Street
Boston, MA 02109
Franklin Resources, Inc................................... 8,417,800(2) 8.5%
("Franklin")
777 Mariners Island Blvd.
San Mateo, CA 94404
Loomis, Sayles & Company, L.P............................. 6,213,650(3) 6.3%
("Loomis")
One Financial Center
Boston, MA 02111
Wellington Management Company............................. 6,463,419(4) 6.5%
("WMC")
75 State Street
Boston, MA 02109
</TABLE>
- ---------------
(1) Based on the latest schedule 13G, dated February 14, 1997, provided to
the Company by FMR; FMR had sole voting power with regard to 746,928
shares and sole dispositive power with respect to 7,894,799 shares.
(2) Based on the latest schedule 13G, dated February 12, 1997, provided to
the Company by Franklin; Franklin had sole voting and dispositive power
with respect to 8,417,800 shares.
(3) Based on the latest schedule 13G, dated February 13, 1997, provided to
the Company by Loomis; Loomis had sole voting power with respect to
2,176,125 shares and shared dispositive power with respect to 6,213,650
shares.
(4) Based on the latest schedule 13G, dated January 24, 1997, provided to
the Company by WMC; WMC had shared voting power with respect to
1,663,574 shares and shared dispositive power with respect to 6,463,419
shares.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 31, 1997, the amount of Common
Stock beneficially owned by each of the Company's directors, each executive
officer named in the Summary Compensation Table, and all directors and executive
officers as a group based on information obtained from such persons.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SOLE
VOTING OPTIONS PERCENTAGE
AND EXERCISABLE OTHER OF
INVESTMENT WITHIN 60 BENEFICIAL COMMON
POWER DAYS OWNERSHIP TOTAL STOCK
---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Beryl F. Anthony, Jr................ 0 20,000 0 20,000 *
David R. Banks(1)................... 216,656 377,223 8,774(2) 602,653 *
James R. Greene..................... 500 20,000 0 20,500 *
Boyd W. Hendrickson(1).............. 142,153 159,000 0 301,153 *
Edith E. Holiday.................... 800 5,000 200(2) 6,000 *
Jon E.M. Jacoby..................... 0 20,000 0 20,000 *
Risa J. Lavizzo-Mourey, M.D......... 1,000 5,000 6,000 *
William A. Mathies(1)............... 76,373 62,500 2,986(2) 141,859 *
Louis W. Menk....................... 0 5,000 0 5,000 *
C. Arnold Renschler................. 65,000 10,000 0 75,000 *
Marilyn R. Seymann.................. 1,000 5,000 0 6,000 *
Mark D. Wortley(1).................. 66,530 33,750 0 100,280 *
All Directors and Executive Officers
as a Group (17 Persons)........... 1,088,897 1,022,029 19,896 2,113,822 2.1%
</TABLE>
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* Percentage of Common Stock owned does not exceed 1%.
(1) Includes shares allocated to the employee through participation in the
Company's Employee Stock Purchase Plan.
(2) Shares owned by family members.
PROPOSAL 1 -- ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is to elect eight directors to
hold office until the 1998 annual meeting and until successors are elected and
qualified. Nominees for election as directors at the Annual Meeting are Beryl F.
Anthony, Jr., David R. Banks, James R. Greene, Boyd W. Hendrickson, Edith E.
Holiday, Jon E. M. Jacoby, Risa J. Lavizzo-Mourey, M.D., and Marilyn R. Seymann,
all of whom are presently serving as directors of the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominees named above.
Unless otherwise directed on the proxy card, the proxy holders named therein
will vote FOR the election of the nominees named above. By appropriate
indication on the proxy card, stockholders may instruct the proxy holders to
vote for some but not all of the nominees named above. In the event that any
nominee is unable to serve, an event not now anticipated, the proxies will then
be voted FOR any nominee who shall be designated by the present Board of
Directors to fill the vacancy.
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<PAGE> 6
INFORMATION ABOUT NOMINEES FOR DIRECTOR
The following table contains certain information as of March 31, 1997, with
respect to the persons who have been nominated to serve as directors for the
term beginning May 29, 1997.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES DIRECTOR
NAME AGE WITH THE COMPANY SINCE
---- --- --------------------- --------
<S> <C> <C> <C>
Beryl F. Anthony, Jr.(a)(b)(e) 59 Director 1993
David R. Banks(c).......................... 60 Chairman of the Board, Chief 1979
Executive Officer and Director
James R. Greene(a)(d)...................... 75 Director 1991
Boyd W. Hendrickson(c)..................... 52 President, Chief Operating 1995
Officer and Director
Edith E. Holiday(b)(d)(e) 45 Director 1995
Jon E. M. Jacoby(a)(c)..................... 59 Director 1987
Risa J. Lavizzo-Mourey, M.D.(a)(d)......... 42 Director 1995
Marilyn R. Seymann(c)(d)(e)................ 54 Director 1995
</TABLE>
- ---------------
(a) Member of the Audit Committee
(b) Member of the Compensation Committee
(c) Member of the Executive Committee
(d) Member of the Quality Management Committee
(e) Member of the Nominating Committee
The following is a summary of the business experience of the persons who
have been nominated to serve as directors of the Company.
Beryl F. Anthony, Jr. Mr. Anthony served in Congress and was Chairman of
the Democratic Congressional Campaign Committee from 1987 through 1990. In 1993,
he became a partner in the law firm of Winston & Strawn.
David R. Banks. Mr. Banks served as President from October 1979 to
September 1995 and has served as Chief Executive Officer since May 1989 and
Chairman of the Board since March 1990. Mr. Banks is a director of Nationwide
Health Properties, Inc., Ralston Purina Company and Wellpoint Health Networks,
Inc.
James R. Greene. Mr. Greene's principal occupation has been that of a
director and consultant to various U.S. and international businesses since 1986.
He is a director of a number of mutual funds of Alliance Capital Management
Corporation, Buck Engineering Company and Bank Leumi.
Boyd W. Hendrickson. Mr. Hendrickson joined the Company in 1988 as a
Division President. He was elected Vice President -- Marketing in May 1989,
Executive Vice President -- Operations and Marketing in February 1990 and
President of Beverly Health and Rehabilitation Services ("BHRS") in January
1995. In September 1995, he was elected President, Chief Operating Officer and
Director.
Edith E. Holiday. 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, Hercules
Incorporated and H.J. Heinz Company. She is also a director or trustee of
various investment companies in the Franklin Templeton Group of Funds.
Jon E. M. Jacoby. Mr. Jacoby is Executive Vice President, Chief Financial
Officer and a director of Stephens Group, Inc., an energy, agricultural and
investment firm. Mr. Jacoby has held the indicated positions with Stephens
Group, Inc., since 1986 and, prior to that time, served as Manager of the
Corporate Finance
4
<PAGE> 7
Department and Assistant to the President of Stephens Inc. Mr. Jacoby is a
director of American Classic Voyages Company, Delta and Pine Land Company Inc.
and Medicus Systems, Inc.
Risa J. Lavizzo-Mourey, M.D. 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. Dr.
Lavizzo-Mourey is a director of Medicus Systems, Inc. and Nellcor Puritan
Bennett.
Marilyn R. Seymann. 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.
COMPENSATION OF DIRECTORS AND OTHER INFORMATION
CONCERNING THE BOARD AND ITS COMMITTEES
By action of the Board, at its meeting on April 11, 1996, effective June 1,
1996, compensation to directors other than Mr. Banks and Mr. Hendrickson was
changed to an annual retainer of $25,000 for serving as a director plus an
additional fee of $1,000 for each Board or committee meeting attended. In
addition, committee chairpersons receive $1,000 for each committee meeting
chaired. Mr. Banks, the current Chairman of the Board and Chief Executive
Officer of the Company, and Mr. Hendrickson, the current President and Chief
Operating Officer of the Company, received no additional cash compensation for
serving on the Board or its committees.
Pursuant to the Beverly Enterprises, Inc. Non-Employee Directors' Stock
Option Plan, each non-employee director is automatically granted an option to
purchase 2,500 shares of Common Stock on June 1 of each year, at an exercise
price of 100 percent of the fair market value of such Common Stock on the
respective grant dates. The options become fully exercisable one year from the
grant date.
Directors who are not employees of the Company and have served as directors
for at least five years participate in the Retirement Plan for Outside Directors
which is an unfunded, non-qualified retirement plan. The retirement benefit is
equal to the product of (a) the director's annual retainer fee immediately
preceding the director's retirement from the Board times (b) the number of years
the director served on the Board up to a maximum of ten. The retirement benefit
is payable in monthly installments beginning at age seventy (70), based on the
years of service up to 10, until the earlier of the full payment of the benefit
or the death of the retired director. This plan will be terminated, effective
May 29, 1997 as part of the implementation of the Beverly Enterprises, Inc.
Non-Employee Director Deferred Compensation Plan that is subject to stockholder
approval as Proposal 2 and described starting on page 17.
During 1996, there were nine meetings of the Board. Each director attended
75% or more in the aggregate of the meetings of the Board and committees on
which the director served.
The Executive Committee, which met nine times during 1996, is delegated
authority to exercise all of the authority of the Board during the intervals
between meetings except that authority delegated to other committees or
extraordinary actions.
The Audit Committee, which met three times during 1996, reviews and acts,
or reports to the Board, with respect to various auditing and accounting
matters, including the selection of the Company's independent auditors, the
scope of audit procedures, the nature of services to be performed for the
Company by and the fees to be paid to the independent auditors, oversight of the
Company's internal audit function, the performance of the Company's independent
auditors and the accounting practices of the Company.
5
<PAGE> 8
The Nominating Committee, which met two times during 1996, is delegated the
following responsibilities: (i) identification and recommendation for nomination
of candidates to stand for election to the Board and (ii) establishment of
procedures for the nomination process and criteria for the selection of
nominees, including stockholders' suggestions of nominees for director that are
submitted in writing in compliance with the Company's by-laws. (See
"Requirements, Including Deadlines, for Submissions of Proxy Proposals,
Nomination of Directors, and Other Business by Stockholders", on page 19). The
Nominating Committee is also responsible for administering the Board's
self-evaluation.
The Quality Management Committee, which met six times during 1996, monitors
the quality of service provided by the Company and reports to the Board progress
made toward reaching quality goals.
The Compensation Committee met seven times during 1996. See the
Compensation Committee Report on Executive Compensation below for a discussion
of the Compensation Committee functions.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
Committee) is currently composed of three independent, non-employee Directors.
There were four members until June 1996, when new Committee assignments were
made. Three Committee members remained and one, Marilyn R. Seymann, left for
another committee assignment. The Committee's overall responsibility is to
ensure executive compensation policies are directly aligned with the strategic
goals of the Company. The Committee approves the design of compensation
programs, evaluates their effectiveness, and authorizes the adoption of new
plans and strategies as warranted.
COMPENSATION PHILOSOPHY
Our compensation philosophy and the underlying compensation programs are
designed to directly support the Company's business objectives by:
- Allowing the Company to recruit, retain and develop highly qualified
executive employee talent
- Linking individual compensation with Company and individual performance
- Maintaining compensation levels that are competitive (targeted at the
median (50th percentile) of the Competitive Market discussed below)
- Emphasizing the variable and at-risk portion of compensation through
incentive plans which properly reflect and reward both short and
long-term performance
- Promoting executive stock ownership and encouraging stock retention by
executives
The Committee evaluates each element of compensation as well as total
executive compensation. The Chief Executive Officer provides input to the
Committee in this regard. In addition, the Committee receives consulting advice
and assistance from an independent executive compensation firm on an ongoing
basis.
COMPETITIVE MARKET EVALUATION
The Company and its Compensation Committee evaluate competitive
compensation practices and levels in the marketplace by considering data from
publicly available surveys published by recognized, major compensation
consulting firms, as well as special studies and surveys of industry
comparisons. In addition, the compensation consulting firm engaged by the
Committee and the Company provided a comprehensive assessment of compensation
from its executive database. This analysis included reference to companies of
comparable revenues to the Company in the healthcare services industry as well
as general industry. In addition, the compensation consultant conducted several
private surveys of executive pay in companies that compete with the Company for
management talent. All of these sources of data have been combined and median
and averages calculated to establish targets for each element of compensation
for Company executives
6
<PAGE> 9
for 1997 and the immediate future. The Competitive Market is the combination of
all the survey data in general industry of similar revenues, health care
industry with similar lines of business and companies from the proxy analysis
peer group with similar revenues. In establishing competitive levels, the
Company has used the 50th percentile as its target level for each element of
compensation. The Committee believes that actual compensation levels for the
five executive officers named in the Summary Compensation Table were at or below
the 50th percentile of the Competitive Market during 1996.
BASE SALARY
The Committee regularly reviews the base salary of corporate officers. In
addition to targeting the median of the Competitive Market, the Committee also
considers the level and scope of responsibility, experience, performance and
internal equity. No specific weighting is assigned to each of these criteria.
The Committee's annual salary review for corporate officers was moved from
December 1996 to March 1997 in order to provide the Committee the opportunity to
review 1996 performance prior to making compensation decisions.
The base salary for Mr. Banks, Chairman of the Board and Chief Executive
Officer of the Company, and other corporate officers was reviewed at the March
27, 1997 meeting of the Committee. The Compensation Committee reviewed the
performance criteria it had established on April 11, 1996 to evaluate Mr. Banks'
performance for 1996. The performance criteria included financial and operating
objectives as well as succession planning, strategic planning and stockholder
relations. Effective January 1, 1997, Mr. Banks' base salary was reinstated to
$627,500, where it had been prior to the 5% salary reduction in 1996. In
addition, based on the results of Mr. Banks' performance in meeting these
objectives, and the comparison to the Competitive Market, his base salary was
also adjusted, effective January 1, 1997, to $700,000, which represents an 11.5%
increase over the reinstated level and places Mr. Banks at approximately the
50th percentile level of the Competitive Market for total compensation.
ANNUAL INCENTIVES
The annual incentive plans are designed to provide a direct link between
Company performance and individual performance over the annual performance
period (calendar year). During 1996, the Company maintained two annual incentive
plans; one for corporate management and one for operations management. Each plan
has an initial performance threshold which must be met before potential awards
become available. This initial threshold is an internal standard of the quality
of service being provided by the Company to its residents. The internal standard
of quality is set and approved by the Quality Management Committee of the Board.
Once the quality threshold has been reached or exceeded, the financial
criteria are then assessed for each executive based upon appropriate corporate
or individual areas of responsibility. The incentive plans measure financial
performance by evaluating Company earnings per share and operating margin and,
in the case of individuals responsible for business units, other key operating
financial measures related to the business unit.
Each executive participating in the annual incentive plan, including all of
the executive officers listed in the Summary Compensation Table, have a target
and maximum annual incentive opportunity expressed as a percentage of base
salary. Opportunities for participants under this plan for 1996 ranged from 25%
to 100% of base salary.
In calculating the 1996 annual incentive for the Chief Executive Officer,
the Committee first ascertained that the quality performance threshold had been
achieved. The Committee then determined that the Chief Executive Officer
exceeded the specific performance goals established by the Committee. As a
result, Mr. Banks received a bonus of $324,973, which amounted to 54.5% of base
salary.
LONG-TERM INCENTIVES
Long-term incentives are delivered through the Beverly Enterprises, Inc.
1996 Long-Term Incentive Stock Plan (the "1996 Plan"), which was approved by
stockholders at the 1996 annual meeting. The
7
<PAGE> 10
Committee believes that annual grants of stock options provide a long-term
incentive for key personnel to remain with the Company and improve future
Company performance. In addition, stock option grants confirm the mutuality of
interests shared by the Company's management and its other stockholders with
this compensation dependent upon the appreciation of the Company's Common Stock.
The compensation consulting firm provides the Committee with data on granting
practices of other healthcare companies to determine if the Company's grants are
competitive in size and terms. Stock options are always granted at 100% of fair
market value on the date of grant. During 1996, a stock option grant for 90,000
shares was provided to Mr. Banks. Option grants for the following number of
shares were granted in 1996 to the following executive officers: Mr.
Hendrickson -- 65,000; Mr. Mathies -- 40,000; Dr. Renschler -- 285,000; and Mr.
Wortley -- 75,000. The vesting schedule for these option grants is shown on page
12.
STOCK OWNERSHIP GUIDELINE
In 1994, the Company introduced a stock ownership initiative for key
executives and officers of the Company. The purpose of this initiative is to
align executive interests with stockholders' interests and to encourage
executives to retain Company shares over an extended period. Participants are
required to own Company securities with a value based on a multiple of the
officer's base salary. Failure to comply with this guideline may result in
reduction in or suspension from participation in the Company's incentive plans.
The Chief Executive Officer is required to own securities with a market value of
three times his base salary. Other executives and officers are required to own
Company securities with a market value ranging from one to two and a half times
base salary.
$1 MILLION LIMIT ON COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the Summary
Compensation Table to $1 million, unless certain requirements are met which
allows for an exemption of certain compensation as performance-based.
The Board of Directors and the Committee desire that all incentive
compensation plans for executive officers be qualified as performance-based,
thereby ensuring the Company will retain full tax deductibility. In 1994, the
Committee approved a change in the design and operation of both the annual and
long-term incentive plans, which change was then approved by the stockholders in
May 1994. In 1996, stockholders approved the 1996 Long-Term Incentive Stock Plan
which provides certain features designed to ensure tax deductibility of awards
granted under the Plan.
OTHER MATTERS
The Committee has worked with a compensation consulting firm in revamping
the Company's compensation plans for 1996 and future years. The focus of this
work was to develop pay for performance and included revised base salary ranges,
annual incentive compensation opportunities, long-term incentives and the
streamlining of certain employee benefits. All of this work has been
accomplished with the goal of motivating management behaviors which will enhance
the Company's financial and operating results, thereby leading to the potential
for increased stockholder value. The work is ongoing and the Committee
anticipates working with top management and the consulting firm throughout 1997
to meet this end.
COMPENSATION COMMITTEE
Louis W. Menk, Chairman
Beryl F. Anthony, Jr.
Edith E. Holiday
Marilyn R. Seymann
8
<PAGE> 11
The Compensation Committee Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities and Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No Committee member had any relationship requiring disclosure under any
paragraph of Item 404 of Regulation S-K.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer and the other four most highly compensated individuals in the
Company as to whom the total annual salary and bonus for the year ended December
31, 1996, exceeded $100,000. All of these individuals were executive officers of
the Company at December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL ----------------------
COMPENSATION OTHER RESTRICTED SECURITIES
----------------- ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(7)(8) (#) ($) ($)(9)
------------------ ------ ------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David R. Banks............... 1996 597,542 324,973 None 697,500 90,000 None 20,230
Chairman of the Board and 1995 622,096 None None None None None 51,973
Chief Executive Officer 1994 539,170 173,384 None 151,711 60,000 None 51,469
Boyd W. Hendrickson.......... 1996 437,971 245,314 None 581,250 65,000 None 17,973
President and Chief 1995 392,862 None None 412,500 70,000 None 38,100
Operating Officer(1) 1994 323,502 80,912 None 70,798 30,000 None 40,646
William A. Mathies........... 1996 275,000 185,000 216,198(5) 465,000 40,000 None 8,858
Executive Vice President 1995 203,481 44,334 48,465(5) 206,250 35,000 None 19,526
and President-Beverly 1994 159,260 29,958 None 26,223 12,000 None 18,630
Health & Rehabilitation
Services, Inc. (BHRS)(2)
C. Arnold Renschler, MD...... 1996 200,481 187,500 46,995(6) 673,750 285,000 None 1,226
Executive Vice President 1995
and President-Pharmacy 1994
Corporation of America(3)
Mark D. Wortley.............. 1996 258,704 171,316 None 465,000 75,000 None 8,693
Executive Vice President 1995 230,481 None None None None None 12,793
and President-Spectra 1994 65,769 24,000 None 20,996 50,000 None 3,779
Rehab Alliance, Inc.(4)
</TABLE>
- ---------------
(1) Mr. Hendrickson was elected to his current position on September 29, 1995.
Prior to that he was Executive Vice President and President-BHRS.
(2) Mr. Mathies was elected to his current position on September 29, 1995. Prior
to that he was a Vice President -Operations of BHRS.
(3) Dr. Renschler assumed his current position on June 3, 1996.
(4) Mr. Wortley was elected to his current position on February 9, 1996. Prior
to that he was a Senior Vice President and President of Spectra Rehab
Alliance, Inc.
(5) Relocation costs and expenses paid to Mr. Mathies in connection with his
relocation from California to Arkansas.
(6) Relocation costs and expenses paid to Dr. Renschler in connection with his
relocation from Pennsylvania to Florida.
9
<PAGE> 12
(7) Amounts shown as Restricted Stock Awards consist of the following (shown in
dollars) (the Company does not currently pay dividends on its Common Stock).
<TABLE>
<CAPTION>
YEAR MR. BANKS MR. HENDRICKSON MR. MATHIES DR. RENSCHLER MR. WORTLEY
---- --------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Restricted Stock Grants 1996 None None None 183,750(a) None
1995 None 412,500(b) 206,250(b) None
1994 None None None None
Performance Shares(c) 1996 697,500 581,250 465,000 490,000 465,000
1995
1994
Award Pursuant to the Annual 1996
Incentive Plan(d) 1995
1994 43,346 20,228 7,494 5,995
Award Pursuant to the Equity 1996
Incentive Plan(e) 1995
1994 108,365 50,570 18,729 15,001
Total 1996 697,500 581,250 465,000 673,750 465,000
1995 None 412,500 206,250 None
1994 151,711 70,798 26,223 20,996
</TABLE>
- ---------------
(a) The total $183,750 restricted stock award to Dr. Renschler in 1996
consists of, on June 3, 1996, at which time the closing price of the
Common Stock was $12.25, a grant of 15,000 shares which vest twenty-five
percent per year beginning one year from the date of the grant.
(b) The total $412,500 restricted stock award to Mr. Hendrickson and the
total $206,250 restricted stock award to Mr. Mathies in 1995 consists
of, on October 2, 1995, at which time the closing price of the Common
Stock was $13.75, grants of 30,000 and 15,000 shares respectively, which
vest twenty-five percent per year beginning one year from the date of
grant.
(c) The total $697,500, $581,250, $465,000 and $465,000 Performance Share
awards to Mr. Banks, Mr. Hendrickson, Mr. Mathies and Mr. Wortley
consist of, on February 9, 1996, at which time the closing price of the
Common Stock was $11.625, a grant of performance-based restricted stock
in the following number of shares: 60,000; 50,000; 40,000; and 40,000
respectively. Performance is measured by appreciation in the price of
Common Stock from December 31, 1995. To satisfy the performance
restriction, the Common Stock must close at or above the performance
target for at least five consecutive trading days on the New York Stock
Exchange. Achievement of the performance target for any performance
period is deemed to be achievement of the performance target for all
prior performance periods. The percentage of shares that vest, if the
performance target is met, and the performance target, are: 10% and
$14.00; 20% and $16.125; 20% and $18.50; 25% and $21.375; 25% and $24.50
for 1996, 1997, 1998, 1999 and 2000 respectively. The total $490,000
Performance Share award to Dr. Renschler consists of, on June 3, 1996,
at which time the closing price of the Common Stock was $12.25, a grant
of 40,000 shares with the same performance targets and vesting schedule
as set forth above.
(d) For 1994 performance, the Annual Incentive Plan provided for the payment
of 20% of the annual incentive award earned to be paid by a grant of
other stock units, vesting one year from the grant date. The following
number of other stock units were granted to the named Executive
Officers: Mr. Banks -- 3,152; Mr. Hendrickson -- 1,471; Mr.
Mathies -- 545; and Mr. Wortley -- 436.
(e) The Equity Incentive Plan provided, for 1994 performance, the granting
of phantom units, with cliff vesting four years from the grant date. The
phantom units are payable, upon vesting, at an amount per unit equal to
the fair market value of the Common Stock on that date, in cash, shares
of Common Stock or a combination thereof at the discretion of the
Compensation Committee. The following number of phantom units were
granted to the named executive officers, to vest on February 14, 2000:
Mr. Banks -- 7,881; Mr. Hendrickson -- 3,678; Mr. Mathies -- 1,362; and
Mr. Wortley -- 1,091.
(8) Based on the closing price for the Common Stock of $12.75, at December 31,
1996, the number and value of aggregate restricted stock, performance shares
and phantom unit holdings for the named executive officers are as follows:
<TABLE>
<CAPTION>
MR. BANKS MR. HENDRICKSON MR. MATHIES DR. RENSCHLER MR. WORTLEY
--------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Restricted Stock (Shares) None 22,500 11,250 15,000 None
(Value $) None 286,875 143,437 191,250 None
Performance Shares (Units) 60,000 50,000 40,000 40,000 40,000
(Value $) 765,000 637,500 510,000 510,000 510,000
Phantom Units (Units) 16,274 7,571 2,436 None 1,091
(Value $) 207,493 96,530 31,059 None 13,910
</TABLE>
10
<PAGE> 13
(9) All other compensation consists of the following:
<TABLE>
<CAPTION>
YEAR MR. BANKS MR. HENDRICKSON MR. MATHIES DR. RENSCHLER MR. WORTLEY
---- --------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Car Allowance(a) 1996 None None None None None
1995 2,019 2,019 2,019 2,019
1994 7,500 7,500 7,500 2,192
Matching Contribution to Employee 1996 2,340 2,340 2,340 None 2,340
Stock Purchase Plan(b) 1995 2,340 2,340 2,340 2,340
1994 2,340 2,340 2,250 None
Executive Medical Plan 1996 3,834 6,659 1,347 62 887
1995 6,168 9,660 4,098 2,530
1994 7,661 11,479 3,570 1,379
Premiums Under Executive Life 1996 1,350 1,080 177 None 216
Insurance Plan(c) 1995 4,753 2,607 420 294
1994 4,410 2,392 407 None
Regular Life Insurance Plan(d) 1996 5,648 2,187 297 626 464
1995 3,410 1,483 167 282
1994 1,125 720 99 33
Matching Contribution to 1996 3,341 1,990 980 None 1,069
Executive Retirement Plan(e) 1995 30,541 17,249 7,938 2,586
1994 28,258 16,040 4,629 None
Financial Planning 1996 None None None None None
1995 None None None None
1994 175 175 175 175
Benefit Allowance(f) 1996 3,717 3,717 3,717 538 3,717
1995 2,742 2,742 2,544 2,742
Total 1996 20,230 17,973 8,858 1,226 8,693
1995 51,973 38,100 19,526 12,793
1994 51,469 40,646 18,630 3,779
</TABLE>
- ---------------
(a) Car allowances were discontinued in 1995. Amounts previously paid were
added to base salary.
(b) The Employee Stock Purchase Plan enables all full-time employees which
have completed one year of continuous service to purchase shares of
Common Stock through payroll deductions of up to $300 per pay period.
The Company contributes 30% of the amount of payroll deductions for the
participating employee.
(c) Effective January 1, 1996, the amount shown represents the dollar value
benefit of premium payments under split dollar life insurance policies
for which the Company will be reimbursed for premiums paid. In prior
years, the amounts shown represented premiums on individual term life
insurance policies.
(d) Imputed income for life insurance provided under the Company's regular
life insurance plan for amounts in excess of $50,000.
(e) The Beverly Enterprises, Inc. Executive Retirement Plan, (the "Executive
Retirement Plan") provides that, depending on the Company's profits, the
Company will match each participant's annual contribution, based on a
sliding scale relating to years of service with the Company, up to a
maximum of six percent of a participant's compensation. The Executive
Retirement Plan also provides that the Company will pay each participant
additional compensation approximately equivalent to the tax liability
such participant shall accrue as a result of the Company's contribution.
During 1995 and 1994, the Company contributed 50 percent and during
1996, 5 percent of the maximum match permitted under the Executive
Retirement Plan for each participant. These figures include both the
employer match and the additional compensation for reimbursement of
taxes.
(f) Reimbursement for premiums paid under regular medical and dental
insurance.
11
<PAGE> 14
The following tables set forth certain information at December 31, 1996 and
for the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation Table above. No
stock appreciation rights have been granted and no options have been granted at
an option price below fair market value on the date of the grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS DATE VALUE
-------------------------------------------------- ----------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS GRANT
OPTIONS/ GRANTED TO EXERCISE DATE
SARS EMPLOYEES OR BASE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#) YEAR ($/SH) DATE ($)(2)
---- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
David R. Banks..................... 90,000(1) 5.26% 12.75 12/11/06 684,900(6)
Boyd W. Hendrickson................ 65,000(1) 3.80% 12.75 12/11/06 494,650(6)
William B. Mathies................. 40,000(1) 2.34% 12.75 12/11/06 304,400(6)
C. Arnold Renschler................ 35,000(2) 2.04% 12.25 06/03/01 172,900(7)
160,000(2) 9.35% 12.625 06/13/01 819,200(8)
40,000(1) 2.34% 12.75 12/11/06 304,400(6)
50,000(3) 2.92% 12.625 06/12/02 256,000(8)
Mark Wortley....................... 22,400(4) 1.31% 11.625 02/09/01 97,216(9)
40,000(1) 2.34% 12.75 12/11/06 304,400(6)
12,600(5) 0.74% 11.625 02/09/01 54,684(9)
</TABLE>
- ---------------
(1) Nonqualified stock options granted on December 12, 1996. 25% of these
options become fully exercisable one year from the grant date and 25% per
year thereafter on a cumulative basis.
(2) Nonqualified stock options for 35,000 shares were granted on June 3, 1996
and nonqualified stock options for 60,000 shares were granted on June 13,
1996. 25% of these options become fully exercisable one year from the grant
date and 25% per year thereafter on a cumulative basis.
(3) Nonqualified stock options granted on June 13, 1996. 10,000 shares vested on
December 31, 1996. 40,000 shares are subject to performance conditions
contained in the stock option agreement. 20,000 shares will vest on December
31, 1997 if the 1997 performance conditions are met and 20,000 shares will
vest on December 31, 1998 if the 1998 performance conditions are met.
Certain of the 1997 and all of the 1998 performance conditions will be set
by the Compensation Committee at a later date.
(4) Nonqualified stock options granted on February 9, 1996. 25% of these options
become fully exercisable one year from the grant date and 25% per year
thereafter on a cumulative basis.
(5) Incentive stock options granted on February 9, 1996. 25% of these options
become fully exercisable one year from the grant date and 25% per year
thereafter on a cumulative basis.
(6) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of options to purchase shares of Common Stock to be
$7.61 per option share. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized will be at or near the value estimated by the Black-Scholes Model.
The assumptions underlying the Black-Scholes Model include: (a) an expected
volatility of .3440 based on the thirty-six months prior to the grant date,
(b) a risk-free rate of return of 6.54%, which approximates the ten year
U.S. Treasury Strip Rate on the grant date, (c) no dividend on the Common
Stock, and (d) a ten year period from the grant until expiration.
(7) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of options to purchase shares of Common Stock to be
$4.94 per option share. The actual value, if any, an
12
<PAGE> 15
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized will be at or near the value estimated by the
Black-Scholes Model. The assumptions underlying the Black-Scholes Model
include: (a) an expected volatility of .3226 based on the thirty-six months
prior to the grant date, (b) a risk-free rate of return of 6.64%, which
approximates the five year U.S. Treasury Strip Rate on the grant date, (c)
no dividend on the Common Stock, and (d) a five year period from the grant
until expiration.
(8) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of options to purchase shares of Common Stock to be
$5.12 per option share. This analysis assumed that all performance
conditions would be met for vesting. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance the
value realized will be at or near the value estimated by the Black-Scholes
Model. The assumptions underlying the Black-Scholes Model include: (a) an
expected volatility of .3326 based on the thirty-six months prior to the
grant date, (b) a risk-free rate of return of 6.79%, which approximates the
five year U.S. Treasury Strip Rate on the grant date, (c) no dividend on the
Common Stock, and (d) a five year period from the grant until expiration.
(9) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of options to purchase shares of Common Stock to be
$4.34 per option share. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized will be at or near the value estimated by the Black-Scholes Model.
The assumptions underlying the Black-Scholes Model include: (a) an expected
volatility of .3167 based on the thirty-six months prior to the grant date,
(b) a risk-free rate of return of 5.23%, which approximates the five year
U.S. Treasury Strip Rate on the grant date, (c) no dividend on the Common
Stock, and (d) a five year period from the grant until expiration.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company, the S&P 500 Composite Index and the S & P Health Care
Composite Index. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Measurement Period S & P Healthcare
(Fiscal Year Covered) Company S&P 500 Composite
<S> <C> <C> <C>
1991 100 100 100
1992 146 108 84
1993 149 118 77
1994 162 120 87
1995 120 165 137
1996 144 203 165
</TABLE>
The total cumulative return on investment (change during the year in stock
price plus reinvested dividends) for each of the periods for the Company, the
S&P 500 Composite Index and the S & P Healthcare Composite Index based on the
stock price or the composite index on December 31, 1991.
The performance graph and its description above shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities and Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
OTHER PLANS
Executive Stock Purchase Program
On October 10, 1996 the Board of Directors established the Executive Stock
Purchase Program whereby those officers subject to the Stock Ownership
Guideline, described on page 8, could borrow, under three year loans made by
City National Bank of Fort Smith and guaranteed by the Company, for the purpose
of buying Common Stock in order to meet the Stock Ownership Guideline.
Executives participating in the program were required to pledge the stock
purchased to the Company pursuant to an Indemnification and Pledge Agreement.
Messrs. Hendrickson, Mathies, Renschler, and Wortley borrowed the following
amounts under the program: $182,125; $100,000; $135,620 and $203,481
respectively.
Deferred Compensation Plan
As of July 18, 1991, the Company amended and restated the Deferred
Compensation Plan: to allow no future grants; to close and pay out accounts with
balances of $10,000 or less; and to fix accounts with balances
14
<PAGE> 17
in excess of $10,000 using the closing price of the Company's Common Stock on
the New York Stock Exchange on July 18, 1991, of $11.00, which was credited to
participants' Special Ledger Accounts. Messrs. Banks and Hendrickson maintain
accounts in the Deferred Compensation Plan which are credited with interest at a
rate of 9% per annum.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
The Company adopted a severance policy, as of December 1, 1989, which
provides assistance in the form of a lump sum severance payment to active,
full-time, corporate or regional office employees who are permanently,
involuntarily and without cause separated from all employment with the Company
or its successor. Severance pay is calculated based upon an employee's base
weekly pay, position and continuous past service with the Company as of the last
day of the employee's active employment. David R. Banks, Boyd W. Hendrickson,
William A. Mathies, C. Arnold Renschler and Mark D. Wortley would have received
$323,077, $192,308, $150,000, $59,385 and $105,192, respectively, if they were
entitled to a severance payment as of January 1, 1997.
Effective December 8, 1995, the Company entered into Change in Control
Severance Agreements that provide for payments to be made to the Executive Vice
Presidents of the Company (including Messrs. Mathies and Wortley) (the
"Severance Agreements"). The Severance Agreements have an initial term of three
years, with an automatic extension of one additional day for each day beyond
December 8, 1995 that the Executive Vice President (the "Executive") remains
employed by the Company until such time as the Company elects to cease such
extension by written notice, thereby setting the term to end three years from
the written notice. The Severance Agreements provide for specified severance
benefits in the event of a change of control and (i) termination of employment
of the Executive by the Company without cause or by the Executive for good
reason (which includes material reduction in duties or authority, reduction in
compensation or benefits, or a relocation of employment from Fort Smith) during
a period of two years following the change in control or (ii) termination of
employment initiated by the Executive without good cause during the 31 day
period commencing on the first day of the 13th month following the change in
control.
For purposes of the Severance Agreements, 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's Common
Stock 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 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 Common
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.
The severance benefit under the Severance Agreements includes (i) a lump
sum payment equal to three times the sum of (a) the Executive's base salary and
(b) the Executive's target bonus under the Company's Annual Incentive Plan, with
(a) and (b) to be determined at either the termination of employment or the
change in control so as to produce the greater payment; (ii) vesting of all
options, restricted stock, phantom units, and other awards granted to Executive
which have not otherwise vested; (iii) continuation, for a period of three years
following termination of employment, of participation in the Company's Medical
Plan, Executive Medical Reimbursement Plan, and Dental Plan; (iv) relocation to
the next base of full-time employment, if commenced within three years of
termination of employment, in accordance with the
15
<PAGE> 18
Company's general relocation policy for executives; (v) a matching contribution
to the Company's Executive Retirement Plan for the plan year in which the
termination of employment occurs; and (vi) for two years following termination
of employment, disability insurance benefits equivalent to the benefits the
Executive would have received had he or she remained employed by the Company.
The Severance Agreements include a provision for a gross-up payment if, in
the opinion of a Big 6 accounting firm or if so alleged by the Internal Revenue
Service, the aggregate severance benefit described above would cause the payment
of any part of such benefit to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Internal Revenue Code. The amount of the
gross-up payment will be equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (a) excise tax on the
severance benefit, (b) income tax on the gross-up payment, and (c) excise tax on
the gross-up payment, to be equal to the aggregate remuneration the Executive
would have received, as if Sections 280G and 4999 of the Internal Revenue Code
had not been enacted into law.
Effective December 8, 1995, the Company entered into employment contracts
(each an "Employment Contract" and collectively the "Employment Contracts") with
Mr. Banks and Mr. Hendrickson (collectively the "Senior Executives"). The
Employment Contracts have an initial term of three years, with an automatic
extension of one additional day for each day beyond December 8, 1995 that each
of the respective Senior Executives remains employed by the Company until such
time as the Company elects to cease such extension by giving written notice
thereby setting the term to end three years from the written notice. The
Employment Contracts provide the Senior Executives with: (i) a stated minimum
base salary per annum through a specified date, and thereafter at any such
greater rate as is determined by the Committee (the stated minimum base salary
per annum for Messrs. Banks and Hendrickson is $627,500 and $450,000
respectively; (ii) participation in all benefit plans; and (iii) an annual cash
bonus pursuant to the Company's Annual Incentive Plan.
The Employment Contracts provide severance benefits in the event of a
change in control (including gross-up payments) on substantially the same terms
and conditions as set forth above with respect to the Severance Agreements
except that the Senior Executives may claim the relocation benefit without
commencing full-time employment. In addition Mr. Banks' Employment Contract
provides that the Company will provide office space to Mr. Banks for a period of
the lesser of three years or the date he commences full-time employment.
In addition to severance benefits in the event of a change in control, the
Employment Contracts provide for severance benefits to the Senior Executives
during their term if there is a termination of employment initiated by (i) the
Company without cause or (ii) by the Senior Executive for good reason. In this
event, the severance benefit includes: (a) a lump sum payment equal to one times
the sum of the Senior Executive's (1) base salary and (2) target bonus or actual
bonus for the previous year, if higher; (b) vesting of all unvested equity-based
compensation; (c) continuation, for at least two years from termination of
employment, of participation in the Company's Medical Plan, Executive Medical
Reimbursement Plan, and Dental Plan; (d) relocation benefits as described above;
and (e) a matching contribution to the Company's Executive Retirement Plan for
the plan year in which the termination of employment occurs.
Effective June 3, 1996 the Company entered into an employment contract with
Dr. Renschler (as amended by the Employment Contract Addendum and Amendment to
Employment Contract, the "Renschler Agreement"). The Renschler Agreement
contains the same terms as the Employment Contract with Mr. Hendrickson with the
following exceptions: (i) the minimum base salary is $375,000; (ii) a guaranteed
bonus for 1996 performance of no less than 50% of base salary; (iii) a payment
of $400,000 in quarterly installments of $100,000 each beginning in June 1996 to
reimburse Dr. Renschler for lost benefits; (iv) the Company agreed to be a
co-signer on a note for $1,200,000 to enable Dr. Renschler to exercise options
from his former employer; (v) the definition of "Change of Control" was amended
to include the sale by the Company of at least 80 percent of the capital stock
of Pharmacy Corporation of America to a person other than the Company or any
direct or indirect affiliate and (vi) various provisions relating to Dr.
Renschler's participation in various Company stock-based compensation and other
benefit plans.
16
<PAGE> 19
A trust has been established with Chemical Bank to fund certain benefits
payable pursuant to certain employee benefit plans, including the Severance
Agreements, the Employment Contracts and the Renschler Agreement in the event of
termination of employment after a change in control of the Company. Immediately
prior to a change in control of the Company, the Company is required to make a
deposit to the trust in an amount equal to the excess of the maximum amount
potentially payable under the plans to all participants over the current value
of the trust assets. The trust is revocable by the Company until a change in
control. The trust assets are subject to the claims of general creditors of the
Company in the event of the Company's insolvency.
The Board of Directors believes that the Severance Agreements, the
Employment Contracts and the Renschler Agreement will encourage the commitment
and availability of its key management employees in the face of potentially
disruptive and distracting circumstances that may arise in the event of an
attempted or actual change in control or an unsolicited takeover of the Company.
In any such event, such key management employees will be able to analyze and
evaluate proposals objectively with a view to the best interest of the Company
and its stockholders. The Severance Agreements, the Employment Contracts and the
Renschler Agreement, however, may have the incidental effect of discouraging
takeovers and protecting employees from removal, since the agreements increase
the cost that would be incurred by an acquiror seeking to replace current
management.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company's officers and directors are required to file initial reports
of ownership and reports of change in ownership with the Securities and Exchange
Commission (SEC). Officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on information provided to the Company by individual officers
and directors, the Company believes that during 1996 its officers and directors
have timely complied with all filing requirements applicable to them except that
during 1996, Neil Gulsvig, an officer of a subsidiary; T. Jerald Moore, an
Executive Vice President and Dr. Risa Lavizzo-Mourey, a director, were late in
reporting one transaction each.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
Jon E.M. Jacoby, a director, serves as Executive Vice President, Chief
Financial Officer and director of Stephens Group, Inc. For the year ended
December 31, 1996, the Company paid to Stephens Group, Inc. or its affiliates,
approximately $880,113 for investment banking and brokerage services.
PROPOSAL 2 -- APPROVAL OF THE BEVERLY ENTERPRISES, INC.
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
The following description of the Beverly Enterprises, Inc. Non-Employee
Director Deferred Compensation Plan (the "Plan") is qualified in its entirety by
reference to the Plan, a copy of which is attached as Exhibit "A" to this Proxy
Statement.
The purpose of the Plan is to provide outside directors with the
opportunity to receive awards equivalent to shares of Common Stock (referred to
as "deferred share units") and to defer receipt of compensation for services
rendered to the Company. It is intended that the Plan shall aid the Company in
retaining and attracting non-employee directors whose abilities, experience and
judgment can contribute to the continued progress of the Company. Further, the
Plan is intended to more closely align directors with stockholders through
compensation awards equivalent to shares of Common Stock.
There are three types of contributions available under the Plan. First,
directors will be able to defer all or part of retainer and meeting fees to a
pre-tax deferred compensation account with two investment options. The first
investment option will be a cash account which is credited with interest (at a
variable interest rate equal to the prime interest rate as established by a
major New York bank), and the second investment option will be
17
<PAGE> 20
a deferred share unit account, with each unit having a value equivalent to one
share of Common Stock. A director's deferred share unit account will fluctuate
in value as if it had been invested in Common Stock, however the Plan is not
actually funded and amounts deferred under the Plan will not necessarily be
invested in the Common Stock. It is possible for the value of a director's
account to decrease in value as a result of this deemed investment if the value
of the Common Stock decreases.
The second type of contribution is a Company matching contribution. The
Company will match 25% of the amount that is deferred, but only to the extent
the director elects to credit his deferral into the deferred share unit account.
Third, in connection with the termination of the current retirement plan
for non-employee directors, which is discussed on page 5 (the "Terminated Plan")
and in order to replace lost benefits under the Terminated Plan, directors will
receive a grant of 500 deferred share units each year under the Plan. Both the
Company matching contribution and the annual 500 deferred share unit grant will
be automatically credited to the deferred share unit account.
Directors are at all times 100% vested in their accounts. Distributions
will commence upon retirement, termination, death, or disability. Earlier
payments are available only if approved by the full Board of Directors (which
administers the Plan), in the event of an unforeseeable emergency resulting in
an extreme financial hardship. Payment will be in the form of a single lump sum
or installment of up to ten years, as elected by each director. Distributions
will be made in shares of Common Stock. However, with prior Board approval, a
director may elect to be paid out of cash instead.
The right of a Director or his or her beneficiary to receive a distribution
under the Plan is an unsecured claim against the general assets of the Company.
The Company may (but is not required to) informally "fund" some or all of the
Plan liabilities through a so-called "rabbi trust" or grantor trust, but neither
a director nor any beneficiary shall have any rights in or against any specific
assets of the Company. The Plan will become effective May 29, 1997, subject to
approval by the stockholders. Failure to obtain stockholder approval shall void
the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR the proposal to
approve the Beverly Enterprises, Inc. Non-Employee Director Deferred
Compensation Plan. Proxies received by the Board of Directors will be so voted
unless stockholders specify a contrary choice in the proxies.
PROPOSAL 3 -- STOCKHOLDER PROPOSAL
Edward S. George, 89 Corning Hill, Glenmont, New York 12077, owner of 1,346
shares of Beverly Enterprises, Inc. common stock, held in street name of Brown &
Co., has advised the Company that it is his intention to present the following
resolution for consideration and action by stockholders at the 1997 Annual
Meeting:
Whereas the dividend is the first casualty in any economic downturn
and the stockholder is the first casualty and the last to benefit from an
upturn, be it
Resolved: That when a dividend is cut, it is recommended that no
salaries will be increased or any stock options allowed to executives or
directors until the dividend is restored to its original amount before the
cut.
The bullet must be large enough to enable the executives and directors
as well as the stockholders to get their teeth on it.
The administration will maintain that the increases in salary and
stock options are necessary to attract and hold good people. This cliche
belongs with the one "The check is in the mail", the New York State
Legislature and certain elected officials to justify an increase in their
salaries, and "I'm from the government and I'm here to help."
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<PAGE> 21
MANAGEMENTS COMMENT
Proposal 3 seeks to limit the Company's ability to increase salaries and
grant stock options to its executive officers and directors in circumstances
where its dividends are reduced. The Company believes this limitation is
inappropriate for several reasons. First, it is in the best interest of the
Company and its shareholders to link executive compensation to performance as
described in greater detail in the Compensation Committee Report under the
heading COMPENSATION PHILOSOPHY (at page 6). Adopting a compensation program
which is tied solely to dividend rates could fail to recognize significant
individual performance by the Company's executives. Secondly, the Company
believes that the determination of executive compensation should not be
arbitrarily limited to a single factor such as dividends but rather that the
Company should be able to base its compensation decisions on a mix of factors,
the goal of which is to provide a competitive compensation program that will
benefit the Company and all its stockholders by allowing it to recruit and
retain qualified talent. Finally, decisions concerning the payment or level of
dividends are appropriately based on considerations relating to the Company's
need for capital, which does not necessarily have a direct relationship to the
Company's current performance. Compensation, on the other hand, should be tied
closely to performance and therefore should not be tied to dividend policies.
The Company's dividend policy will continue to be determined by the Board based
on a mix of factors including capital investment needs for future performance
improvements and the expected returns to stockholders from such capital
investments.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote AGAINST Proposal 3.
Proxies received by the Board of Directors will be so voted unless stockholders
specify a contrary choice.
PROPOSAL 4 -- RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP as auditors for the Company for
the year ending December 31, 1997, subject to the ratification by stockholders.
Ernst & Young LLP audited the Company's consolidated financial statements for
the year ended December 31, 1996, and together with its predecessor, Arthur
Young & Company, has been the Company's auditors since 1965.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement if they
desire to do so. It is also expected that they will be available to respond to
appropriate questions from stockholders at the Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Ernst & Young LLP as independent auditors for 1997. Proxies
received by the Board of Directors will be so voted unless stockholders specify
a contrary choice.
REQUIREMENTS, INCLUDING DEADLINES FOR SUBMISSIONS OF PROXY PROPOSALS,
NOMINATION OF DIRECTORS, AND OTHER BUSINESS BY STOCKHOLDERS
Under the rules of the Securities and Exchange Commission, the date by
which proposals of stockholders intended to be presented at the 1998 annual
meeting must be received by the Company for inclusion in its proxy statement and
form of proxy relating to that meeting is December 30, 1997.
Under the By-Laws, certain procedures are provided which a stockholder must
follow to nominate persons for election as directors or to introduce an item of
business at the annual meeting. These procedures provide, generally, that
stockholders desiring to make nominations for directors, and/or bring a proper
subject of business before the meeting, must do so by written notice timely
received not less than seventy-five (75) days prior to such meeting by the
Secretary of the Company containing the name and address of the stockholder, and
a representation that the stockholder is a holder of record and intends to
appear in person or by proxy at the meeting. If the notice relates to a
nomination for director, it must also set forth the name and
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<PAGE> 22
address of any nominee(s), all arrangements or understandings between the
stockholder and each nominee, and any other person(s) naming such person(s)
pursuant to which the nomination(s) are to be made, such other information
regarding each nominee as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated by the Board, and the consent of each
nominee to serve. Notice of an item of business shall include a brief
description of the proposed business, the reasons for conducting such business
at the annual meeting, and any material interest of the stockholder in such
business.
The Chairman of the annual meeting may refuse to allow the transaction of
any business not presented, or to acknowledge the nomination of any person not
made, in compliance with the foregoing procedures.
Stockholders were advised by a press release on June 13, 1996 that the
Annual Meeting would be held on May 29, 1997. It is currently expected that the
1998 annual meeting will be held on or about May 21, 1998, in which event any
advance notice of nominations for directors and items of business (other than
the proposals intended to be included in the proxy statement and form of proxy,
which is noted above, must be received by December 30, 1997) must be given by
stockholders by March 7, 1998. The Company does, however, retain the right to
change this date as it, in its sole discretion, may determine. Notice of any
change will be furnished to stockholders prior to the expiration of the
seventy-five day advance notice period referred to above.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by directors, officers
and regular employees of the Company personally and by telephone or facsimile.
The Company may reimburse persons holding shares in their own names, or in the
names of the nominees, for expenses such persons incur in obtaining instructions
from beneficial owners of such shares. The Company has also engaged Georgeson &
Company Inc. to solicit proxies for a fee not to exceed $8,500, plus $6.00 per
call to individual stockholders or NOBO's if assigned, plus out-of-pocket
expenses.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if other matters do properly come before the Annual Meeting,
it is intended that the persons named in the proxy will vote on said matters in
accordance with their best judgment.
ROBERT W. POMMERVILLE
Secretary
April 29, 1997
Fort Smith, Arkansas
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EXHIBIT A
BEVERLY ENTERPRISES, INC.
NON-EMPLOYEE DIRECTOR
DEFERRED
COMPENSATION PLAN
(EFFECTIVE MAY 29, 1997)
* * * * *
SECTION 1. Purpose. The purpose of the Plan is for the Company to provide
Directors of the Company with an opportunity to receive awards equivalent to
Company Stock (referred to as "Deferred Share Units") and defer receipt of
compensation for services rendered to the Company in the form of annual retainer
and meeting fees. It is intended that the Plan shall aid the Company in
retaining and attracting Directors whose abilities, experience and judgment can
contribute to the continued progress of the Company.
SECTION 2. Definitions. (a) "Beneficiary" means the person or persons
(including legal entities) who have been designated in accordance with Section
18 hereof to receive benefits under this Plan following a Director's death.
(b) "Board" means the Board of Directors of the Company.
(c) "Company Matching Contribution" means the Deferred Share Units credited
to the Deferred Share Unit Account pursuant to Section 8(b).
(d) "Company" means Beverly Enterprises, Inc.
(e) "Compensation" means a Director's Meeting Fees and Retainer.
(f) "Date of Crediting" means, with respect to any compensation deferred
pursuant to the Plan, the first business day of the month following the date
when such compensation would otherwise be paid to a Director.
(g) "Deferred Compensation" means all or any part of any cash, or other
consideration to be paid to a Director by the Company as Director's fees or
retainers that are subject to an elective deferral under Section 7.
(h) "Deferral Account" means the bookkeeping account established for a
Director under the Plan and to which Deferred Compensation amounts, Company
Matching Contributions and annual grants of Deferred Share Units with respect to
such Director are credited from time to time, as adjusted from time to time as
provided in the Plan. The Deferral Account may be credited with Deferred Share
Units (a "Deferred Share Unit Account") as defined in Section 8 or may be
credited with the Variable Interest Option (a "Deferred Cash Account") as
defined in Section 9.
(i) "Deferred Compensation Election Form" means the form pursuant to which
Directors elect to become participants in the Plan and defer Compensation
thereunder, in such form as the Board determines from time to time in its sole
discretion.
(j) "Deferred Share Unit" means a bookkeeping entry having a unit of value
equal to one (1) share of Stock as set forth in Section 8 of the Plan.
(k) "Director" means any non-employee member of the Board of Directors of
the Company.
(l) "Disability" means the inability of a Director, as determined by the
Board in its sole discretion, substantially to perform such Director's regular
duties and responsibilities due to a medically determinable physical or mental
illness which has lasted (or can reasonably be expected to last) for a period of
three (3) consecutive months.
(m) "Fair Market Value" means the closing sales price of the Stock for such
day, or if no such sale is made on such day, the average of the closing bid and
asked prices of the Stock for such day, in each case as
<PAGE> 24
officially reported on the New York Stock Exchange (or, if the Stock is not then
listed or admitted to trading on the New York Stock Exchange, the principal
national stock exchange or stock market on which the Stock is then listed or
admitted to trading.)
(n) "Meeting Fees" means Compensation paid by the Company to Directors for
attendance at Board and committee meetings as well as fees paid for a telephonic
Board or committee meeting.
(o) "Plan" means the Beverly Enterprises, Inc. Non-Employee Director
Deferred Compensation Plan, as set forth herein and as amended from time to
time.
(p) "Plan Year" means the calendar year.
(q) "Retainer" means the annual fixed payment awarded by the Company to a
Director for services on the Board.
(r) "Stock" means the common stock of the Company, par value $.10 per
share.
(s) "Unforeseeable Emergency" means a severe financial hardship to the
Director resulting from a sudden and unexpected illness or accident of the
Director, loss of the Director's property due to casualty, or other similar
extraordinary unforeseeable circumstances arising as a result of events beyond
the control of the Director. The circumstances that will constitute an
"Unforeseeable Emergency" would depend on the facts of each case, but, in any
case, payment may not be made in the event that such hardship is or may be
relieved:
(1) through reimbursement or compensation by insurance or otherwise, or
(2) by liquidation of the Director's assets, to the extent that liquidation
of such assets would not itself cause severe financial hardship.
SECTION 3. Eligibility. Individuals eligible to participate in the Plan
shall be limited solely to the Directors of the Company.
SECTION 4. Administration. (a) The Plan shall be administered by the Board.
The Board has complete fiduciary discretion and authority to construe and
interpret the Plan; promulgate, amend and rescind rules and regulations relating
to the implementation, administration and maintenance of the Plan; decide all
questions of eligibility and benefits (including underlying factual
determinations); and adjudicate all claims and appeals. The Board may designate
persons other than members of the Board to carry out the day-to-day ministerial
administration of the Plan under such conditions and limitations as it may
prescribe; provided, however, the Board shall not delegate its authority to the
extent that actual Board action may be required under Section 16 of the
Securities Exchange Act of 1934 or other applicable law. Any action by the Board
in connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and binding
upon all Directors and any person(s) claiming under or through any Directors.
(b) The Company will indemnify and hold harmless the Board and each member
thereof against any cost or expense (including, without limitation, attorney's
fees) or liability (including, without limitation, any sum paid in settlement of
a claim with the approval of the Company) arising out of any act in connection
with administration of the Plan, or omission to so act, except in the case of
willful gross misconduct or gross negligence.
SECTION 5. Annual Deferred Share Unit Grants. 500 Deferred Share Units
shall be credited by the Company to each Director as of May 29, 1997. Beginning
with the year 1998 and each year thereafter, each Director will receive a grant
of 500 Deferred Share Units, credited as of the last day of the Stock's active
trading in the month of January of the respective Plan Year. The awards will be
credited to the Director's Deferred Share Unit Account.
SECTION 6. Payment of Deferral Accounts. The balance in the Deferral
Accounts shall be paid to a Director , or, in the case of any Director's death
prior to retirement from the Board, the Director's designated Beneficiary(ies),
in stock (or, with Board approval, in cash) in either a) one (1) lump sum or, b)
over a period of two (2) to ten (10) years commencing as soon as it is
administratively feasible the month after the Director's retirement, death or
disability pursuant to the Director's advanced written election received at
least
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twenty four (24) months prior to said retirement, death or disability. Such
election of distribution method shall be made at the time of deferral and may be
changed at any time with Board approval prior to the Director's, retirement,
death or disability as long as it is made at least twenty four (24) months prior
to the Director's retirement, death or disability.
SECTION 7. Participation: Elective Deferrals. (a) To elect to participate
in the Plan for a particular Plan Year, a Director must execute a Deferred
Compensation Election Form and file such form with the Board (or its designee)
before the commencement of such Plan Year. To participate in the Plan during the
year in which the Plan is first implemented, the Director must make an election
to defer Compensation for services to be performed subsequent to the election
within 30 days after the effective date of the Plan. To participate in the Plan
during the first year in which a Director becomes eligible to participate in the
Plan, the new Director must make an election to defer Compensation for services
to be performed subsequent to the election within 30 days after the date the new
Director becomes eligible. Such election shall:
(i) contain a statement that the Director elects to defer a portion of
the Director's Compensation (up to 100% thereof, in increments of 25%) for
a specified Plan Year that becomes payable to the Director after the filing
of such election;
(ii) apply only to the Compensation otherwise payable to the Director
during the Plan Year for which such election is made; and
(iii) be irrevocable with respect to the Plan Year to which it
applies. The Director may elect to have the Deferred Compensation credited
to the Deferred Share Unit Account, the Deferred Cash Account or any
combination thereof. Any such investment election shall be irrevocable for
the Deferred Compensation or other contribution to which it relates. Upon
receipt of a Director's Deferred Compensation Election Form, the Company
shall establish as an accounting entry an individual Deferral Account for
such Director and such Director shall become a participant under the Plan.
SECTION 8. Deferred Share Unit Account; Matching Contributions. (a)
"Deferred Share Unit" -- Upon initial participation in the Plan, a "Deferred
Share Unit Account" shall be established in the Director's name. Deferred Share
Units and fractions thereof shall be credited to such Deferred Share Unit
Account in an amount determined by dividing the amount of Compensation to be
deferred into such account by the Fair Market Value on the Date of Crediting.
Upon the occurrence of any stock split, stock dividend, combination or
reclassification with respect to any outstanding series or class of stock, or
consolidation, merger or sale of all or substantially all of the assets of the
Company, the number of Deferred Share Units in each Deferred Share Unit Account
shall, to the extent deemed appropriate by the Board, be adjusted accordingly.
(b) "Company Matching Contributions" -- Upon a deferral of Deferred
Compensation into the Deferred Share Unit Account (but not the Deferred Cash
Account) and the associated crediting of Deferred Share Units, the Company shall
credit each such Deferred Share Unit Account, as of the same Date of Crediting,
with an additional number of Deferred Share Units equal to 25% of the number of
Deferred Share Units credited by virtue of such Deferred Compensation. Such
additionally credited Deferred Share Units, and all dividend equivalents
associated therewith, are hereinafter referred to as "Company Matching
Deferrals". No Company Matching Contributions shall be made with respect to the
Annual Deferred Share Unit grant described in Section 5.
(c) "Dividend Equivalents" -- To the extent dividends on any outstanding
Stock are paid, dividend equivalents and fractions thereof shall be calculated
with respect to balances of such Deferred Share Units in any Deferred Share Unit
Account, converted to additional equivalents of such Stock and credited to the
appropriate Deferred Share Unit Account as of the dividend payment dates. The
number of Deferred Share Units to be credited as of each such date shall be
determined by dividing the amount of the dividend equivalent by the Fair Market
Value on the dividend payment date. The Director's Deferred Share Unit Account
shall continue to earn such dividend equivalents until fully distributed.
SECTION 9. Deferred Cash Account. (a) "Interest Equivalents" -- Upon
approval of a deferral under the variable interest option, a "Deferred Cash
Account" shall be established in the Director's name. The amount of Compensation
being deferred under this option will be credited to this account as of the Date
of
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Crediting. Interest equivalents on amounts deferred under this option shall be
calculated annually as of December 31 of each year. Such equivalents shall be
based on the prime rate, as established by a major New York bank, in effect on
the first business day of the year (and shall be calculated, with respect to
amounts credited prior to such year, for the entire year, or with respect to
amounts credited during such year, for the number of days from the Date of
Crediting). At distribution, interest equivalents shall be similarly calculated
on amounts in the Deferred Cash Account based on prime rates from the preceding
January 1, or, if later, the Date of Crediting, through the date prior to the
date of distribution, and added to the total to be distributed. The crediting of
interest equivalents to the Director's Deferred Cash Account shall continue
until the balance in such account is fully distributed. Notwithstanding anything
to the contrary in this Section 9(a), all payments will be made in accordance
with Section 6.
(b) "Time of Crediting" -- The interest equivalents calculated each
December 31 shall be credited to a Director's Deferred Cash Account as of
January 1 of the next year.
SECTION 10. Transfer of Liabilities of Retirement Plan for Directors.
Effective May 29, 1997, The Retirement Plan for Non-Employee Directors
("Retirement Plan") shall be terminated and Directors shall be credited with an
amount equal to the present value of retirement benefits accrued by them as of
that date under the Retirement Plan, with such present value to be determined
based on the assumptions that each Director will retire on his or her 70th
birthday or, if greater, at the age attained as of May 29, 1997. Amounts shall
be converted, as of May 29, 1997, into Deferred Share Units and credited on that
date to each Director's Deferred Share Unit Account. No Company Matching
Contributions shall be credited in connection with these amounts.
SECTION 11. Distribution in Cases of Hardship. The Board in its sole
discretion may make distributions to a Director from the balances in such
Director's Deferral Account upon a showing by such Director that an
Unforeseeable Emergency has occurred. Such distributions shall be limited to the
amount shown to be necessary to meet the Unforeseeable Emergency.
SECTION 12. Amendment. The Plan may be amended, modified or terminated at
any time, for any reason, without notice, by the Board except that no such
amendment, modification or termination shall have a material adverse effect on
the accrued balance of any Director's Deferral Account as of the effective date
of any such amendment,modification or termination (without the consent of the
Director (or, if the Director is deceased, his or her beneficiary(ies))).
SECTION 13. Company's Obligations Unfunded. All benefits due a Director or
a Beneficiary under this Plan are unfunded and unsecured and are payable solely
out of the general funds of the Company. The Company, in its sole and absolute
discretion, may establish a "grantor trust" for the payment of benefits and
obligations hereunder, the assets of which shall be at all times subject to the
claims of creditors of the Company as provided for in such trust, provided that
such trust does not alter the characterization of the Plan as an "unfunded plan"
for purposes of the Internal Revenue Code. Such trust shall make distributions
in accordance with the terms of the Plan.
SECTION 14. Stock Subject to the Plan. Pursuant to the payment option
available under the Plan as specified in Section 6, the Company has the right to
reserve the appropriate number of shares as may be necessary to fund
distributions hereunder. The shares to be delivered under the Plan may consist
of authorized but unissued Stock or Stock reacquired by the Company, including
shares purchased in the open market.
SECTION 15. Restrictions on Alienation. No amount deferred or credited to
any account under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge. Any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
levy or charge the same shall be void; nor shall any amount be in any manner
subject to any claims for the debts, contracts, liabilities, engagements or
torts of the Director (or the Director's beneficiary or personal representative)
entitled to such benefit. No Director shall be entitled to borrow at any time
any portion of the Director's account balances under the Plan.
SECTION 16. Withholding. There shall be deducted from all payments under
the Plan the amount of any taxes required to be withheld by any Federal, state
or local taxing authority. The Directors, their beneficiaries
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and personal representatives shall bear any and all Federal, foreign, state or
local income or any other tax imposed on amounts paid under the Plan.
SECTION 17. Directors Bound by Terms of the Plan. By electing to become a
Director, each Director shall be deemed conclusively to have accepted and
consented to all terms of the Plan and all actions or decisions made by the
Company with regard to the Plan. Such terms and consent shall also apply to and
be binding upon the beneficiaries, personal representatives and other successors
in interest of each Director. Each Director shall receive a copy of the Plan.
SECTION 18. Designation of Beneficiary(ies). Each Director under the Plan
may designate a beneficiary or beneficiaries to receive any payment which under
the terms of the Plan becomes payable on, after or as a result of the Director's
death. At any time, and from time to time, any such designation may be changed
or canceled by the Director without the consent of any such beneficiary. Any
such designation, change or cancellation must be on a form provided for that
purpose by the Board and shall not be effective until received by the Board. If
no beneficiary has been designated by a deceased Director, the beneficiary shall
be the Director's estate. If the Director designates more than one beneficiary,
any payments under the Plan to such beneficiaries shall be made in equal
allocations unless the Director has expressly designated otherwise, in which
case the payments shall be made in the allocations designated by the Director.
SECTION 19. Severability of Provisions. In the event any provision of the
Plan would serve to invalidate the Plan, that provision shall be deemed to be
null and void, and the Plan shall be construed as if it did not contain the
particular provision that would make it invalid. The Plan shall be binding upon
and inure to the benefit of (a) the Company and its respective successors and
assigns, and (b) each Director, his or her designees and estate. Nothing in the
Plan shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation, or
engaging in any other corporate transaction.
SECTION 20. Governing Laws and Interpretation. The Plan shall be construed
and enforced in accordance with, and the rights of the parties hereto shall be
governed by, the laws of the State of Delaware. This Plan shall not be
interpreted as either an employment or trust agreement.
SECTION 21. ARBITRATION. Except as otherwise provided in this Plan, any
controversy between the parties arising out of this Plan shall be submitted to
the American Arbitration Association under its Commercial Arbitration Rules for
binding arbitration. The arbitration shall be held in Fort Smith, Arkansas or
such other location where the Company may have its corporate headquarters, using
a single arbitrator. The costs of the arbitration, including any American
Arbitration Association administration fee, the arbitrator's fee, and costs for
the use of facilities during the hearings, shall be borne equally by the parties
to the arbitration. Each side shall bear its own attorney fees. The arbitrator
shall not have any power to alter, amend, modify or change any of the terms of
this Plan nor to grant punitive, special, extracontractual or consequential
damages or any other remedy which is either prohibited by the terms of this
Plan, or not available in a court of law. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
SECTION 22. Effective Date of the Plan. The Plan shall be effective as of
May 29, 1997 upon its adoption by the Company and approval by the stockholders
of the Company.
IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this
day of , 1997.
BEVERLY ENTERPRISES, INC.
By:
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Title:
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YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSALS 2 AND 4 AND
A VOTE AGAINST PROPOSAL 3.
<S> <C> <C>
1. ELECTION OF DIRECTORS: FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: Beryl F. Anthony, Jr., David R. Banks, James R. Greene, Boyd W. Hendrickson, Edith E. Holiday, Jon E.M. Jacoby, Risa J.
Lavizzo-Mourcy, M.D., and Marilyn R. Seymann.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
*Exceptions
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If any nominee named above declines or is unable to serve as a director, the persons named as proxies, and each of them shall have
full discretion to vote for any other person who may be nominated.
2. Beverly Enterprises, Inc. Non-Employee Director Deferred 3. Stockholder Proposal Concerning Executive Compensation.
Compensation Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Appointment of Ernst & Young LLP as Independent Auditors Please sign, date and return today in the enclosed envelope.
for 1997. This Proxy will not be used if you attend the meeting in
person and so request.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and [ ]
or Comments Mark Here
NOTE: Please sign exactly as name appears on this Proxy. When
shares are held by joint tenants, both should sign. When
signing as attorney, as executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATED: , 1997
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Signature of Stockholder(s)
VOTES MUST BE INDICATED [ ]
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE. (X) IN BLACK OR BLUE INK.
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BEVERLY ENTERPRISES
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David R. Banks, Boyd W. Hendrickson and
Robert W. Pommerville, each of them, as proxies, each with the power to appoint
his substitute, to represent and to vote as designated below, all the shares of
common stock of Beverly Enterprises, Inc. held of record by the undersigned on
March 31, 1997 at the Annual Meeting of Stockholders to be held on May 29, 1997
and any and all adjournment or postponements thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any and all adjournments or
postponements thereof. This Proxy when properly executed will be voted in the
manner directed herein by the undersigned. If no specification is made, the
Proxy will be voted FOR the election of the directors named in the Proxy
Statement; FOR the approval of the Beverly Enterprises, Inc. Non-Employee
Director Deferred Compensation Plan; AGAINST the Stockholder proposal concerning
executive compensation; and FOR the appointment of Ernst & Young LLP as
independent auditors for 1997.
(Continued and to be signed and dated on the reverse side.)
BEVERLY ENTERPRISES, INC.
P.O. BOX 11050
NEW YORK, NY 10203-0050
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