-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FBgsG+VJ/kEQnJpk2LnTqh8Zh7Sp7EOQ1xkjah1bsCBqGSjIimZst++Na0uMDETh dIHU5WbkKRaOtYLXQvgODQ== 0000950134-94-000986.txt : 19940815 0000950134-94-000986.hdr.sgml : 19940815 ACCESSION NUMBER: 0000950134-94-000986 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES INC /DE/ CENTRAL INDEX KEY: 0000812305 STANDARD INDUSTRIAL CLASSIFICATION: 8051 IRS NUMBER: 954100309 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09550 FILM NUMBER: 94543759 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD #155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 10-Q 1 BEVERLY ENTERPRISES 10-Q FOR 6/30/94 1 ================================================================================ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ___ SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-9550 BEVERLY ENTERPRISES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-4100309 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1200 SOUTH WALDRON ROAD, NO. 155 FORT SMITH, ARKANSAS 72903 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 452-6712 INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ___ ___ SHARES OF REGISTRANT'S COMMON STOCK, $.10 PAR VALUE, OUTSTANDING, EXCLUSIVE OF TREASURY SHARES, AT JULY 29, 1994 -- 83,110,802 ============================================================================== ______________________________________________________________________________ 2 BEVERLY ENTERPRISES, INC. FORM 10-Q JUNE 30, 1994 TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . 2 Condensed Consolidated Statements of Income . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . 4 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 8 Part II -- Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 13
1 3 PART I BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1994 AND DECEMBER 31, 1993 (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, 1994 1993 ---- ---- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 75,182 $ 73,773 Accounts receivable-patient, less allowance for doubtful accounts: 1994 - $20,068; 1993 - $19,561 . . . . . . . . . . . . . . . . . . . 356,332 340,249 Accounts receivable-nonpatient, less allowance for doubtful accounts: 1994 - $283; 1993 - $343 . . . . . . . . . . . . . . . . . . . . . . 6,162 6,329 Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,882 4,617 Operating supplies . . . . . . . . . . . . . . . . . . . . . . . . . . 61,571 62,915 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 25,674 27,050 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . 38,213 33,817 ---------- ----------- Total current assets . . . . . . . . . . . . . . . . . . . . . . 567,016 548,750 Property and equipment, net of accumulated depreciation and amortization: 1994 - $564,087; 1993 - $544,611 . . . . . . . . . . . . . . . . . . 1,181,869 1,153,370 Other assets: Notes receivable, less allowance for doubtful notes: 1994 - $9,865; 1993 - $10,440 . . . . . . . . . . . . . . . . . . . . 41,232 41,689 Designated and restricted funds . . . . . . . . . . . . . . . . . . . . 40,274 44,948 Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,347 72,209 Operating and leasehold rights and licenses, net . . . . . . . . . . . 24,312 25,819 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,848 106,745 ---------- ----------- Total other assets . . . . . . . . . . . . . . . . . . . . . . . 289,013 291,410 ---------- ----------- $2,037,898 $ 1,993,530 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,709 $ 119,212 Accrued wages and related liabilities . . . . . . . . . . . . . . . . . 124,525 126,909 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,715 9,519 Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . . . 17,402 34,310 Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 69,886 63,433 Current portion of long-term obligations . . . . . . . . . . . . . . . 41,631 42,873 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . 3,589 625 ---------- ----------- Total current liabilities . . . . . . . . . . . . . . . . . . . 391,457 396,881 Long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 712,893 706,695 Deferred income taxes payable . . . . . . . . . . . . . . . . . . . . . . 70,641 72,765 Other liabilities and deferred items . . . . . . . . . . . . . . . . . . 78,649 78,180 Commitments and contingencies Stockholders' equity: Preferred stock: Series B, shares issued and outstanding: 3,000,000 . . . . . . . . . 150,000 150,000 Series A, shares issued and outstanding: 999,999 . . . . . . . . . . -- 100,000 Funds designated for the redemption of Series A preferred stock . . . -- (100,000) Common stock, shares issued: 1994 - 87,081,560; 1993 - 85,845,400 . . . . . . . . . . . . . . . . 8,708 8,585 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 592,459 578,239 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,226 42,320 Treasury stock, at cost: 3,977,800 shares . . . . . . . . . . . . . . . (40,135) (40,135) ---------- ----------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . 784,258 739,009 ---------- ----------- $2,037,898 $ 1,993,530 ========== ===========
See accompanying notes. 2 4 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1994 AND 1993 (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 1994 1993 1994 1993 ---- ---- ---- ---- Net operating revenues . . . . . . . . . . . . . . . . . $719,030 $ 714,440 $ 1,431,218 $1,405,657 Interest income . . . . . . . . . . . . . . . . . . . . . 3,623 3,722 7,330 7,030 -------- --------- ----------- ---------- Total revenues . . . . . . . . . . . . . . . . . . 722,653 718,162 1,438,548 1,412,687 Costs and expenses: Operating and administrative: Wages and related . . . . . . . . . . . . . . . . . . 386,662 392,680 771,778 778,123 Other . . . . . . . . . . . . . . . . . . . . . . . . 270,713 265,927 541,351 522,158 Interest . . . . . . . . . . . . . . . . . . . . . . . 14,544 16,303 28,995 32,565 Depreciation and amortization . . . . . . . . . . . . . 21,513 21,556 44,139 42,687 -------- --------- ----------- ---------- Total costs and expenses . . . . . . . . . . . . . 693,432 696,466 1,386,263 1,375,533 -------- --------- ----------- ---------- Income before provision for income taxes . . . . . . . . 29,221 21,696 52,285 37,154 Provision for income taxes . . . . . . . . . . . . . . . 9,643 7,160 17,254 12,261 -------- --------- ----------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . $ 19,578 $ 14,536 $ 35,031 $ 24,893 ======== ========= =========== ========== Net income per share of common stock: Primary . . . . . . . . . . . . . . . . . . . . . . . . $ .21 $ .18 $ .37 $ .31 ======== ========= =========== ========== Fully diluted . . . . . . . . . . . . . . . . . . . . . $ .20 $ .17 $ .37 $ .30 ======== ========= =========== ========== Shares used to compute net income per share: Primary . . . . . . . . . . . . . . . . . . . . . . . . 84,521 81,299 84,444 81,308 ======== ========= =========== ========== Fully diluted . . . . . . . . . . . . . . . . . . . . . 95,774 88,481 84,443 88,465 ======== ========= =========== ==========
Primary earnings per share for the three-month and six-month periods ended June 30, 1994 and fully diluted earnings per share for the six-month period ended June 30, 1994 were computed by dividing net income, after deduction of preferred stock dividends, by the weighted average number of shares of common stock outstanding during the period and the weighted average number of shares issuable upon exercise of stock options, calculated using the treasury stock method. For fully diluted earnings per share, conversion of the Company's Series B preferred stock (as defined herein), 7.625% convertible subordinated debentures and zero coupon notes would have an anti-dilutive effect for such periods and, therefore, were not assumed. Fully diluted earnings per share for the three-month period ended June 30, 1994 was computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, the weighted average number of shares issuable upon exercise of stock options, calculated using the treasury stock method, and the assumed conversion of the Company's Series B preferred stock. Conversion of the Company's 7.625% convertible subordinated debentures and zero coupon notes would have an anti-dilutive effect and, therefore, were not assumed. Primary earnings per share for the three-month and six-month periods ended June 30, 1993 were computed by dividing net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Common stock equivalents included the Company's Series A preferred stock (as defined herein) and the weighted average number of shares issuable upon exercise of stock options, calculated using the treasury stock method. Fully diluted earnings per share for the three-month and six-month periods ended June 30, 1993 were computed as above and assumed conversion of the Company's 9% convertible subordinated debentures. Conversion of the Company's 7.625% convertible subordinated debentures and zero coupon notes would have an anti-dilutive effect and, therefore, were not assumed. See accompanying notes. 3 5 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1994 AND 1993 (UNAUDITED) (IN THOUSANDS)
1994 1993 ---- ---- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 35,031 $ 24,893 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . 44,139 42,687 Provision for reserves and discounts on patient, notes and other receivables, net . . . . . . . . . . . . . . . . . 6,483 9,261 Gains on dispositions of facilities, net . . . . . . . . . . . (3,100) (2,037) Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . 833 (1,447) Net increase (decrease) in insurance reserves . . . . . . . . 198 (9,597) Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable - patient . . . . . . . . . . . . . . (24,358) (16,481) Operating supplies . . . . . . . . . . . . . . . . . . . . (677) (263) Prepaid expenses and other receivables . . . . . . . . . . (2,150) (3,777) Accounts payable and other accrued expenses . . . . . . . 773 (4,088) Income taxes payable . . . . . . . . . . . . . . . . . . . 1,790 4,684 Other, net . . . . . . . . . . . . . . . . . . . . . . . . (7,502) (4,838) -------- --------- Total adjustments . . . . . . . . . . . . . . . . . . 16,429 14,104 -------- --------- Net cash provided by operating activities . . . . . . 51,460 38,997 Cash flows from investing activities: Payments for acquisitions, net of cash acquired . . . . . . . . . . (29,113) (18,964) Proceeds from dispositions of facilities and other assets . . . . . 32,764 5,850 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (39,199) (40,012) Construction in progress, net . . . . . . . . . . . . . . . . . . . (13,323) (4,601) Payments on notes receivable . . . . . . . . . . . . . . . . . . . 5,756 2,193 Other, net . . . . . . . . . . . . . . . . . . . . . . . . (11,599) (5,220) -------- --------- Net cash used for investing activities . . . . . . . . (54,714) (60,754) Cash flows from financing activities: Proceeds from issuance of long-term obligations . . . . . . . . . . 25,000 41,541 Net borrowings under revolving credit agreement . . . . . . . . . . -- 5,000 Repayments of long-term obligations . . . . . . . . . . . . . . . . (29,374) (32,318) Proceeds from exercise of stock options . . . . . . . . . . . . . . 13,508 986 Deferred financing costs . . . . . . . . . . . . . . . . . . . . . (3,141) (5,574) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (4,125) (500) Proceeds from designated funds, net . . . . . . . . . . . . . . . . 2,795 757 -------- --------- Net cash provided by financing activities . . . . . . 4,663 9,892 -------- --------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 1,409 (11,865) Cash and cash equivalents at beginning of period . . . . . . . . . . . . 73,773 49,597 -------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 75,182 $ 37,732 ======== ========= Supplemental schedule of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) . . . . . . . . . . . . . . $ 28,799 $ 31,729 Income taxes (net of refunds) . . . . . . . . . . . . . . . . . . 14,631 8,875
See accompanying notes. 4 6 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1994 (UNAUDITED) (i) The condensed consolidated financial statements included herein have been prepared by the Company, without audit, and include all adjustments of a normal recurring nature which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three-month and six-month periods ended June 30, 1994 and 1993 pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto included in the Company's 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three-month and six-month periods ended June 30, 1994 are not necessarily indicative of the results for a full year. Unless the context indicates otherwise, the Company means Beverly Enterprises, Inc. and its consolidated subsidiaries. Certain prior year amounts have been reclassified to conform with the 1994 presentation. (ii) The provisions for income taxes for the three-month and six-month periods ended June 30, 1994 and 1993 are based on estimated annual tax rates of 33%. The Company's effective tax rate is lower than the federal statutory rate primarily due to the utilization of certain tax credit carryforwards, partially offset by the impact of state income taxes. The provisions for income taxes consist of the following for the three-month and six-month periods ended June 30 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 1994 1993 1994 1993 ---- ---- ---- ---- Federal: Current . . . . . . . . . . . . . . . . $ 7,054 $ 5,387 $ 13,026 $ 10,126 Deferred . . . . . . . . . . . . . . . 251 38 45 (837) State: Current . . . . . . . . . . . . . . . . 2,086 1,311 3,395 2,385 Deferred . . . . . . . . . . . . . . . 252 424 788 587 ------- --------- ---------- --------- $ 9,643 $ 7,160 $ 17,254 $ 12,261 ======= ========= ========== =========
(iii) During the six months ended June 30, 1994, the Company acquired 10 nursing facilities (1,246 beds), which were previously leased by the Company, and certain other assets, for approximately $29,163,000 cash, approximately $9,580,000 assumed and acquired debt and approximately $1,143,000 security and other deposits. Also during such period, the Company sold, subleased or terminated the leases on 42 nursing facilities (3,735 beds) (11 of such facilities were included in the 1992 restructuring program discussed below) and certain other assets for cash proceeds of approximately $33,417,000 and approximately $681,000 notes receivable. The Company recognized pre-tax losses of approximately $9,000,000 for the 11 facilities included in the 1992 restructuring program. Such losses were included in the $57,000,000 pre-tax restructuring charge discussed below. The Company recognized pre-tax gains of approximately $3,000,000 related to the remaining dispositions, which were primarily included in the Company's operating results for the six months ended June 30, 1994. The operations of these facilities were immaterial to the Company's financial position and results of operations. During the year ended December 31, 1992, the Company recognized a $57,000,000 pre-tax restructuring charge related to a program to discontinue the Company's operation of 33 nursing facilities with historically poor financial performance, and to replace, relocate or sell certain other assets (the "1992 restructuring program"). This charge included the estimated operating losses to be incurred by these 33 facilities during the anticipated period required 5 7 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED) to implement the program. Certain transactions which were reserved as part of the 1992 restructuring program were not completed by the originally anticipated one-year implementation period; however, it is anticipated that the remaining transactions will be substantially completed during 1994. The Company evaluates the reserves established in connection with the remaining transactions on a regular basis and believes the current reserves are adequate. On July 8, 1994, the Company filed a Registration Statement on Form S-4 with the Securities and Exchange Commission to register 3,099,030 common shares, all or a portion of which will be used for the acquisition of American Transitional Hospitals, Inc. ("ATH"), as previously announced. The Company filed an amendment to such Registration Statement which was declared effective on August 5, 1994. The stockholders of ATH have until September 1, 1994, to vote on the transaction. The Company anticipates that the acquisition will be accounted for as a pooling-of-interests and closing is expected to occur on or before September 30, 1994. The transaction is subject to the satisfaction of certain conditions, including receipt of ATH stockholder approvals. The acquisition of ATH by the Company is not expected to have a material effect on the Company's financial position or results of operations. The Company has entered into an agreement to purchase three institutional pharmacy subsidiaries of Synetic, Inc., through Pharmacy Corporation of America, a subsidiary of the Company, in exchange for cash of approximately $107,300,000. The acquisition will be accounted for as a purchase. Closing is subject to satisfaction of certain conditions, including receipt of regulatory and Synetic stockholder approvals. The Company has obtained a financing commitment to complete the transaction. The Synetic businesses provide pharmaceutical dispensing services in New England and Indiana to approximately 45,000 patients in various institutions, including nursing homes, transitional care facilities, correctional facilities and group homes. (iv) In May 1994, the Company entered into a $25,000,000 promissory note (the "Note") which bears interest at the rate of 7.75% per annum. The Note is due in equal quarterly installments of approximately $708,000, including principal and interest, beginning in September, 1994, with a balloon payment due in June, 2001. The Note is secured by a mortgage interest in 11 nursing facilities and a security interest in certain personal property. In addition, the Company amended certain of its credit agreements during the second quarter of 1994 to change various restrictive covenants, release certain collateral and adjust the interest rate calculations. During 1993, the Company completed the sale of 3,000,000 shares of $2.75 Cumulative Convertible Exchangeable Preferred Stock (the "Series B preferred stock") through a public offering. On January 3, 1994, the Company used approximately $100,000,000 of the net proceeds from such offering to redeem all of the Company's cumulative convertible preferred stock (the "Series A preferred stock"). (v) There are various lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's consolidated financial position or results of operations. (vi) Effective July 31, 1987, Beverly Enterprises, a California corporation ("Beverly California"), became a wholly-owned subsidiary of Beverly Enterprises, Inc., a Delaware corporation ("Beverly Delaware"). Beverly Delaware (the parent) provides financial, administrative and legal services to Beverly California for which Beverly California is charged management fees. 6 8 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED) The following summarized unaudited financial information is being reported because Beverly California's 7.625% convertible subordinated debentures due March 2003 and its zero coupon notes (collectively, the "Debt Securities") and its senior secured notes (the "Senior Secured Notes") are publicly held. Beverly Delaware is co-obligor of the Debt Securities and guarantor of the Senior Secured Notes. Summary unaudited financial information for Beverly California is as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 1994 1993 1994 1993 ---- ---- ---- ---- Total revenues . . . . . . . . . . . . . . . . . $722,934 $ 718,519 $ 1,439,082 $ 1,413,337 Total costs and expenses . . . . . . . . . . . . 693,706 696,832 1,386,839 1,376,267 Net income . . . . . . . . . . . . . . . . . . . 19,583 14,530 35,003 24,837
AS OF AS OF JUNE 30, 1994 DECEMBER 31, 1993 ------------- ----------------- Current assets . . . . . . . . . . . . . . . . . $ 490,445 $ 468,441 Long-term assets . . . . . . . . . . . . . . . . 1,503,606 1,483,400 Current liabilities . . . . . . . . . . . . . . . 388,689 392,244 Long-term liabilities . . . . . . . . . . . . . . 849,435 838,673
In addition to Beverly Delaware, one of its direct wholly-owned subsidiaries and each of Beverly California's material wholly-owned subsidiaries (collectively, the "Subsidiary Guarantors") have guaranteed the obligations of Beverly California under the Senior Secured Notes. Separate financial statements of Beverly California and the Subsidiary Guarantors are not considered to be material to holders of the Senior Secured Notes since the guaranty of each of the Subsidiary Guarantors is joint and several and full and unconditional (except that liability thereunder is limited to an aggregate amount equal to the largest amount that would not render its obligations thereunder subject to avoidance under Section 548 of the Bankruptcy Code of 1978, as amended, or any comparable provisions of applicable state law), and the aggregate net assets, earnings and equity of the Subsidiary Guarantors and Beverly California together, after adjustment for intercompany management fees, are substantially equivalent to the net assets, earnings and equity of Beverly Delaware on a consolidated basis. 7 9 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 1994 (UNAUDITED) OPERATING RESULTS SECOND QUARTER 1994 COMPARED TO SECOND QUARTER 1993 Net income was $19,578,000 for the three months ended June 30, 1994, as compared to net income of $14,536,000 for the same period in 1993. Net operating revenues increased approximately $4,600,000 for the three months ended June 30, 1994, as compared to the same period in 1993. This increase consists of the following: increases of approximately $51,200,000 for facilities which the Company operated during each of the three-month periods ended June 30, 1994 and 1993 ("same facility operations"); increases of approximately $2,100,000 due to the acquisition of three facilities in 1993; offset by decreases of approximately $48,700,000 due to the disposition of, or lease terminations on, 42 facilities in 1994 and 43 facilities in 1993. Operating and administrative costs decreased approximately $1,200,000 for the three months ended June 30, 1994, as compared to the same period in 1993. This decrease consists of the following: decreases of approximately $43,100,000 due to the disposition of, or lease terminations on, 42 facilities in 1994 and 43 facilities in 1993; offset by increases of approximately $39,900,000 for same facility operations and approximately $2,000,000 due to the acquisition of three facilities in 1993. The increase in net operating revenues for same facility operations for the three months ended June 30, 1994, as compared to the same period in 1993, was due to the following: approximately $24,100,000 due to increased ancillary revenues as a result of providing additional ancillary services to the Company's Medicare and private-pay patients; approximately $26,700,000 due primarily to increases in Medicaid room and board rates, and to a lesser extent, private and Medicare room and board rates; and approximately $6,200,000 due to increases in pharmacy revenues and various other items. These increases in net operating revenues were partially offset by approximately $5,800,000 due to a decrease in same facility occupancy to 88.5% for the three months ended June 30, 1994, as compared to 89.5% for the same period in 1993. The increase in operating and administrative costs for same facility operations for the three months ended June 30, 1994, as compared to the same period in 1993, was due to the following: approximately $18,700,000 due to increased wages and related expenses principally due to higher wages and greater benefits intended to attract and retain qualified personnel, the hiring of therapists on staff as opposed to contracting for their services, and increased staffing levels in the Company's nursing facilities to cover increased patient acuity; approximately $17,800,000 due to additional ancillary costs (excluding wages and related expenses) associated with the increase in ancillary services provided to the Company's Medicare and private-pay patients; and approximately $3,400,000 due primarily to increases in pharmacy-related costs and various other items. Ancillary revenues are derived from providing services to residents beyond room and board care. These services include occupational, physical, speech, respiratory and IV therapy, as well as, sales of pharmaceutical products and other services. The Company's overall ancillary revenues for the three months ended June 30, 1994 were $175,997,000 and represented 24.5% of net operating revenues, as compared to $153,705,000 of ancillary revenues for the same period in 1993 which represented 21.5% of net operating revenues for the three months ended June 30, 1993. Although the Company is pursuing further growth of ancillary revenues through expansion of specialty services, such as rehabilitation and sub-acute care, there can be no assurance that such growth will continue. Growth in ancillary revenues, as well as increases in Medicare census, have also resulted in higher costs for the Company due to higher acuity services being provided to these patients. The Company's overall ancillary costs, excluding wages and related expenses, were $96,230,000 for the three months ended June 30, 1994, compared to $85,164,000 for the same period in 1993. 8 10 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) JUNE 30, 1994 (UNAUDITED) Interest expense decreased approximately $1,800,000 as compared to the same period in 1993 primarily due to the repayment of approximately $45,000,000 of debt with a portion of the proceeds from issuance of the Series B preferred stock (as defined herein) and the conversion of approximately $46,000,000 in principal amount of the Company's 9% convertible subordinated debentures into common stock. Such transactions were completed during the third quarter of 1993. SIX MONTHS 1994 COMPARED TO SIX MONTHS 1993 Net income was $35,031,000 for the six months ended June 30, 1994, as compared to net income of $24,893,000 for the same period in 1993. Net operating revenues and operating and administrative costs increased approximately $25,600,000 and $12,800,000, respectively, for the six months ended June 30, 1994, as compared to the same period in 1993. These increases consist of the following: increases in net operating revenues and operating and administrative costs for facilities which the Company operated during each of the six-month periods ended June 30, 1994 and 1993 ("same facility operations") of approximately $110,600,000 and $91,600,000, respectively; increases in net operating revenues and operating and administrative costs of approximately $4,600,000 and $4,200,000, respectively, due to the acquisition of three facilities in 1993; and decreases in net operating revenues and operating and administrative costs of approximately $89,600,000 and $83,000,000, respectively, due to the disposition of, or lease terminations on, 42 facilities in 1994 and 43 facilities in 1993. The increase in net operating revenues for same facility operations for the six months ended June 30, 1994, as compared to the same period in 1993, was due to the following: approximately $54,600,000 due to increased ancillary revenues as a result of providing additional ancillary services to the Company's Medicare and private-pay patients; approximately $53,200,000 due primarily to increases in Medicaid room and board rates, and to a lesser extent, private and Medicare room and board rates; approximately $3,700,000 due to a shift in the Company's patient mix to a higher Medicare census; and approximately $11,400,000 due to increases in pharmacy revenues and various other items. The Company's Medicare, private and Medicaid census for same facility operations was 12%, 19%, and 68%, respectively, for the six months ended June 30, 1994, as compared to 11%, 19%, and 69%, respectively, for the same period in 1993. These increases in net operating revenues were partially offset by approximately $12,300,000 due to a decrease in same facility occupancy to 88.5% for the six months ended June 30, 1994, as compared to 89.6% for the same period in 1993. The increase in operating and administrative costs for same facility operations for the six months ended June 30, 1994, as compared to the same period in 1993, was due to the following: approximately $39,900,000 due to increased wages and related expenses principally due to higher wages and greater benefits intended to attract and retain qualified personnel, the hiring of therapists on staff as opposed to contracting for their services, and increased staffing levels in the Company's nursing facilities to cover increased patient acuity; approximately $43,700,000 due to additional ancillary costs (excluding wages and related expenses) associated with the increase in ancillary services provided to the Company's Medicare and private-pay patients; and approximately $8,000,000 due primarily to increases in pharmacy-related costs and various other items. The Company's overall ancillary revenues for the six months ended June 30, 1994 were $346,190,000 and represented 24.2% of net operating revenues, as compared to ancillary revenues of $295,042,000 for the same period in 1993 which represented 21.0% of net operating revenues for the six months ended June 30, 1993. The Company's overall ancillary costs, excluding wages and related expenses, were $191,701,000 for the six months ended June 30, 1994, compared to $162,848,000 for the same period in 1993. Interest expense decreased approximately $3,600,000 as compared to the same period in 1993 primarily due to the repayment of approximately $45,000,000 of debt with a portion of the proceeds from issuance of the Series B preferred 9 11 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) JUNE 30, 1994 (UNAUDITED) stock (as defined herein) and the conversion of approximately $46,000,000 in principal amount of the Company's 9% convertible subordinated debentures into common stock. Such transactions were completed during the third quarter of 1993. Depreciation and amortization expense increased approximately $1,500,000 as compared to the same period in 1993 primarily due to the acquisition of previously-leased nursing facilities, partially offset by a decrease due to the disposition of or lease terminations on certain nursing facilities. The Company's future operating performance will continue to be affected by the issues facing the long-term health care industry as a whole, including the maintenance of occupancy, the availability of nursing personnel, the adequacy of funding of governmental reimbursement programs, the demand for nursing home care and the nature of any health care reform measures that may be taken by the federal government, as discussed below, as well as by any state governments. The Company's ability to control costs, including its wages and related expenses which continue to rise and represent the largest component of the Company's operating and administrative expenses, will also significantly impact its future operating results. As a general matter, increases in the Company's operating costs result in higher patient rates under Medicaid programs in subsequent periods. However, the Company's results of operations will continue to be affected by the time lag in most states between the increases in reimbursable costs and the receipt of related reimbursement rate increases. Medicaid rate increases, adjusted for inflation, are generally based upon changes in costs for a full calendar year period. The time lag before such costs are reflected in permitted rates varies from state to state, with a substantial portion of the increases taking effect up to 18 months after the related cost increases. The Clinton Administration is actively pursuing reform of the health care system. The White House Task Force on Health Care Reform studied the issue of health care reform and presented its report and recommendations to the Administration. The Administration proposed health care reform legislation to Congress in October 1993 and other proposed health care reform legislation is being debated and formulated. Among the proposals under consideration are insurance market reforms to increase the availability of group health insurance to small businesses, requirements that all businesses offer health insurance coverage to their employees and the creation of a single governmental health insurance plan that would cover all citizens. These proposals and industry and other groups' recommendations will likely impact the form and content of any future health care reform legislation. As a result, the Company is unable to predict the type of legislation or regulations that may be adopted or the impact, if any, on the Company. There can be no assurance that any health care reform will not adversely affect the Company's financial position or results of operations. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1994, the Company had approximately $75,182,000 in cash and cash equivalents and net working capital of approximately $175,559,000. The Company anticipates that approximately $23,645,000 of its existing cash at June 30, 1994, while not legally restricted, will be utilized for funding insurance claims, and the Company does not expect to use such cash for other purposes. The Company has $50,000,000 of unused commitments under its revolving credit agreement and $15,000,000 of unused commitments under its commercial paper program as of June 30, 1994. Net cash provided by operating activities for the six months ended June 30, 1994 was approximately $51,460,000, an increase of approximately $12,463,000 from the prior year due primarily to an improvement in the Company's operations and various other items. Net cash used for investing activities was approximately $54,714,000 and net cash provided by financing activities was approximately $4,663,000 for the six months ended June 30, 1994. The Company primarily used cash generated from operations to fund capital expenditures and construction totaling approximately $52,522,000. The Company received cash proceeds of approximately $31,000,000 from the sale or sublease of 28 nursing facilities in the state of Texas, and received $12,000,000 in cash proceeds from the exercise of an option grant 10 12 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) JUNE 30, 1994 (UNAUDITED) for 1,000,000 common shares at $12.00 per share. In addition, the Company issued approximately $25,000,000 in long-term obligations. A portion of such proceeds was used to repay approximately $29,374,000 of long-term obligations and to fund acquisitions of approximately $29,113,000. In April 1994, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission to register the 1,000,000 common shares purchased under the option grant. This did not result in any additional proceeds to the Company. On July 8, 1994, the Company filed a Registration Statement on Form S-4 with the Securities and Exchange Commission to register 3,099,030 common shares, all or a portion of which will be used for the acquisition of American Transitional Hospitals, Inc. ("ATH"), as previously announced. The Company filed an amendment to such Registration Statement which was declared effective on August 5, 1994. The stockholders of ATH have until September 1, 1994, to vote on the transaction. The Company anticipates that the acquisition will be accounted for as a pooling-of-interests and closing is expected to occur on or before September 30, 1994. The transaction is subject to the satisfaction of certain conditions, including receipt of ATH stockholder approvals. The acquisition of ATH by the Company is not expected to have a material effect on the Company's financial position or results of operations. The Company has entered into an agreement to purchase three institutional pharmacy subsidiaries of Synetic, Inc., through Pharmacy Corporation of America, a subsidiary of the Company, in exchange for cash of approximately $107,300,000. The acquisition will be accounted for as a purchase. Closing is subject to satisfaction of certain conditions, including receipt of regulatory and Synetic stockholder approvals. The Company has obtained a financing commitment to complete the transaction. The Synetic businesses provide pharmaceutical dispensing services in New England and Indiana to approximately 45,000 patients in various institutions, including nursing homes, transitional care facilities, correctional facilities and group homes. In May 1994, the Company entered into a $25,000,000 promissory note (the "Note") which bears interest at the rate of 7.75% per annum. The Note is due in equal quarterly installments of approximately $708,000, including principal and interest, beginning in September, 1994, with a balloon payment due in June, 2001. In addition, the Company amended certain of its credit agreements during the second quarter of 1994 to change various restrictive covenants, release certain collateral and adjust the interest rate calculations. During 1993, the Company completed the sale of 3,000,000 shares of $2.75 Cumulative Convertible Exchangeable Preferred Stock (the "Series B preferred stock") through a public offering. On January 3, 1994, the Company used approximately $100,000,000 of the net proceeds from such offering to redeem all of the Company's cumulative convertible preferred stock (the "Series A preferred stock"). The Series A preferred stock dividend rate was scheduled to increase from 1% to 10% on January 1, 1994. The Company believes that its existing cash and cash equivalents, working capital from operations, borrowings under its banking arrangements and commercial paper program, proceeds from issuance of certain debt securities and refinancings of certain existing indebtedness will be adequate to repay its debts due within one year of approximately $41,631,000, to make normal recurring capital additions and improvements for the twelve months ending June 30, 1995 of approximately $100,000,000, to make selective acquisitions, including the purchase of previously-leased facilities, and to meet working capital requirements. 11 13 PART II BEVERLY ENTERPRISES, INC. OTHER INFORMATION JUNE 30, 1994 (UNAUDITED) ITEM 1. LEGAL PROCEEDINGS There are various lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 19, 1994, the Company held its Annual Meeting of Stockholders in Fort Smith, Arkansas, for the purposes of electing seven members of the Board of Directors, considering Amendment No. 1 to the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, considering the Beverly Enterprises, Inc. Annual Incentive Plan, considering the Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan, ratifying the appointment of Ernst & Young as independent auditors for 1994, considering an Independent Stockholders' Resolution recommending the preparation of a special report to stockholders on patient care related lawsuits filed against the Company and the issuance of instructions to legal counsel to refrain from sealing court settlements involving the Company, and transacting such other business as may have properly come before the meeting or any adjournment thereof. The following table sets forth the directors elected at such meeting and the number of votes cast for and withheld for each director:
DIRECTOR FOR WITHHELD -------- --- -------- Beryl F. Anthony, Jr. . . . . . . . 50,528,871 376,511 David R. Banks . . . . . . . . . . 50,533,638 371,744 Curt F. Bradbury . . . . . . . . . 50,552,399 352,983 James R. Greene . . . . . . . . . . 50,552,905 382,477 Jon E. M. Jacoby . . . . . . . . . 50,516,449 388,933 Louis W. Menk . . . . . . . . . . . 50,485,563 419,819 Will K. Weinstein . . . . . . . . . 50,535,540 369,842
Amendment No. 1 to the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan was approved at the meeting. The following table sets forth the number of votes for and against, as well as abstentions as to this matter: For . . . . . . . . . . 51,689,078 Against . . . . . . . . 2,953,809 Abstentions . . . . . . 434,031
The Beverly Enterprises, Inc. Annual Incentive Plan was approved at the meeting. The following table sets forth the number of votes for and against, as well as abstentions as to this matter: For . . . . . . . . . . 48,973,739 Against . . . . . . . . 5,661,042 Abstentions . . . . . . 465,132
12 14 BEVERLY ENTERPRISES, INC. OTHER INFORMATION (CONTINUED) JUNE 30, 1994 (UNAUDITED) The Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan was approved at the meeting. The following table sets forth the number of votes for and against, as well as abstentions as to this matter: For . . . . . . . . . . 52,182,878 Against . . . . . . . . 2,429,830 Abstentions . . . . . . 488,192
The appointment of Ernst & Young as independent auditors for 1994 was ratified at the meeting. The following table sets forth the number of votes for and against, as well as abstentions as to this matter: For . . . . . . . . . . 54,770,625 Against . . . . . . . . 156,892 Abstentions . . . . . . 146,564
The Independent Stockholders' Resolution was not approved at the meeting. The following table sets forth the number of votes for and against, as well as abstentions as to this matter: For . . . . . . . . . . 3,557,143 Against . . . . . . . . 47,188,450 Abstentions . . . . . . 3,950,219
ITEM 6(A). EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.1 Indenture dated as of December 27, 1990 (the "Senior Secured Note Indenture"), among Beverly California, Beverly Enterprises and Yasuda Bank and Trust Company (U.S.A.) with respect to Senior Secured Floating Rate Notes due 1995 and 14 1/4% Senior Secured Fixed Rate Notes due 1997 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co- Registrants filed on February 8, 1991 (File No. 33-38954)) 4.2 Supplemental Indenture No. 1, dated as of September 20, 1991, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 4.3 Supplemental Indenture No. 2, dated as of September 26, 1991, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 4.4 Supplemental Indenture No. 3, dated as of March 11, 1992, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 4.5 Supplemental Indenture No. 4, dated as of July 21, 1993, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993)
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.6 Subsidiary Guaranty dated as of December 27, 1990 by Beverly Enterprises, Beverly California and the Subsidiary Guarantors listed therein (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)) 4.7 Subsidiary Guaranty dated as of April 1, 1991 by Beverly Enterprises, Beverly California and the Subsidiary Guarantors listed therein (incorporated by reference to Exhibit 4.5 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.8 Subsidiary Guaranty dated as of October 31, 1991 by Beverly Enterprises, Beverly California and Northshore Rehab Association, Inc. as Subsidiary Guarantor (incorporated by reference to Exhibit 4.6 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.9 Subsidiary Guaranty dated as of December 30, 1991 by Beverly Enterprises, Beverly California and Beverly Indemnity, Inc. as Subsidiary Guarantor (incorporated by reference to Exhibit 4.7 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.10 Indenture dated as of August 1, 1993 between Beverly Enterprises and Chemical Bank, as Trustee with respect to Beverly Enterprises' 5 1/2% Convertible Subordinated Debentures due August 1, 2018, issuable upon exchange of Beverly Enterprises' $2.75 Cumulative Convertible Exchangeable Preferred Stock (the "Subordinated Debenture Indenture") (incorporated by reference to Exhibit 4.10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.11 Certificate of Designation, Powers, Preferences and Rights, and the Qualifications, Limitations or Restrictions Thereof, of the Series of Preferred Stock to be designated $2.75 Cumulative Convertible Exchangeable Preferred Stock of Beverly Enterprises (the "$2.75 Certificate of Designation") (incorporated by reference to Exhibit 4.12 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.12 Indenture dated as of April 1, 1993 (the "First Mortgage Bond Indenture"), among Beverly Enterprises, Delaware Trust Company, as Corporate Trustee, and Richard N. Smith, as Individual Trustee, with respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.13 First Supplemental Indenture dated as of April 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds (Series A) due 2008 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.14 Second Supplemental Indenture dated as of July 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds (Series B) due 2008 (replaces Exhibit 4.1 to Beverly Enterprises' Current Report on Form 8-K dated July 15, 1993)(incorporated by reference to Exhibit 4.15 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.15 Indenture dated as of December 30, 1993 (the "Notes Indenture"), between Beverly Enterprises, Inc. and Boatmen's Trust Company, as Trustee, with respect to the Notes (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Registration Statement on Form S-3 filed on November 9, 1993 (File No. 33-50965)) 4.16 First Supplemental Indenture dated as of December 30, 1993 to the Notes Indenture, with respect to 8.75% Notes due 2003 (incorporated by reference to Exhibit 4.4 to Beverly Enterprises' Current Report on Form 8-K dated January 4, 1994) In accordance with item 601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to Beverly Enterprises' long- term obligations have not been filed; copies thereof will be furnished to the Securities and Exchange Commission upon request. 10.1 * Amended and Restated 1981 Beverly Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243)) 10.2 * Amended and Restated 1981 Beverly Incentive Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243))
14 16
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.3 * 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243)) 10.4 * Amended and Restated Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan (as amended by Amendment No. 1) 10.5 * Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by reference to Exhibit A to Beverly Enterprises definitive proxy for the Annual Meeting of Stockholders held May 19, 1994) 10.6 * Retirement Plan for Outside Directors (incorporated by reference to Exhibit 10.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.7 * Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan (incorporated by reference to Exhibit B to Beverly Enterprises definitive proxy for the Annual Meeting of Stockholders held May 19, 1994) 10.8 * Executive Medical Reimbursement Plan (incorporated by reference to Exhibit 10.5 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1987) 10.9 * Amended and Restated Beverly Enterprises, Inc. Executive Life Insurance Plan and Summary Plan Description (incorporated by reference to Exhibit 10.7 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1993) 10.10 * Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.11 * Amended and Restated Deferred Compensation Plan effective July 18, 1991 (incorporated by reference to Exhibit 10.6 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.12 * Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1987) 10.13 * Amendment No. 1, effective as of July 1, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.14 * Amendment No. 2, effective as of December 12, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.15 * Amendment No. 3, effective as of July 31, 1992, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.10 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.16 * Form of Indemnification Agreement between Beverly Enterprises and its officers, directors and certain of its employees (incorporated by reference to Exhibit 19.14 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1987) 10.17 * Form of request by Beverly Enterprises to certain of its officers or directors relating to indemnification rights (incorporated by reference to Exhibit 19.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1987)
15 17
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.18 * Form of request by Beverly Enterprises to certain of its officers or employees relating to indemnification rights (incorporated by reference to Exhibit 19.6 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.19 * Agreement dated December 29, 1986 between Beverly Enterprises and Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly Enterprises' Registration Statement on Form S-1 filed on January 18, 1990 (File No. 33-33052)) 10.20 * Severance Plan for Corporate and Regional Employees effective December 1, 1989 (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to Beverly Enterprises' Registration Statement on Form S-1 filed on February 26, 1990 (File No. 33-33052)) 10.21 * Form of Restricted Stock Performance Agreement dated June 28, 1990 under the 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10.22 to Beverly Enterprises' Registration Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109)) 10.22 * Form of Agreement Concerning Benefits Upon Severance dated as of September 1, 1990 between Beverly Enterprises and certain officers of Beverly Enterprises (incorporated by reference to Exhibit 10.23 to Beverly Enterprises' Registration Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109)) 10.23 * First Amendment to Agreement Concerning Benefits Upon Severance dated as of April 25, 1993 between Beverly Enterprises and Ronald C. Kayne (incorporated by reference to Exhibit 10.22 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1993) 10.24 * Beverly Enterprises Company Car Policy effective May 1, 1988 (incorporated by reference to Exhibit 10.18 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.25 Master Lease Document - General Terms and Conditions dated December 30, 1985 for Leases between Beverly California and various subsidiaries thereof as lessees and Beverly Investment Properties, Inc. as lessor (incorporated by reference to Exhibit 10.12 to Beverly California's Annual Report on Form 10-K for the year ended December 31, 1985) 10.26 Agreement dated as of December 29, 1986 among Beverly California, Beverly Enterprises - Texas, Inc., Stephens Inc. and Real Properties, Inc. (incorporated by reference to Exhibit 28 to Beverly California's Current Report on Form 8-K dated December 30, 1986) and letter agreement dated as of July 31, 1987 among Beverly Enterprises, Beverly California, Beverly Enterprises - Texas, Inc. and Stephens Inc. with reference thereto (incorporated by reference to Exhibit 19.13 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1987) 10.27 Credit Agreement, dated as of March 24, 1992, among Beverly Enterprises, Inc., Beverly California Corporation, the Lenders listed therein, Bank of Montreal as Co-Agent, and The Long Term Credit Bank of Japan, Ltd. Los Angeles Agency as Agent (the "LTCB Credit Agreement") (incorporated by reference to Exhibit 10.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.28 Amendment No. 1 dated as of April 7, 1992 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.3 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.29 Second Amendment dated as of May 11, 1992 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.23 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.30 Third Amendment dated as of March 1, 1993 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.24 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992)
16 18
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.31 Seventh Amendment dated as of May 2, 1994 to the LTCB Credit Agreement 10.32 Master Sale and Servicing Agreement dated as of December 1, 1990 among Beverly Funding Corporation, Beverly California, the wholly-owned subsidiaries of Beverly Enterprises listed therein, Beverly Enterprises and certain wholly-owned subsidiaries of Beverly Enterprises which may become parties thereto (incorporated by reference to Exhibit 10.27 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)) 10.33 First Omnibus Amendment to Liquidity Agreement, Depository Agreement, Pledge and Security Agreement and Master Sale and Servicing Agreement dated as of July 1, 1991 (incorporated by reference to Exhibit 10.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 10.34 Second Amendment to Master Sale and Servicing Agreement dated as of March 1, 1992 (incorporated by reference to Exhibit 10.4 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.35 Second Omnibus Amendment to Master Sale and Servicing Agreement, Pledge Agreement and Selling Subsidiary Agreements dated as of September 28, 1992, among Beverly Funding Corporation, Beverly California Corporation, Beverly Enterprises, Inc., the wholly-owned subsidiaries of Beverly Enterprises, Inc. listed on the signature pages and the Banks listed on the signature pages (incorporated by reference to Exhibit 10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1992) 10.36 Credit Agreement dated as of March 2, 1993 among Beverly Enterprises, Inc., Beverly California Corporation, the Lenders listed therein, and the Nippon Credit Bank, Ltd. Los Angeles Agency as Agent (the "Nippon Credit Agreement") (incorporated by reference to Exhibit 10.29 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.37 Second Amendment dated as of May 19, 1994 to the Nippon Credit Agreement 10.38 Credit Agreement dated as of March 1, 1993 among Beverly California Corporation, Beverly Enterprises, Inc., the Banks listed therein, Morgan Guaranty Trust Company of New York as Issuing Bank and Agent (the "Morgan Credit Agreement") (incorporated by reference to Exhibit 10.30 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.39 First Amendment dated as of May 3, 1993 to the Morgan Credit Agreement (incorporated by reference to Exhibit 10.34 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1993) 10.40 Second Amendment dated as of September 30, 1993 to the Morgan Credit Agreement (incorporated by reference to Exhibit 10.35 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1993) 10.41 Third Amendment dated as of April 6, 1994 to the Morgan Credit Agreement 10.42 Data Processing Agreement, dated as of August 1, 1992, by and between Systematics Telecommunications Services, Inc. and Beverly California Corporation (incorporated by reference to Exhibit 10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1992) 11.1 Computation of Net Income Per Share
* Exhibits 10.1 through 10.24 are the management contracts, compensatory plans, contracts and arrangements in which any director or named executive officer participates. 17 19 ITEM 6(B). REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K dated April 7, 1994, which reported under Item 5 that the Consent of Independent Auditors dated April 1, 1994 which was filed as Exhibit 23.1 to the Company's Registration Statement No. 33-53013 had a typographical error, and filed under Item 7 the corrected Consent of Independent Auditors. 18 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BEVERLY ENTERPRISES, INC. Registrant Dated: August 11, 1994 By: SCOTT M. TABAKIN _______________________________ Scott M. Tabakin Vice President, Controller and Chief Accounting Officer 19 21 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.1 Indenture dated as of December 27, 1990 (the "Senior Secured Note Indenture"), among Beverly California, Beverly Enterprises and Yasuda Bank and Trust Company (U.S.A.) with respect to Senior Secured Floating Rate Notes due 1995 and 14 1/4% Senior Secured Fixed Rate Notes due 1997 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co- Registrants filed on February 8, 1991 (File No. 33-38954)) 4.2 Supplemental Indenture No. 1, dated as of September 20, 1991, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 4.3 Supplemental Indenture No. 2, dated as of September 26, 1991, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 4.4 Supplemental Indenture No. 3, dated as of March 11, 1992, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 4.5 Supplemental Indenture No. 4, dated as of July 21, 1993, to the Senior Secured Note Indenture (incorporated by reference to Exhibit 4.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993)
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.6 Subsidiary Guaranty dated as of December 27, 1990 by Beverly Enterprises, Beverly California and the Subsidiary Guarantors listed therein (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)) 4.7 Subsidiary Guaranty dated as of April 1, 1991 by Beverly Enterprises, Beverly California and the Subsidiary Guarantors listed therein (incorporated by reference to Exhibit 4.5 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.8 Subsidiary Guaranty dated as of October 31, 1991 by Beverly Enterprises, Beverly California and Northshore Rehab Association, Inc. as Subsidiary Guarantor (incorporated by reference to Exhibit 4.6 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.9 Subsidiary Guaranty dated as of December 30, 1991 by Beverly Enterprises, Beverly California and Beverly Indemnity, Inc. as Subsidiary Guarantor (incorporated by reference to Exhibit 4.7 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 4.10 Indenture dated as of August 1, 1993 between Beverly Enterprises and Chemical Bank, as Trustee with respect to Beverly Enterprises' 5 1/2% Convertible Subordinated Debentures due August 1, 2018, issuable upon exchange of Beverly Enterprises' $2.75 Cumulative Convertible Exchangeable Preferred Stock (the "Subordinated Debenture Indenture") (incorporated by reference to Exhibit 4.10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.11 Certificate of Designation, Powers, Preferences and Rights, and the Qualifications, Limitations or Restrictions Thereof, of the Series of Preferred Stock to be designated $2.75 Cumulative Convertible Exchangeable Preferred Stock of Beverly Enterprises (the "$2.75 Certificate of Designation") (incorporated by reference to Exhibit 4.12 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.12 Indenture dated as of April 1, 1993 (the "First Mortgage Bond Indenture"), among Beverly Enterprises, Delaware Trust Company, as Corporate Trustee, and Richard N. Smith, as Individual Trustee, with respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.13 First Supplemental Indenture dated as of April 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds (Series A) due 2008 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.14 Second Supplemental Indenture dated as of July 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds (Series B) due 2008 (replaces Exhibit 4.1 to Beverly Enterprises' Current Report on Form 8-K dated July 15, 1993)(incorporated by reference to Exhibit 4.15 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.15 Indenture dated as of December 30, 1993 (the "Notes Indenture"), between Beverly Enterprises, Inc. and Boatmen's Trust Company, as Trustee, with respect to the Notes (incorporated by reference to Exhibit 4.2 to Beverly Enterprises' Registration Statement on Form S-3 filed on November 9, 1993 (File No. 33-50965)) 4.16 First Supplemental Indenture dated as of December 30, 1993 to the Notes Indenture, with respect to 8.75% Notes due 2003 (incorporated by reference to Exhibit 4.4 to Beverly Enterprises' Current Report on Form 8-K dated January 4, 1994) In accordance with item 601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to Beverly Enterprises' long- term obligations have not been filed; copies thereof will be furnished to the Securities and Exchange Commission upon request. 10.1 * Amended and Restated 1981 Beverly Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243)) 10.2 * Amended and Restated 1981 Beverly Incentive Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243))
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.3 * 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises' Registration Statement on Form S-4 filed on July 31, 1987 (File No. 33-13243)) 10.4 * Amended and Restated Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan (as amended by Amendment No. 1) 10.5 * Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by reference to Exhibit A to Beverly Enterprises definitive proxy for the Annual Meeting of Stockholders held May 19, 1994) 10.6 * Retirement Plan for Outside Directors (incorporated by reference to Exhibit 10.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.7 * Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan (incorporated by reference to Exhibit B to Beverly Enterprises definitive proxy for the Annual Meeting of Stockholders held May 19, 1994) 10.8 * Executive Medical Reimbursement Plan (incorporated by reference to Exhibit 10.5 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1987) 10.9 * Amended and Restated Beverly Enterprises, Inc. Executive Life Insurance Plan and Summary Plan Description (incorporated by reference to Exhibit 10.7 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1993) 10.10 * Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.11 * Amended and Restated Deferred Compensation Plan effective July 18, 1991 (incorporated by reference to Exhibit 10.6 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.12 * Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1987) 10.13 * Amendment No. 1, effective as of July 1, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.14 * Amendment No. 2, effective as of December 12, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1991) 10.15 * Amendment No. 3, effective as of July 31, 1992, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.10 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.16 * Form of Indemnification Agreement between Beverly Enterprises and its officers, directors and certain of its employees (incorporated by reference to Exhibit 19.14 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1987) 10.17 * Form of request by Beverly Enterprises to certain of its officers or directors relating to indemnification rights (incorporated by reference to Exhibit 19.5 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1987)
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.18 * Form of request by Beverly Enterprises to certain of its officers or employees relating to indemnification rights (incorporated by reference to Exhibit 19.6 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.19 * Agreement dated December 29, 1986 between Beverly Enterprises and Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly Enterprises' Registration Statement on Form S-1 filed on January 18, 1990 (File No. 33-33052)) 10.20 * Severance Plan for Corporate and Regional Employees effective December 1, 1989 (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to Beverly Enterprises' Registration Statement on Form S-1 filed on February 26, 1990 (File No. 33-33052)) 10.21 * Form of Restricted Stock Performance Agreement dated June 28, 1990 under the 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10.22 to Beverly Enterprises' Registration Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109)) 10.22 * Form of Agreement Concerning Benefits Upon Severance dated as of September 1, 1990 between Beverly Enterprises and certain officers of Beverly Enterprises (incorporated by reference to Exhibit 10.23 to Beverly Enterprises' Registration Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109)) 10.23 * First Amendment to Agreement Concerning Benefits Upon Severance dated as of April 25, 1993 between Beverly Enterprises and Ronald C. Kayne (incorporated by reference to Exhibit 10.22 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1993) 10.24 * Beverly Enterprises Company Car Policy effective May 1, 1988 (incorporated by reference to Exhibit 10.18 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.25 Master Lease Document - General Terms and Conditions dated December 30, 1985 for Leases between Beverly California and various subsidiaries thereof as lessees and Beverly Investment Properties, Inc. as lessor (incorporated by reference to Exhibit 10.12 to Beverly California's Annual Report on Form 10-K for the year ended December 31, 1985) 10.26 Agreement dated as of December 29, 1986 among Beverly California, Beverly Enterprises - Texas, Inc., Stephens Inc. and Real Properties, Inc. (incorporated by reference to Exhibit 28 to Beverly California's Current Report on Form 8-K dated December 30, 1986) and letter agreement dated as of July 31, 1987 among Beverly Enterprises, Beverly California, Beverly Enterprises - Texas, Inc. and Stephens Inc. with reference thereto (incorporated by reference to Exhibit 19.13 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1987) 10.27 Credit Agreement, dated as of March 24, 1992, among Beverly Enterprises, Inc., Beverly California Corporation, the Lenders listed therein, Bank of Montreal as Co-Agent, and The Long Term Credit Bank of Japan, Ltd. Los Angeles Agency as Agent (the "LTCB Credit Agreement") (incorporated by reference to Exhibit 10.2 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.28 Amendment No. 1 dated as of April 7, 1992 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.3 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.29 Second Amendment dated as of May 11, 1992 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.23 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.30 Third Amendment dated as of March 1, 1993 to the LTCB Credit Agreement (incorporated by reference to Exhibit 10.24 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992)
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.31 Seventh Amendment dated as of May 2, 1994 to the LTCB Credit Agreement 10.32 Master Sale and Servicing Agreement dated as of December 1, 1990 among Beverly Funding Corporation, Beverly California, the wholly-owned subsidiaries of Beverly Enterprises listed therein, Beverly Enterprises and certain wholly-owned subsidiaries of Beverly Enterprises which may become parties thereto (incorporated by reference to Exhibit 10.27 to the Registration Statement on Form S-4 of Beverly California, Beverly Enterprises and the Registrants set forth on the Table of Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)) 10.33 First Omnibus Amendment to Liquidity Agreement, Depository Agreement, Pledge and Security Agreement and Master Sale and Servicing Agreement dated as of July 1, 1991 (incorporated by reference to Exhibit 10.1 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1991) 10.34 Second Amendment to Master Sale and Servicing Agreement dated as of March 1, 1992 (incorporated by reference to Exhibit 10.4 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31, 1992) 10.35 Second Omnibus Amendment to Master Sale and Servicing Agreement, Pledge Agreement and Selling Subsidiary Agreements dated as of September 28, 1992, among Beverly Funding Corporation, Beverly California Corporation, Beverly Enterprises, Inc., the wholly-owned subsidiaries of Beverly Enterprises, Inc. listed on the signature pages and the Banks listed on the signature pages (incorporated by reference to Exhibit 10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1992) 10.36 Credit Agreement dated as of March 2, 1993 among Beverly Enterprises, Inc., Beverly California Corporation, the Lenders listed therein, and the Nippon Credit Bank, Ltd. Los Angeles Agency as Agent (the "Nippon Credit Agreement") (incorporated by reference to Exhibit 10.29 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.37 Second Amendment dated as of May 19, 1994 to the Nippon Credit Agreement 10.38 Credit Agreement dated as of March 1, 1993 among Beverly California Corporation, Beverly Enterprises, Inc., the Banks listed therein, Morgan Guaranty Trust Company of New York as Issuing Bank and Agent (the "Morgan Credit Agreement") (incorporated by reference to Exhibit 10.30 to Beverly Enterprises' Annual Report on Form 10-K for the year ended December 31, 1992) 10.39 First Amendment dated as of May 3, 1993 to the Morgan Credit Agreement (incorporated by reference to Exhibit 10.34 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1993) 10.40 Second Amendment dated as of September 30, 1993 to the Morgan Credit Agreement (incorporated by reference to Exhibit 10.35 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended September 30, 1993) 10.41 Third Amendment dated as of April 6, 1994 to the Morgan Credit Agreement 10.42 Data Processing Agreement, dated as of August 1, 1992, by and between Systematics Telecommunications Services, Inc. and Beverly California Corporation (incorporated by reference to Exhibit 10 to Beverly Enterprises' Quarterly Report on Form 10-Q for the quarter ended June 30, 1992) 11.1 Computation of Net Income Per Share
* Exhibits 10.1 through 10.24 are the management contracts, compensatory plans, contracts and arrangements in which any director or named executive officer participates. EX-10.4 2 AMEND #1 TO BEVERLY 1993 L-T INCENTIVE STOCK PLAN 1 EXHIBIT 10.4 BEVERLY ENTERPRISES, INC. 1993 LONG-TERM INCENTIVE STOCK PLAN (AS AMENDED BY PROPOSED AMENDMENT NO. 1) ARTICLE I. ESTABLISHMENT, PURPOSE AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Beverly Enterprises, Inc. (hereinafter referred to as the "Company"), a Delaware corporation, hereby establishes an incentive compensation plan to be known as the "1993 Long Term Incentive Stock Plan" (hereinafter referred to as the "Plan"), as set forth in this document. Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in Section 2.1 herein. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Awards in the form of Performance Units, or Performance Shares and Other Stock Unit Awards. The Plan was adopted by the Board of Directors on March 17, 1993, and shall become effective as of July 1, 1993 (the "Effective Date"), subject to the approval by vote of stockholders of the Company in accordance with applicable laws. Awards may be granted prior to stockholder approval of the Plan, but each such Award shall be subject to the approval of the Plan by the stockholders. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success of the Company and its Subsidiaries by providing incentives to Key Employees that will promote the identification of their personal interest with the long-term financial success of the Company and with growth in stockholder value. The Plan is designed to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Key Employees upon whose judgment, interest, and special effort the successful conduct of its operation is largely dependent. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 12 herein, until June 30, 2003, at which time it shall terminate except with respect to Awards made prior to, and outstanding on, that date, which shall remain valid in accordance with their terms. ARTICLE II. DEFINITIONS 2.1 DEFINITIONS. Except as otherwise defined in the Plan, the following terms shall have the meanings set forth below: (a) "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 under the Exchange Act. (b) "AGREEMENT" means a written agreement implementing the grant of each Award signed by an authorized officer of the Company and by the Participant. A-1 2 (c) "AWARD" means individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance units, Performance Shares, or Other Stock Unit Awards. (d) "AWARD DATE" or "GRANT DATE" means the date on which an Award is made by the Committee under this Plan. (e) "BENEFICIAL OWNER" shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act. (f) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company. (g) "CHANGE IN CONTROL" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (i) Any person, corporation or other entity or group, including any "group" as defined in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of the Company having 30% or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) As the result of, or in connection with, any tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company or its assets; or (iii) If at any time, (w) the Company shall consolidate with, or merge with, any other Person and the Company shall not be the continuing or surviving corporation, (x) 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 Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (y) the Company shall be a party to a statutory share exchange with any other Person after which the Company is subsidiary of any other Person, or (z) 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. (h) "CODE" means the Internal Revenue Code of 1986, as amended from time to time. (i) "COMMITTEE" means the Compensation Committee of the Board which will administer the Plan pursuant to Article 3 herein. (j) "COMPANY" means Beverly Enterprises, Inc., including all Affiliates and wholly-owned Subsidiaries, or any successor thereto as provided in Article 14 herein. (k) "CONTINUING DIRECTOR" means an individual who was a member of the Board of Directors on the Effective Date or whose subsequent nomination for election or reelection of the Board of Directors was recommended or approved by the affirmative vote of two-thirds of the Continuing Directors then in office. A-2 3 (l) "COVERED PARTICIPANT" means a Participant who is a "covered employee" as defined in Section 162(m)(3) of the Code, and the regulations promulgated thereunder, or who the Committee believes will be such a covered employee for a Performance Period, and who the Committee believes will have renumeration in excess of $1,000,000 for the Performance Period, as provided in Section 162(m) of the Code. (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (n) "FAIR MARKET VALUE" means, on any given date, the closing price of Stock as reported on the New York Stock Exchange composite tape on such day or, if no Shares were traded on the New York Stock Exchange on such day, then on the next preceding day that Stock was traded on such exchange, all as reported by such source as the Committee may select. (o) "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Stock, granted under Article 6 herein, which is designated as an incentive stock option and is intended to meet the requirements of Section 422A of the Code. (p) "KEY EMPLOYEE" means an officer or other key employee of the Company or its Subsidiaries, who, in the opinion of the Committee, can contribute significantly to the growth and profitability of, or perform services of major importance to, the Company and its Subsidiaries. Key Employee does not include directors of the Company who are not also employees of the Company or its Subsidiaries. (q) "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Stock, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (r) "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option. (s) "OTHER STOCK UNIT AWARD" means awards of Stock or other awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other securities of the Company. (t) "PARTICIPANT" means a Key Employee who has been granted an Award under the Plan. (u) "PERFORMANCE AWARD" means a performance-based Award, which may be in the form of either Performance Shares or Performance Units. (v) "PERFORMANCE PERIOD" means the time period designated by the Committee during which performance goals must be met, which period shall be the calendar year. (w) "PERFORMANCE SHARE" means an Award, designated as a performance share, granted to a Participant pursuant to Article 8 herein, the value of which is determined, in whole or in part, by the value of Stock in a manner deemed appropriate by the Committee and described in the Agreement. (x) "PERFORMANCE UNIT" means an Award, designated as a performance unit, granted to a Participant pursuant to Article 8 herein, the value of which is determined, in whole or in part, by the attainment of preestablished goals relating to Company A-3 4 financial or operating performance as deemed appropriate by the Committee and described in the Agreement. (y) "PERIOD OF RESTRICTION" means the period during which the transfer of Shares of Restricted Stock is restricted, pursuant to Article 7 herein. (z) "PERSON" shall have the meaning ascribed in such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (aa) "PLAN" means the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan as herein described and as hereafter from time to time amended. (bb) "RESTRICTED STOCK" means an Award of Stock granted to a Participant pursuant to Article 7 herein. (cc) "SECRETARY" means the officer designated as the Secretary of the Company. (dd) "STOCK" or "SHARES" means the common stock of the Company. (ee) "SUBSIDIARY" shall mean a corporation at least 50% of the total combined voting power of all classes of stock of which is owned by the Company, either directly or through one or more of its Subsidiaries. ARTICLE III. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Committee which shall have all powers necessary or desirable for such administration. The express grant in this Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. In addition to any other powers and, subject to the provisions of the Plan, the Committee shall have the following specific powers: (i) to determine the terms and conditions upon which the Awards may be made and exercised; (ii) to determine all terms and provisions of each Agreement, which need not be identical; (iii) to construe and interpret the Agreements and the Plan; (iv) to establish, amend, or waive rules or regulations for the Plan's administration; (v) to accelerate the exercisability of any Award, the end of a Performance Period or termination of any Period of Restriction; and (vi) to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. 3.2 SELECTION OF PARTICIPANTS. The Committee shall have the authority to grant Awards under the Plan, from time to time, to such Key Employees as may be selected by it. Each Award shall be evidenced by an Agreement. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive, and binding. 3.4 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on any Award, and the Board amend the Plan in any such respects, as may be required to satisfy the requirements of Rule 16b-3, as amended (or any successor or similar rule), under the Exchange Act. A-4 5 3.5 INDEMNIFICATION OF COMMITTEE. In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee shall he indemnified by the Company against reasonable expenses, including attorneys' fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted or made hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Company and its Subsidiaries. ARTICLE IV. STOCK SUBJECT TO THE PLAN 4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.4 herein, the maximum aggregate number of Shares that may be issued pursuant to Awards made under the Plan shall not exceed 3,000,000. No more than one-half of the aggregate number of such Shares shall be issued in connection with Restricted Stock Awards, Performance Awards, or Other Stock Unit Awards. Except as provided in Sections 4.2 and 4.3 herein, the issuance of Shares in connection with the exercise of, or as other payment for, Awards under the Plan shall reduce the number of Shares available for future Awards under the Plan. 4.2 LAPSED AWARDS OR FORFEITED SHARES. If any Award granted under this Plan terminates, expires, or lapses for any reason other than by virtue of exercise of the Award, or if Shares issued pursuant to Awards are forfeited, any Stock subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 DELIVERY OF SHARES AS PAYMENT. In the event a Participant pays the Option Price for Shares pursuant to the exercise of an Option with previously acquired Shares, the number of Shares available for future Awards under the Plan shall be reduced only by the net number of new Shares issued upon the exercise of the option. 4.4 CAPITAL ADJUSTMENTS. The number and class of Shares subject to each outstanding Award, the Option Price and the aggregate number and class of Shares for which Awards thereafter may be made shall be subject to such adjustment, if any, as the Committee deems appropriate, such that: (a) If the outstanding Shares are increased, decreased or exchanged, through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split or other distribution in respect of such Shares, for a different number of kind of Shares, or if additional Shares or new or different Shares are distributed in respect of such Share, an appropriate and proportionate adjustment shall be made in: (i) the maximum number of Shares as provided in Section 4.1 herein; (ii) the number of Shares subject to then outstanding Awards; and (iii) the price for each Share subject to such Awards, but without change in the aggregate purchase price as to which such Options remain exercisable or Restricted Stock releasable. (b) Adjustments under this Section 4.4 shall be made by the Committee, subject to the approval of the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional A-5 6 interests shall be issued under the Plan on account of such adjustments. ARTICLE V. ELIGIBILITY Persons eligible to participate in the Plan include all employees of the Company and its Subsidiaries who, in the opinion of the Committee, are Key Employees. Key Employees may not include directors of the Company who are not employees of the Company or its Subsidiaries. ARTICLE VI. STOCK OPTIONS 6.1 GRANT OF OPTIONS TO KEY EMPLOYEES. Subject to the terms and provisions of the Plan, Options may be granted to Key Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Shares subject to Options granted to each Key Employee, provided, however, that the aggregate Fair Market Value (determined at the time the Award is made) of Shares with respect to which a Key Employee may first exercise ISOs granted under the Plan during any calendar year may not exceed $100,000 or such amount as shall be specified in Section 422A of the Code and rules and regulation thereunder. 6.2 OPTION AGREEMENT. Each Option grant shall be evidenced by an Agreement that shall specify the type of Option granted, the Option Price (as hereinafter defined), the duration of the Option, the number of Shares to which the Option pertains, any conditions imposed upon the exercisability of Options in the event of retirement, death, disability, or other termination of employment, and such other provisions as the Committee shall determine. The Agreement shall specify whether the Option is intended to be an Incentive Stock Option within the meaning of Section 422A of the Code, or a Nonqualified Stock Option not intended to be within the provisions of Section 422A of the Code. 6.3 OPTION PRICE. The exercise price per share of Stock covered by an Option ("Option Price") shall be determined by the Committee subject to the following limitations. The Option Price shall be not less than 100% of the Fair Market Value of such Stock on the Grant Date, except that the Option Price for a NQSO may be set at not less than 85 percent of the Fair Market Value of the Stock on the Grant Date if the Committee grants the amount of the discount from 100% of the Fair Market Value of such Stock in lieu of a cash payment. 6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee shall determine at the time of grant provided, however, that no option shall be exercisable later than the tenth (10th) anniversary of its Award Date. 6.5 EXERCISABILITY. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine, which need not be the same for all Participants. No Option, however, shall be exercisable until the expiration of at least twelve months after the Award Date, except that such limitation shall not apply in the case of death or disability of the Participant. 6.6 METHOD OF EXERCISE. Options shall be exercised by the delivery of a written notice to the Company in the form prescribed by the Committee setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price shall be payable to the Company in full either in cash, by delivery of Shares of Stock valued a A-6 7 Fair Market Value at the time of exercise or by a combination of the foregoing. As soon as practicable, after receipt of written notice and payment, the Company shall deliver to the Participant, stock certificates in an appropriate amount based upon the number of Shares with respect to which the Option is exercised, issued in the Participant's name. No Participant who is awarded an Option shall have rights as a stockholder until the date of exercise of the Option. 6.7 CASHLESS EXERCISE. To the extent permitted under the applicable laws and regulations, at the request of the Participant, the Company agrees to cooperate in a "cashless exercise" of the Option. 6.8 OPTIONS AWARDED UPON STOCK DELIVERY EXERCISE. The Committee, in its discretion, may provide in the Agreement that, in the event a Participant pays the Option Price for an Option by delivery of previously acquired Shares, the Participant will be granted a new Option ("Replacement Option") for that number of Shares delivered in payment of the Option Price of the original Option ("Original Option"). The Committee shall determine the terms and conditions of the Replacement Option, provided, however, that the Option Price of the Replacement Option shall be the Fair Market Value of Shares on its Award Date and the term of the Replacement Option shall expire upon the expiration date of the Original Option. 6.9 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative. ARTICLE VII. RESTRICTED STOCK 7.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the plan, the Committee, at any time and from time to time, may grant shares of Restricted Stock Plan under the Plan to such Participants and in such amounts as it shall determine. Participants receiving Restricted Stock Awards are not required to pay the Company therefor (except for applicable tax withholding) other than the rendering of services and/or until other conditions are satisfied as determined by the Committee in its sole discretion. 7.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by an Agreement that shall specify the Period of Restriction; the conditions which must be satisfied prior to removal of the restriction; the number of Shares of Restricted Stock granted; and such other provisions as the Committee shall determine. 7.3 TRANSFERABILITY. Except as provided in this Article 7 and subject to the limitation in the next sentence, the Shares of Restricted Stock granted hereunder may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the termination of the applicable Period of Restriction or upon earlier satisfaction of other conditions as specified by the Committee in its sole discretion and set forth in the Agreement. No restriction shall be removed until the expiration of at least twelve months after the Award Date, except that such limitation shall not apply in the case of death or disability of the Participant. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative. 7.4 OTHER RESTRICTIONS. The Committee shall impose such other restrictions on any Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions under applicable Federal A-7 8 or state securities laws, and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. Alternatively, the Committee, in its sole discretion, may have Restricted Stock issued without legend and held by the Secretary until such time all restrictions are satisfied. 7.5 CERTIFICATE LEGEND. In the event the Committee elects to legend the certificates representing Restricted Stock, and in addition to any legends placed on certificates pursuant to Section 7.4 herein, each certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: The sale of other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, in the rules and administrative procedures adopted pursuant to such Plan, and in an Agreement dated XXXXXXXXXX. A copy of the Plan, such rules and procedures, and such Agreement may be obtained from the Secretary of Beverly Enterprises, Inc. 7.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article 7, Restricted Stock covered by each Award made under the Plan shall be provided and become freely transferable by the Participant after the last day of the Period of Restriction and/or upon the satisfaction of other conditions as determined by the Committee. Once the Shares are released from the restrictions, the Participant shall be entitled to have removed any legend that may have been placed on certificates pursuant to Section 7.4 and 7.5 herein. Except: as specifically provided in this Article 7, the Committee shall have no authority to reduce or remove the restrictions or to reduce or remove the Period of Restriction without the express consent of the stockholders of the Company. Any shares of Restricted Stock issued pursuant to this Article 7 shall provide that the minimum Period of Restriction shall be three (3) years, which Period of Restriction would permit the removal of restrictions on no more than one-third (1/3) of the shares of Restricted Stock at the end of the first year following the Grant Date, and the removal of the restrictions on an additional one subsequent year. In no event shall any restrictions be removed from shares of Restricted Stock during the first year following the Grant Date. If the grant of Restricted Stock is performance based, the total Period of Restriction for any or all shares of Restricted Stock so granted shall be no less than one (1) year. 7.7 VOTING RIGHTS. During the Period of Restriction, Participants in whose name Restricted Stock is granted hereunder may exercise full voting rights with respect to those Shares. 7.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants in whose name Restricted Stock is granted hereunder shall be entitled to receive all dividends and other distribution paid with respect to those Shares. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed. 7.9 TERMINATION OF EMPLOYMENT DUE TO RETIREMENT. Unless otherwise provided in the Agreement, in the event that a Participant terminates his employment with the Company or one of its Subsidiaries due to the earlier of attaining age 65 or normal retirement (as defined in the rules of the Company in effect at the time) , any remaining Period of Restriction applicable to the Restricted Stock pursuant to section 7.3 herein shall automatically terminate and, except as otherwise provided in Section 7.4 herein, the Restricted Stock shall thereby be delivered to such Participant and be free of restrictions. 7.10 TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. In the event a Participant's employment is terminated because of death or disability during the Period of Restriction, any remaining Period of Restriction applicable to the Restricted Stock pursuant to Section 7.3 herein shall automatically terminate A-8 9 and, except as otherwise provided in Section 7.4 herein, the Restricted Stock shall thereby be released and free of restrictions. 7.11 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. Unless otherwise provided in the Agreement, in the event that a Participant terminates his employment with the Company for any reason other than for death, disability, or retirement, as set forth in Section 7.9 and 7.10 herein, during the Period of Restriction, then any Restricted Stock still subject to restrictions as of the date of such termination shall automatically be forfeited and, if held by the Participant, returned to the Company. ARTICLE VIII. PERFORMANCE AWARDS 8.1 GRANT OF PERFORMANCE AWARDS. Subject to the terms and provisions of the Plan, Performance Awards in the form of either Performance Units or Performance Shares may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units or Performance Shares granted to each Participant. Participants receiving Performance Awards are not required to pay the Company therefore (except for applicable tax withholding) other than the rendering of services. 8.2 VALUE OF PERFORMANCE AWARDS. The Committee shall determine the number of Performance Units or Performance Shares granted to each Participant as a Performance Award. The Committee shall set performance goals in its discretion for each Participant who is granted a Performance Award. The extent to which such performance goals are met will determine the value of the Performance Unit or Performance Share to the Participant. Such performance goals may be particular to a Participant, may relate to the performance of the Subsidiary which employs him, may be based on the performance of the Company generally, or a combination of the foregoing. The performance goals may be based on achievement of balance sheet or income statement objectives, or any other objectives established by the Committee. The performance goals may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. The terms and conditions of each Performance Award shall be set forth in an Agreement. 8.3. SETTLEMENT OF PERFORMANCE AWARDS. After a Performance Period has ended, the holder of a Performance Unit or Performance Share shall be entitled to receive the value thereof based on the degree to which the performance goals established by the Committee and set forth in the Agreement have been satisfied. 8.4. FORM OF PAYMENT. Payment of the amount to which a Participant shall be entitled upon the settlement of a Performance Award shall be made in cash, Stock, or a combination thereof as determined by the Committee. Payment may be made in a lump sum or installments as prescribed by the Committee. 8.5. NONTRANSFERABILITY. No Performance Units or Performance Shares granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. All rights with respect to Performance Units and Performance Shares granted to a Participant under the Plan shall not be exercisable until the expiration of twelve months after the Award Date and thereafter during his lifetime only by such Participant or his guardian or personal representative. A-9 10 ARTICLE IX. OTHER STOCK UNIT AWARDS 9.1 GRANT. The Committee is authorized to grant to Participants, either alone or in addition to other Awards made under the Plan, Other Stock Unit Awards, in lieu of cash payments, to be issued at such times, subject to or based upon achievement of such performance or other goals and on such other terms and conditions as the Committee shall deem appropriate and specify in the Agreement relating thereto, which need not be the same with respect to each Participant. Stock or other securities granted pursuant to Other Stock Unit Awards may be issued for no cash consideration or for such minimum consideration as may be required by applicable law. Stock or other securities purchased pursuant to Other Stock Unit Awards may be purchased for such purchase price as the Committee shall determine, which price shall not be less than 75% of the Fair Market Value of the Stock or other securities on the Award Date. 9.2 SALE AND TRANSFERABILITY. Stock or other securities issued pursuant to Other Stock Unit Awards may not be sold by a Participant until the expiration of at least twelve months from the Award Date, except that such limitation shall not apply in the case of death or disability of a Participant. To the extent Other Stock Unit Awards are deemed to be derivative securities within the meaning of Rule 16b-3 under the Exchange Act, a Participant's rights with respect to such Awards shall not vest or be exercisable until the expiration of at least twelve months from the Award Date. To the extent an Other Stock Unit Award granted under the Plan is deemed to be a derivative security within the meaning of Rule 16b-3 under the Exchange Act, it may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. All rights with respect to such Other Stock Unit Awards granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or personal representative. ARTICLE X. CHANGE IN CONTROL In the event of a Change in Control of the Company, the Committee shall ensure the following actions: (i) all Options then outstanding under the Plan shall become fully exercisable and remain so for the duration of the Option as specified in the Agreement; and (ii) all restrictions or conditions related to grants of Restricted Stock shall be deemed immediately and fully satisfied and all certificates representing such Restricted Stock shall be released or have any legend removed by the Secretary, and thereby become freely transferable. ARTICLE XI. MODIFICATION, EXTENSION, AND RENEWAL OF AWARDS Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify, extend, or renew outstanding Awards, or accept the surrender of outstanding Awards (to the extent not yet exercised) granted under the Plan and authorize the granting of new Awards pursuant to the Plan in substitution therefor, and the substituted Awards may specify a longer term than the surrendered Awards or may contain any other provisions that are authorized by the Plan, provided, however, that the Committee may not modify outstanding Awards or grant new Awards in substitution for outstanding Awards that specify a lower exercise price. Except as limited by the foregoing sentence, the Committee may also modify the terms of an outstanding Agreement. Notwithstanding the foregoing, however, no modification of an Award shall, without the consent of the Participant, adversely affect the rights or obligations of the Participant. A-10 11 ARTICLE XII. AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN 12.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to time, the Board may terminate, amend, or modify the Plan. Such amendment or modification may be without shareholder approval except to the extent that such approval is required by the Code, pursuant to the rules under Section 16 of the Exchange Act, by any national securities exchange or system on which the Stock is then listed or reported, by any regulatory body having jurisdiction with respect thereto or under any other applicable laws, rules, or regulations. 12.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan, other than pursuant to Section 4.4 herein, shall in any manner adversely affect any Award theretofore granted under the Plan, without the written consent of the Participant. ARTICLE XIII. WITHHOLDING 13.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, State, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any grant, exercise, or payment under or as a result of this Plan. 13.2 STOCK WITHHOLDING. With respect to withholding required upon the exercise of Nonqualified Stock Options, or upon the lapse of restrictions on Restricted Stock, or upon the occurrence of any other similar taxable event, participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value equal to the amount required to be withheld. The value of the Shares to be withheld shall be based on Fair Market Value of the Shares on the date that the amount of tax to be withheld is to be determined. All elections shall be irrevocable and be made in writing, signed by the Participant on forms approved by the Committee in advance of the day that the transaction becomes taxable. ARTICLE XIV. SUCCESSORS All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE XV. GENERAL 15.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under this Plan shall he subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies as may be required. No Shares shall be issued or transferred pursuant to this Plan unless and until all legal requirements applicable to such issuance or transfer have, in the opinion of counsel to the Company, been complied with. In connection with any such issuance or transfer, the person acquiring the Shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company A-11 12 in respect to such matters as the Company may deem desirable to assure compliance with all applicable legal requirements. 15.2 EFFECT OF PLAN. The establishment of the Plan shall not confer upon any Participant any legal or equitable right against the Company, a Subsidiary, or the Committee, except as expressly provided in the Plan. The Plan does not constitute an inducement or consideration for the employment of any Participant, nor is it a contract between the Company or any of its Subsidiaries and any Participant. Participation in the Plan shall not give any Participant any right to be retained in the service of the Company or any of its Subsidiaries. No award and no right under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature except that, under such rules and regulations as the Committee may establish pursuant to the terms of the Plan, a beneficiary may be designated in respect to the Award in the event of the death of the holder of the Award and except, also, that if the beneficiary shall be the executor or administrator of the estate of the holder of the Award, any rights in respect to such Award may be transferred to the person or persons or entity (including a trust) entitled thereto under the will of the holder of such Award or under the laws relating to descent and distribution. 15.3 CREDITORS. The interests of any Participant under the Plan or any Agreement are not subject to the claims of creditors and may not, in any way, be assigned, alienated, or encumbered. 15.4 GOVERNING LAW. The Plan, and all Agreements hereunder, shall be governed, construed, and administered in accordance with and governed by the laws of the State of Arkansas and the intention of the Company is that ISOs granted under the Plan quality as such under Section 422A of the Code. 15.5 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. ARTICLE XVI. SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS Notwithstanding any other provision of this Plan to the contrary, any Awards paid to Covered Participants under this Plan shall be subject to the following conditions: (a) All performance measures, goals, standards, formulas, or criteria relating to Covered Participants ("Performance Measures") for a relevant Performance Period shall be established by the Committee in writing prior to the beginning of the Performance Period, or by such other later date for the Performance Period as may be permitted under Section 162(m) of the Code. Performance Measures may include alternate and multiple Performance Measures and may be based on one or more business criteria. In establishing Performance Measures, the Committee shall consider an internal budget for factors such as earnings per share, return on equity, revenue growth, cash flow, income and operating margins. (b) The Performance Measures must be objective and must satisfy the third party "objectivity" standards under Section 162(m) of the Code, and the regulations promulgated thereunder. A-12 13 (c) The Performance Measures shall not allow for any discretion by the Committee as to an increase in any Award, but discretion to lower an Award is permissible. (d) The award and payment of any Award under this Plan to a Covered Participant with respect to a relevant Performance Period shall be contingent upon the attainment of the Performance Measures that are applicable to such Covered Participant. The Committee shall certify in writing prior to the payment of any such Award that such applicable Performance Measures relating to the Award are satisfied. Approved minutes of a meeting of the Committee may be used for this purpose. (e) The maximum Award that may be paid to any Covered Participant under the Plan pursuant to Articles VIII and IX for any Performance Period is 100 percent of the Covered Participant's base salary as of the first day of that Performance Period. The maximum number of shares of Stock subject to Options or Restricted Stock granted to any Covered Participant for any Performance Period shall be 300,000, and any grant of a NQSO at less than 100 percent of Fair Market Value shall be subject to the attainment of Performance Measures as provided herein. (f) All Awards to Covered Participants under this Plan shall be further subject to such other conditions, restrictions, and requirements as the Committee may determine to be necessary to carry out the purposes of this Article XVI. A-13 EX-10.31 3 7TH AMEND TO LTCB CREDIT AGREEMENT 1 EXHIBIT 10.31 SEVENTH AMENDMENT TO CREDIT AGREEMENT AMONG BEVERLY ENTERPRISES, INC., BEVERLY CALIFORNIA CORPORATION, THE SUBSIDIARY GUARANTORS LISTED HEREIN, THE LENDERS LISTED HEREIN, BANK OF MONTREAL, AS CO-AGENT, AND THE LONG-TERM CREDIT BANK OF JAPAN, LTD. LOS ANGELES AGENCY, AS AGENT DATED AS OF MAY 2, 1994 THIS SEVENTH AMENDMENT dated as of May 2, 1994 (this "AMENDMENT"), is entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation ("BEI"), BEVERLY CALIFORNIA CORPORATION, a California corporation ("BORROWER"), the SUBSIDIARY GUARANTORS listed on the signature pages hereof (together with BEI, the "GUARANTORS"), the LENDERS listed on the signature pages hereof (such lenders, together with each Person that may or has become a party to the Credit Agreement (as defined below) pursuant to subsection 10.8 thereof, are referred to herein individually as a "LENDER" and collectively as the "LENDERS"), BANK OF MONTREAL as co-agent for the Lenders (in such capacity, the "CO-AGENT"), and THE LONG-TERM CREDIT BANK OF JAPAN, LTD., Los Angeles Agency ("LTCB"), as agent for the Lenders (in such capacity, the "AGENT"). This Amendment amends the Credit Agreement dated March 24, 1992 by and among BEI, Borrower, Co-Agent, Agent and Lenders, as amended by that First Amendment to Credit Agreement dated April 7, 1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Second Amendment to Credit Agreement dated as of May 11, 1992 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Third Amendment to Credit Agreement dated as of March 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Fourth Amendment to Credit Agreement dated as of November 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Fifth Amendment to Credit Agreement dated as of March 21, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by that Sixth Amendment to Credit Agreement dated as of April 22, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders (said Credit Agreement, as so amended, the "CREDIT AGREEMENT"), as set forth herein. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. 2 RECITALS WHEREAS, Borrower desires to amend the Credit Agreement in certain respects; WHEREAS, Lenders, Co-Agent and Agent have agreed to approve such amendments; WHEREAS, Guarantors desire to reaffirm the effectiveness respectively of the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement; NOW, THEREFORE, in consideration of the terms and conditions herein contained, BEI, Borrower, Guarantors, Co-Agent, Agent and Lenders agree as follows: AGREEMENT SECTION 1. AMENDMENTS TO DEFINITIONS (a) Subsection 1.1 of the Credit Agreement is hereby amended by the addition of the following definitions in alphabetical order: "'APPLICABLE MARGIN' means, for any day, the rate per annum set forth under the column heading 'Applicable Margin' below for the higher of the S&P Rating or the Moody's Rating in effect on such day:
Higher of S&P Rating or Moody's Rating -------------------- S&P Rating Moody's Rating Applicable Margin ---------- -------------- ----------------- BBB+(or higher) Baa1(or higher) 0.75% BBB Baa2 1.00% BBB- Baa3 1.25% BB+ Ba1 1.75% BB or BB- Ba2 or Ba3 2.00% B+(or lower) or no rating B1(or lower) or no rating 2.50%
Any change in the Applicable Margin shall become effective on the day on which a change in the Moody's Rating or the S&P Rating that requires a change in the Applicable Margin in accordance with this definition shall be announced publicly by the respective rating agency. 'APPRAISED VALUE' means, with respect to any asset subjected to or released from any Lien securing any Designated Obligations or any Pooled Mortgage Debt, the 2 3 value of such asset as determined by an independent appraisal performed within 90 days of, and as of a date not less than 90 days prior to, the date upon which such asset is subjected to or released from such Lien. 'BEI 1992 DISPOSITION PLAN' means the disposition plan announced by BEI on November 9, 1992 relating to the proposed disposition of certain facilities and the establishment of reserves therefor, in each case, as summarized in Schedule VII to the Morgan Credit Agreement as in effect as of March 1, 1993. 'COMMERCIAL PAPER BACKSTOP FACILITY' means a credit facility entered into by a Special Purpose Commercial Paper Issuer for the purposes of providing liquidity with respect to commercial paper issued by such Special Purpose Commercial Paper Issuer and of financing transactions of the type intended to be financed with the proceeds of such commercial paper. 'COMMERCIAL PAPER PROGRAM' means a program pursuant to which a Special Purpose Commercial Paper Issuer issues commercial paper secured by (i) Medicaid, Medicare or other patient accounts receivable purchased from BEI and its Subsidiaries or (ii) security interests in Medicaid, Medicare or other patient accounts receivable granted by BEI and its Subsidiaries. 'CONSOLIDATED CAPITAL EXPENDITURES' means, for any period, the sum, without duplication, of (i) the total amount of additions to property and equipment of BEI and its Consolidated Subsidiaries during such period of the types classified as "Capital expenditures" or "Payments for acquisitions, net of cash acquired" on the consolidated statement of cash flows included in the Coverage Base Financials and (ii) all investments (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) made by BEI or any of its Subsidiaries during such period in Beverly Japan Corporation; provided that "Consolidated Capital Expenditures" shall exclude (A) the application of insurance or condemnation proceeds to rebuilding facilities as permitted by the Morgan Credit Agreement and the Security Documents (as defined in the Morgan Credit Agreement), (B) any acquisition by BEI or any of its Subsidiaries of any assets in connection with and as part of a Workout Transaction and (C) any acquisition by BEI or any of its Subsidiaries of any assets as part of a Lease Termination Acquisition. 'CONSOLIDATED RENTAL EXPENSE' means, for any period, the gross rental expense of BEI and its Consolidated Subsidiaries with respect to leases of real property and improvements of real property less, with respect to any 3 4 facility identified in the BEI 1992 Disposition Plan, the amount of such gross rental expense with respect to such facility for such period to the extent, but only to the extent, that such expense is charged against the reserves established in respect of such facility as part of the BEI 1992 Disposition Plan prior to March 1, 1993, determined on a consolidated basis for such period. 'COVERAGE BASE FINANCIALS' means the consolidated balance sheet of BEI and its Consolidated Subsidiaries as of December 31, 1991 and the related consolidated statements of operation, stockholders' equity and cash flows for the year then ended, together with the notes thereto, included in BEI's 1991 Form 10-K and reported on without qualification by Ernst & Young. 'COVERAGE CONSOLIDATED EBIDA' means, for any period, Coverage Consolidated Net Income of BEI and its Consolidated Subsidiaries for such period plus, without duplication, any amounts deducted in determining such consolidated net income (loss) in respect of (a) Consolidated Interest Charges for such period and (b) expenses for such period of the types classified as "depreciation and amortization" on the consolidated statements of operation included in the Coverage Base Financials. 'COVERAGE CONSOLIDATED NET INCOME' means, for any period, the net income (calculated (a) before preferred and common stock dividends, and (b) exclusive of the effect of any extraordinary or other material non-recurring gain or loss outside the ordinary course of business) of BEI and its Consolidated Subsidiaries, determined on a consolidated basis for such period. 'DESIGNATED OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'FIXED CHARGE COVERAGE RATIO' means, on any date, the ratio of (i) the sum of Coverage Consolidated EBIDA and Consolidated Rental Expense for the four consecutive fiscal quarters most recently ended on or prior to such date to (ii) the sum of Consolidated Interest Charges, Consolidated Rental Expense and Consolidated Capital Expenditures for such four fiscal quarters. 'INCREMENTAL POOLED MORTGAGE DEBT' means, at any time with respect to any Pooled Mortgage Debt, the excess (but not less than zero) of (i) the aggregate principal amount of such Pooled Mortgage Debt outstanding at such time over (ii) the sum, without duplication, of (A) an amount equal to 80% of the cost of acquisition or construction of any Initial Pooled Mortgage Assets that have been acquired or constructed by BEI or any of its 4 5 Subsidiaries within 90 days of the incurrence of such Pooled Mortgage Debt and that are subject to a Lien securing such Pooled Mortgage Debt; (B) the aggregate principal amount of all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations that had been secured by a Lien permitted under clauses (i), (v), (vi), (vii), (ix) or (x) of subsection 5.13A (or permitted under clause (xi) of subsection 5.13A as it relates to any of the foregoing clauses) on some or all of such Initial Pooled Mortgage Assets, which Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations either were refinanced by such Pooled Mortgage Debt or repaid within 180 days prior to the incurrence of such Pooled Mortgage Debt; and (C) the value of any Initial Cash Collateral at such time. 'INITIAL POOLED MORTGAGE ASSETS' means (i) assets from two or more facilities on which Liens securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations are created within 90 days after the incurrence of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ('INITIAL POOLED MORTGAGE FACILITIES') and (ii) cash proceeds of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations (and Temporary Cash Investments made with such proceeds) that are held by a trustee to secure such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ('INITIAL CASH COLLATERAL'). 'LEASE TERMINATION ACQUISITION' means any acquisition by BEI or any of its Subsidiaries of a facility and related property that is made in connection with the early termination of a leasehold interest of BEI or any of its Subsidiaries in such facility. 'MATERIAL DEBT' means Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations (other than such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations that arise under this Agreement) of BEI and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $15,000,000. 5 6 'MOODY'S RATING' means, for any day, the rating of BEI's senior unsecured indebtedness by Moody's Investors Service, Inc. in effect on such day. 'MORGAN' means Morgan Guaranty Trust Company of New York and its successors. 'MORGAN COLLATERAL' means the real property and related personal property that constitute Collateral (as defined in the Morgan Credit Agreement), as of the Morgan Effective Date. 'MORGAN EFFECTIVE DATE' means March 3, 1993. 'MORGAN FINANCING DOCUMENTS, means the Morgan Credit Agreement, the Notes (as defined in the Morgan Credit Agreement), the Subsidiary Guaranty (as defined in the Morgan Credit Agreement) and the Security Documents (as defined in the Morgan Credit Agreement). 'MORGAN OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'NEW ASSETS' shall have the meaning set forth in subsection 5.13. 'NIPPON' means The Nippon Credit Bank, Ltd. and its successors. 'NIPPON COLLATERAL' means the real property and related personal property that constitutes Collateral (as defined in the Nippon Credit Agreement) as of the Morgan Effective Date. 'NIPPON CREDIT AGREEMENT' means that certain Credit Agreement, dated as of March 2, 1993, among Borrower, BEI, the lenders party thereto (the "NIPPON LENDERS") and Nippon, as agent, as amended, supplemented or modified. 'NIPPON FINANCING DOCUMENTS' means the Nippon Credit Agreement, the Nippon Notes and the Nippon Mortgages. 'NIPPON MORTGAGES' means the Mortgages (as defined in the Nippon Credit Agreement). 'NIPPON NOTES' means the Notes (as defined in the Nippon Credit Agreement) in favor of the Nippon Lenders. 'NIPPON OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'POOLED MORTGAGE ASSETS' means Initial Pooled Mortgage Assets or Substitute Pooled Mortgage Assets. 6 7 'POOLED MORTGAGE DEBT' means Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Pooled Mortgage Assets. 'REFINANCED DEBT' shall have the meaning set forth in subsection 5.15. 'REFINANCING DEBT' shall have the meaning set forth in subsection 5.15. 'S&P RATING' means, for any day, the rating of BEI's senior unsecured indebtedness by Standard & Poor's Corporation on such day. 'SENIOR NOTE AGREEMENT' means that certain Indenture, dated as of December 27, 1990, among Borrower, BEI and Yasuda Bank and Trust Company (U.S.A.), as Trustee, as amended, supplemented or modified. 'SENIOR NOTE COLLATERAL' means the real property and related personal property described in Exhibit A to the Collateral Release Agreement (as defined in the Morgan Credit Agreement). 'SENIOR NOTE DOCUMENTS' means the Senior Notes (as defined in the Senior Note Agreement), the Senior Note Agreement, the Trust Agreement (as defined in the Senior Note Agreement) and the Senior Note Mortgages. 'SENIOR NOTE MORTGAGES' means the mortgages related to the Senior Note Collateral. 'SENIOR NOTE OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'SPECIAL PURPOSE COMMERCIAL PAPER ISSUER' means a Wholly-Owned Subsidiary of BEI the sole purpose of which is to issue commercial paper and to purchase Medicare, Medicaid or other patient accounts receivable of BEI and its Subsidiaries and make advances to BEI and its Subsidiaries secured by security interests in such Medicare, Medicaid or other patient accounts receivable, which accounts receivable and security interests therein are to be pledged to secure such commercial paper and borrowings by such Special Purpose Commercial Paper Issuer under a Commercial Paper Backstop Facility. 'SUBSTITUTE POOLED MORTGAGE ASSETS' means assets on which Liens are created in substitution of, or in addition to, any Initial Pooled Mortgage Facilities to secure Debt (including, without limitation, any obligation with respect to any letter of credit or 7 8 similar instrument) and contingent obligations that are secured by such Initial Pooled Mortgage Assets. 'TEMPORARY CASH INVESTMENT' means any investment (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) in (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper with maturities of not more than 180 days rated at least P-1 by Moody's Investors Service or A-1 by Standard & Poor's Corporation, (iii) deposit accounts in, and certificates of deposit, repurchase agreements and bankers' acceptances of, Wilmington Trust Company or United States branches of other commercial banks whose unsecured senior long-term debt is rated A or better by Moody's Investors Service or Standard & Poor's Corporation, in each case maturing within one year from the date of acquisition thereof or (iv) in addition to the accounts and instruments referred to in clause (iii), deposit accounts and certificates of deposit in United States branches of banks insured by the Federal Deposit Insurance Corporation that do not aggregate more than $100,000 in any one bank. 'WORKOUT TRANSACTION' means any adjustment, renegotiation, exchange, subordination, amendment, sale or other disposition of any note receivable, investment in any Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) or other similar asset of BEI or any of its Subsidiaries, any release, subordination, renegotiation or other adjustment or any Lien securing any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation of any Person held by or owed to BEI or any of its Subsidiaries, any acquisition of any asset by BEI or any of its Subsidiaries or the making of any investment in an Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) by BEI or any of its Subsidiaries, in each case in connection with (i) the foreclosure, enforcement or realization by BEI or any such Subsidiary on any Lien securing any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation of any Person held by or owed to BEI or any such Subsidiary or (ii) any renegotiation, composition, adjustment, amendment or restructuring of, or any other similar arrangement with respect to, any such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation, in each case in connection with the bankruptcy, 8 9 insolvency, financial distress or other similar condition of such Person; provided that any such adjustment, renegotiation, exchange, subordination, amendment, sale, disposition, release or acquisition or the making of any such investment in any Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) (A) will, in the reasonable opinion of an Authorized Financial Officer of BEI, in light of the circumstances affecting the relevant obligor, be likely to maximize the amount to be realized by BEI and its Subsidiaries with respect to such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation or (B) is imposed on BEI or any of its Subsidiaries pursuant to voting arrangements mandated by any law or contract arrangements binding upon BEI or such Subsidiary.'" (b) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Permitted Commercial Paper" and replacing such definition with the following: "'PERMITTED COMMERCIAL PAPER' means commercial paper issued by a Special Purpose Commercial Paper Issuer pursuant to a Commercial Paper Program and borrowings by a Special Purpose Commercial Paper Issuer under a related Commercial Paper Backstop Facility." (C) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Permitted Liens" and replacing such definition with the following: "'PERMITTED LIENS' means, with respect to any Collateral, those Liens set forth below: (i) Liens created or permitted by the Collateral Documents; (ii) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by subsection 5.17; (iii) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iv) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of 9 10 business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; (vi) Easements, rights-of-way, restrictions, other similar charges or encumbrances, in each case that do not interfere with the ordinary conduct of the business of BEI or any of its Subsidiaries; and (vii) Liens (excluding Liens securing Debt) set forth on the title insurance policies delivered in connection with the Mortgages that the Agent may approve in its sole discretion." (d) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Consolidated Interest Charges" and replacing such definition with the following: "'CONSOLIDATED INTEREST CHARGES' means for any period all items for such period of the types classified as 'interest' on the consolidated statement of operations included in the Coverage Base Financials." (e) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Morgan Credit Agreement" and replacing such definition with the following: "'MORGAN CREDIT AGREEMENT' means that certain Credit Agreement, dated as of March 1, 1993, among Borrower, BEI, the banks party thereto, Morgan, as issuing bank and as agent, as amended, supplemented or modified." SECTION 2. AMENDMENTS WITH RESPECT TO THE ELIGIBLE COLLATERAL APPRAISAL VALUE (a) Subsection 2.6B of the Credit Agreement is hereby amended by deleting the references to "160%" in the second and sixteenth lines thereof and replacing such references with "125%". 10 11 (b) Subsection 3.2D of the Credit Agreement is hereby amended by deleting the reference to "160%" in the eighth line thereof and replacing such reference with "125%" (c) Subsection 5.18A of the Credit Agreement is hereby amended by deleting the reference to "160%" in the third line thereof and replacing such reference with "125%". (d) Subsection 5.18D of the Credit Agreement is hereby amended by deleting the references to "160%" in the second and eleventh lines thereof and replacing such references with "125%". (e) Subsection 5.18E of the Credit Agreement is hereby amended by deleting the reference to "160%" in the third line thereof and replacing such reference with "125%". SECTION 3. AMENDMENT TO SUBSECTION 2.7A OF THE CREDIT AGREEMENT Subsection 2.7A of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "A. EURODOLLAR RATE LOANS. During such periods as such Loan is a Eurodollar Rate Loan, at a rate per annum equal at all times during each Interest Period for such Loan to the Adjusted Eurodollar Rate for such Interest Period plus the Applicable Margin; provided, that after the occurrence and during the continuation of any Event of Default, the Eurodollar Rate Loans shall bear interest from the date on which such Event of Default shall have occurred until such amount is paid in full at a rate per annum equal at all times to 2.0% per annum above the rate of interest otherwise payable under this subsection 2.7A, in each case payable in arrears on each Interest Payment Date and on the date of any prepayment thereof, unless such amounts are past due, in which case they shall be payable on demand." SECTION 4. AMENDMENT TO SUBSECTION 5.1 OF THE CREDIT AGREEMENT Subsection 5.1 of the Credit Agreement is hereby amended by deleting the final word "and" from clause H thereof, relettering clause I thereof as clause "J" and inserting a new clause I as follows: "I. promptly upon the occurrence of any change in the S&P Rating or the Moody's Rating from such ratings last notified to the Lenders, a written notice of such change setting forth the details thereof; and" 11 12 SECTION 5. AMENDMENT TO SUBSECTION 5.5 OF THE CREDIT AGREEMENT Subsection 5.5 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "5.5 FIXED CHARGE COVERAGE RATIO The Fixed Charge Coverage Ratio shall not be less than 1.00 to 1.00 at any time." SECTION 6. AMENDMENT TO SUBSECTION 5.8 OF THE CREDIT AGREEMENT Subsection 5.8 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "5.8 CONSOLIDATED DEBT FOR BORROWED MONEY TO CONSOLIDATED EBITDA RATIO On the last day of each fiscal quarter, the ratio of (a) the quotient derived by dividing the sum of Consolidated Debt For Borrowed Money as of the last day of each of the four fiscal quarters ending on such date, by four, to (b) the sum of (i) Consolidated EBITDA and (ii) EBITDA for Sold Facility for each facility the Debt of which is guaranteed by BEI or a Subsidiary and which is included in Consolidated Debt for Borrowed Money for such four fiscal quarters shall not be more than 6.00 to 1.00." SECTION 7. AMENDMENT TO SUBSECTION 5.13A OF THE CREDIT AGREEMENT Subsection 5.13A of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "A. Neither BEI nor any of its Subsidiaries will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except the following: (i) Liens existing on the Morgan Effective Date securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligations and other obligations outstanding on the Morgan Effective Date; 12 13 (ii) Liens created or permitted by the Collateral Documents; (iii) Liens on the Nippon Collateral securing the obligations ("NIPPON OBLIGATIONS") of BEI and its Subsidiaries under the Nippon Financing Documents and Liens on the Morgan Collateral securing obligations ("MORGAN OBLIGATIONS") of BEI and its Subsidiaries under the Morgan Financing Documents; provided that, in each case, the amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured thereby does not exceed the amount that has been or may be borrowed thereunder as of the Morgan Effective Date; (iv) Liens on the Senior Note Collateral securing the obligations ("SENIOR NOTE OBLIGATIONS" and, together with the Nippon Obligations and the Morgan Obligations, the "DESIGNATED OBLIGATIONS") of BEI and its Subsidiaries outstanding on the Morgan Effective Date under the Senior Note Documents; (v) any Lien on any asset of any corporation that becomes a Consolidated Subsidiary of BEI after the Morgan Effective Date that exists at the time such corporation becomes such a Consolidated Subsidiary and (other than in a Workout Transaction) not created in contemplation thereof; (vi) any Lien existing on any asset prior to the acquisition thereof, acquired after the Morgan Effective Date by BEI or a Subsidiary of BEI and (other than in a Workout Transaction) not created in contemplation thereof; (vii) any Lien on any asset securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset or reconstructing substantially all of such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (viii) any Lien on any asset securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred or assumed for the purpose of improving or making any 13 14 addition to such asset, provided that (A) such Lien attaches to such asset concurrently with or within 180 days after the completion of the improvement thereof or addition thereto and (B) the aggregate principal amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by any such Lien shall not, at any time, exceed $20,000,000; (ix) Liens securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred in connection with the early termination of a lease, provided that the aggregate amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by any such Lien shall not, at any time, exceed $20,000,000; (x) Liens securing industrial development revenue bonds (or securing contingent obligations to issuers of letters of credit issued to support industrial development revenue bonds) arising in connection with the conversion of the interest rate on such bonds from floating to long-term fixed rates or from fixed rates to other long-term fixed rates; (xi) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations secured by any Lien permitted by any of the foregoing clauses of this subsection 5.13A, provided that the principal amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations is not increased and such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations are not secured by any additional assets other than assets that relate directly to the facility subject to the original financing; (xii) Liens on Medicare, Medicaid or other patient accounts receivable of BEI or any of its Subsidiaries granted to secure Permitted Commercial Paper, provided that the net amount of all uncollected accounts receivable owing to BEI or any of its Subsidiaries over which such a Lien is 14 15 granted, together, without duplication, with the net amount of all uncollected accounts receivable owing to BEI or any of its Subsidiaries that are assigned to secure such Permitted Commercial Paper, shall not exceed, at any time, 175% of the aggregate principal amount of all Permitted Commercial Paper then outstanding; (xiii) Liens incidental to the conduct of its business or the ownership of its assets that (A) do not secure Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations and (B) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (xiv) Liens on assets (other than Nippon Collateral) securing Nippon Obligations, Liens on assets (other than Morgan Collateral) securing Morgan Obligations or Liens on assets (other than Senior Note Collateral) securing Senior Note Obligations (such assets collectively, "NEW ASSETS"), provided that the sum of (A) the excess of the Appraised Value of all New Assets over the Appraised Value of all Nippon Collateral, Morgan Collateral and Senior Note Collateral no longer subject to any Lien securing any Designated Obligations, (B) the amount set forth in subclause (A) of clause (xvi) of this subsection 5.13A and (C) the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; (xv) Liens on Initial Pooled Mortgage Assets, provided that the sum of the amounts set forth in subclause (A) of each of clause (xiv) and clause (xvi) of this subsection 5.13A and the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; (xvi) Liens on Substitute Pooled Mortgage Assets, provided that the sum of (A) the excess of the Appraised Value of all Substitute Pooled 15 16 Mortgage Assets over the Appraised Value of all Initial Pooled Mortgage Facilities no longer subject to any Lien securing any Pooled Mortgage Debt, (B) the amounts set forth in subclause (A) of clause (xiv) of this subsection 5.13A, (C) the aggregate principal amount of all Incremental Pooled Mortgage Debt and (D) all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; and (xvii) Liens not otherwise permitted under clauses (i) through (xvi) of this subsection 5.13A, provided that the sum of the amounts set forth in subclause (A) of each of clause (xiv) and clause (xvi) of this subsection 5.13A and the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under this clause (xvii) shall not at any time exceed $50,000,000. Notwithstanding the foregoing, neither BEI nor any of its Subsidiaries will create, assume or suffer to exist any Lien on any Collateral now owned or hereafter acquired by it, except the Permitted Liens." SECTION 8. AMENDMENT TO SUBSECTION 5.15 OF THE CREDIT AGREEMENT Subsection 5.15 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "5.15 INCURRENCE OF DEBT BEI will not permit any of its Subsidiaries (other than the Borrower) to incur, assume or suffer to exist any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or any contingent obligation, except: (a) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding on March 1, 1993 and listed in Schedule II attached to the Morgan Credit Agreement as in effect as of March 1, 1993; 16 17 (b) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred in connection with the early termination of a lease, provided that the aggregate principal amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding at any time shall not exceed $20,000,000; (c) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by a Lien permitted pursuant to clause (v) or (vi) of subsection 5.13; (d) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ("REFINANCING DEBT") incurred to refinance Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ("REFINANCED DEBT") permitted under clauses (a) through (c) above, provided that (i) the principal amount of such Refinancing Debt shall not exceed the principal amount of such Refinanced Debt and (ii) such Refinancing Debt shall have a weighted average life of not less than the remaining weighted average life of such Refinanced Debt or such Refinancing Debt shall not have any required payments of principal prior to February 15, 1997; (e) Permitted Commercial Paper, provided that the aggregate principal amount of all Permitted Commercial Paper outstanding at any time shall not exceed $100,000,000; (f) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred under the Loan Documents; (g) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred under the Morgan Financing Documents, the Nippon Financing Documents or the Senior Note Documents not in excess of the amounts specified in clauses (iii) and (iv) of subsection 5.13A; (h) Guarantees by any Subsidiary of BEI of any obligation of BEI or any of its other 17 18 Subsidiaries that such guaranteeing Subsidiary would have been permitted to incur hereunder as a primary obligation; (i) Debt (including, without limitation, any obligation under any letter of credit or similar instrument) and contingent obligations consisting of advances from BEI or any of its Subsidiaries in connection with the normal operation of the business of BEI and its Subsidiaries; (j) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred in connection with and as part of a Workout Transaction; (k) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred or assumed for the purpose of financing the cost of acquiring, constructing or improving an asset of BEI or any of its Subsidiaries; (l) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Pooled Mortgage Assets, provided that the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of this subsection 5.15 shall not at any time exceed $50,000,000; and (m) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations not otherwise permitted under clauses (a) through (l) of this subsection 5.15, provided that the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under this clause (m) shall not at any time exceed $50,000,000." 18 19 SECTION 9. AMENDMENT TO SUBSECTION 6.4 OF THE CREDIT AGREEMENT Subsection 6.4 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "6.4 BREACH OF OTHER AGREEMENTS Any event or condition shall occur that results in the acceleration of the maturity, or requires the early redemption or prepayment, of any Material Debt or any event or condition shall occur and be continuing that enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any Material Debt or any Person acting on such holder's behalf to accelerate the maturity, or require the early redemption or prepayment, thereof (unless such event or condition shall have been waived and any acceleration or required redemption or prepayment rescinded), provided that the fact that the interest paid on any industrial development revenue bonds ceases to be exempt from federal income taxation shall not constitute an Event of Default under this subsection 6.4 unless such industrial development revenue bonds are accelerated, redeemed or prepaid or the aggregate principal amount of industrial development revenue bonds subject to acceleration or early redemption or prepayment as a result of such event or condition shall be at least $15,000,000; or" SECTION 10. AMENDMENT TO EXHIBIT VIII OF THE CREDIT AGREEMENT (a) Exhibit VIII of the Credit Agreement is hereby amended by deleting section A.1 of Attachment No. 1 thereof in its entirety and replacing it with section A.1 set forth in Exhibit A attached hereto. (b) Exhibit VIII of the Credit Agreement is hereby further amended by deleting section A.4(a) of Attachment No. 1 thereof in its entirety and replacing it with section A.4(a) set forth in Exhibit B attached hereto. (c) Exhibit VIII of the Credit Agreement is hereby further amended by deleting section C(a) of Attachment No. 1 thereof in its entirety and replacing it with section C(a) set forth in Exhibit C attached hereto. (d) Exhibit VIII of the Credit Agreement is hereby further amended by adding at the end of Attachment No. 1 thereof sections D and E set forth in Exhibit D attached hereto. 19 20 SECTION 11. REPRESENTATIONS AND WARRANTIES In order to induce Agent, Co-Agent and Lenders to enter into this Amendment, each of BEI and Borrower represents and warrants to Agent, Co-Agent and Lenders that: (a) The representations and warranties of each Loan Party contained in the Credit Agreement are true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of the date hereof except to the extent that such representations and warranties specifically relate to an earlier date, in which case they are true, correct and complete in all material respects as of such earlier date; (b) No event has occurred and is continuing or would result from the execution of this Amendment that constitutes an Event of Default or Potential Event of Default; (c) Each Loan Party has performed in all material respects all agreements and satisfied all conditions that the Credit Agreement and this Amendment provide shall be performed by it on or before the date hereof; (d) The execution, delivery and performance of this Amendment and the Credit Agreement as amended by this Amendment, by each Loan Party are within the corporate power and authority of each such Loan Party and, as of the Seventh Amendment Effective Date (as hereinafter defined), will be duly authorized by all necessary corporate action on the part of each Loan Party, and this Amendment, as of the Seventh Amendment Effective Date, is duly executed and delivered by each of such Loan Parties and will constitute a valid and binding agreement of each of such Loan Parties, enforceable against such Loan Parties in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The Credit Agreement constitutes and, as of the Seventh Amendment Effective Date, the Credit Agreement, as amended by this Amendment, will constitute, valid and binding agreement of BEI and Borrower, enforceable against BEI and Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles, relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. (e) The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of the Credit Agreement as amended by this Amendment, do not and will not (i) violate any provision of any law or any 20 21 governmental rule or regulation applicable to any Loan Party, the Certificate or Articles of Incorporation or Bylaws of any Loan Party or any order, judgment or decree of any court or other agency of government binding on any Loan Party, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any instrument that is material, individually or in the aggregate, and that is binding on such Loan Party, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of any Loan Party (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any approval or consent of any Person under any instrument that is material, individually or in the aggregate, and that is binding on such Loan Party. (f) The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of the Credit Agreement as amended by this Amendment, do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. SECTION 12. CONDITIONS TO EFFECTIVENESS Sections 1 through 10 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "SEVENTH AMENDMENT EFFECTIVE DATE"): A. On or before the Seventh Amendment Effective Date, BEI, Borrower and each Subsidiary Guarantor shall deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies, as appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Seventh Amendment Effective Date: (i) Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Amendment, certified as of the Seventh Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (ii) Signature and incumbency certificates of its officers executing this Amendment certified by its secretary or an assistant secretary; and (iii) Executed counterparts of this Amendment. B. Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of Robert W. Pommerville, general counsel for 21 22 BEI, and Weil, Gotshal & Manges, counsel for BEI, Borrower and each Subsidiary Guarantor, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Seventh Amendment Effective Date and setting forth substantially the matters in the opinions designated in Exhibit E to this Amendment and as to such other matters as Agent acting on behalf of Lenders may reasonably request. C. On or before the Seventh Amendment Effective Date, each Lender shall have delivered to Agent a counterpart of this Amendment originally executed by a duly authorized officer of such Lender or by telex or telephonic confirmation. D. On or before the Seventh Amendment Effective Date: (i) Borrower shall have caused payment to each Lender of an amendment fee equal to 0.10% of the aggregate principal amount of Loans of such Lender outstanding on the Seventh Amendment Effective Date; (ii) Borrower shall have caused payment to Agent of all amounts regarding the costs and expenses reasonably incurred by Agent in connection with this Amendment which Borrower has agreed to pay; (iii) Borrower shall have delivered to Agent (with sufficient copies for each Lender) an Appraisal dated on or a recent date prior to the Seventh Amendment Effective Date covering all Collateral (other than Collateral which will be released after taking into account the provisions of this Amendment and after taking into account the prepayment of Loans made on or prior to the Seventh Amendment Effective Date), which Appraisal shall show that the Eligible Collateral Appraisal Value of all Eligible Collateral (other than any such Collateral which will be so released) is greater than 125% of the aggregate outstanding principal amount of the Loans; (iv) Amendment No. 3 dated as of March 15, 1994 to the Morgan Credit Agreement (as defined in the Credit Agreement as amended by this Amendment) shall have become effective in all respects; and (v) An amendment to the Nippon Credit Agreement (as defined in the Credit Agreement as amended by this Amendment), which amendment decreases the minimum ratio of (x) the appraised value of the Collateral (as defined in the Nippon Credit Agreement) to (y) the aggregate principal amount of Debt outstanding under the Nippon Credit Agreement to 1.25 to 1.00, shall have effective in all respects. 22 23 E. On or before the Seventh Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. SECTION 13. THE GUARANTIES Each Guarantor acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Guarantor hereby confirms that the Guaranty Agreement and the Collateral Documents to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all Obligations, Guarantied Obligations (as defined in the applicable Guaranty Agreements) and Secured Obligations (as defined in the Collateral Documents), as the case may be, including, without limitation, the payment and performance of all Obligations of Borrower now or hereafter existing under or in respect of the Credit Agreement as amended by this Amendment and the Notes defined therein. Each Guarantor acknowledges and agrees that any of the Guaranty Agreements and the Collateral Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Guarantor represents and warrants that all representations and warranties contained in the Credit Agreement as amended by this Amendment and the Guaranty Agreements and the Collateral Documents to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the Seventh Amendment Effective Date to the same extent as though made on and as of that date except to the extent that such representations and warranties specifically relate to an earlier date, in which case they are true, correct and complete in all material respects as of such earlier date. Each Guarantor acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment or any other Loan Document and (ii) that neither the terms of the Credit Agreement, any other Loan 23 24 Document nor this Amendment shall be deemed to require the consent of any Guarantor to any future amendments to the Credit Agreement. SECTION 14. COUNTERPARTS; EFFECTIVENESS This Amendment may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Amendment (other than the provisions of Sections 1 through 10 hereof) shall become effective upon the execution of a counterpart hereof by all Lenders and each of the Loan Parties and receipt of written or telephonic notification of such execution and authorization of delivery thereof. SECTION 15. FEES AND EXPENSES Borrower acknowledges that all costs, fees and expenses as described in subsection 10.4 of the Credit Agreement incurred by Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. SECTION 16. EFFECT OF AMENDMENT It is hereby agreed that, except as specifically provided herein, this Amendment does not in any way affect or impair the terms and conditions of the Credit Agreement, and all terms and conditions of the Credit Agreement are to remain in full force and effect unless otherwise specifically amended or changed pursuant to the terms and conditions of this Amendment. SECTION 17. APPLICABLE LAW This Amendment and the rights and obligations of the parties hereto and all other aspects hereof shall be deemed to be made under, shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. 24 25 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BEI: BEVERLY ENTERPRISES, INC. By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Senior Vice President and Treasurer Borrower: BEVERLY CALIFORNIA CORPORATION By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Senior Vice President and Treasurer AGENT, CO-AGENT AND LENDERS: THE LONG-TERM CREDIT BANK OF JAPAN, LOS ANGELES AGENCY, as Agent and as a Lender By: /s/ YUTAKA KAMISAWA Title: Deputy General Manager BANK OF MONTREAL, as Co-Agent and as a Lender By: /s/ DANIEL A. BROWN Title: Director S-1 26 LENDERS: INTERNATIONALE NEDERLANDEN (U.F.) CAPITAL CORPORATION By: /s/ J.W. LATIMER Title: Managing Director NIPPON SANSO NETHERLANDS B.V. By: /s/ NOBUYOSHI ASAI Title: Managing Director U.S. NATIONAL BANK OF OREGON By: /s/ JANET JORDAN Title: Vice President NICHIJUKIN (USA), LTD. By: /s/ KAYUAKI OGAWA Title: Treasurer and Secretary ORIX USA CORPORATION By: Title: S-2 27 NIPPON SHINPAN FINANCE (U.S.A.) CO., LTD. By: /s/ SHUICHI TANAKAMARU Title: President THE SUBSIDIARY GUARANTORS: Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arkansas, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Minnesota, Inc. Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - North Carolina, Inc. Beverly Enterprises - Oregon Beverly Enterprises - Wisconsin, Inc. S-3 28 Commercial Management, Inc. Hallmark Convalescent Homes, Inc. Hospital Facilities Corporation Moderncare of Lumberton, Inc. Nebraska City S-C-H, Inc. South Dakota - Beverly Enterprises, Inc. Vantage Healthcare Corporation AGI-Camelot, Inc. AGI-McDonald County Health Care, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Kansas, Inc. S-4 29 Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Indemnity, Ltd. Beverly Manor Inc. of Hawaii Beverly Savana Cay Manor, Inc. Columbia-Valley Nursing Home, Inc. Computran Systems, Inc. S-5 30 Continental Care Centers of Council Bluffs, Inc. Forest City Building Ltd. Home Medical Systems, Inc. Kenwood View Nursing Home, Inc. Liberty Nursing Homes, Incorporated Medical Arts Health Facility of Lawrenceville, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. Pharmacy Corporation of America Salem No. 1, Inc. South Alabama Nursing Home, Inc. Taylor County Health Facility, Incorporated By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Senior Vice President & Treasurer S-6 31 Exhibit A 1. (a) Minimum Fixed Charge Coverage Ratio permitted for the Applicable Period pursuant to subsection 5.5 . . . . . 1.00:1.00 (b) (i) Coverage Consolidated EBIDA for the four consecutive fiscal quarters immediately preceding and including the Period End Date (the "APPLICABLE PERIOD") . . . . . . . . . $________ (ii) Consolidated Rental Expense for the Applicable Period . . . . . . . . . . . . . . . . $________ (iii) Sum of Coverage Consolidated EBIDA and Consolidated Rental Expense for the Applicable Period (Item (b)(i) plus Item (b)(ii)). . . . . . . . . . . . . . . . . . . . . $________ (c) (i) Consolidated Interest Charges for the Applicable Period . . . . . . . . . . . . . . . . $________ (ii) Consolidated Rental Expense for the Applicable Period . . . . . . . . . . . . . . . . $________ (iii) Consolidated Capital Expenditures for the Applicable Period . . . . . . . . . . . . . . $________ (iv) Sum of Consolidated Interest Charges, Consolidated Rental Expense and Consolidated Capital Expenditures for the Applicable Period (Item (c)(i) plus Item (c)(ii) plus Item (c)(iii)) . . . . . . $________ (d) Actual Fixed Charge Coverage Ratio for the Applicable Period (ratio of Item (b)(iii) to Item (c) (iv)) . . . . . . . . . . . . . . . . . . . . ___: 1.00
A-1 32 Exhibit B 4. (a) Maximum Consolidated Debt for Borrowed money to Consolidated EBITDA ratio permitted for the Applicable Period pursuant to subsection 5.8 . . . . . . . . . . . . . . . . . . . . 6.00:1.00
B-1 33 Exhibit C 1. (a) Minimum Eligible Collateral Appraisal Value percentage as permitted and described in subsection 5.18A . . . . . . . . . . . . . . . . . . . . . 125%
C-1 34 Exhibit D D. Negative Pledge --------------- (a) Maximum aggregate principal amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens on assets permitted pursuant to subsection 5.13A(viii) . . . . . . . . . . . . . . . . . . $20,000,000 (b) Actual aggregate principal amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations on the Period End Date . . . . . . . . . . . . . . . . . . . . . $__________ (c) Maximum aggregate amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by any Lien and incurred in connection with early termination of leases permitted pursuant to subsection 5.13A(ix) . . . . . . . . . . . . . $20,000,000 (d) Actual aggregate amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations on the Period End Date . . . . . . $__________ (e) (i) Maximum excess Appraised Value of all New Assets plus excess Appraised Value of Substitute Pooled Mortgage Assets plus aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under subsection 5.13A(xvii) . . . . . $50,000,000 (ii) Excess of the Appraised Value of all New Assets over the Appraised Value of all Nippon Collateral, Morgan Collateral, and Senior Note Collateral no longer subject to any Lien securing Designated Obligations on the Period End Date . . . . . . . . . . . . . $__________
D-1 35 (iii) Excess of the Appraised Value of all Substitute Pooled Mortgage Assets over the Appraised Value of all Initial Pooled Mortgage Facilities no longer subject to any Lien securing any Pooled Mortgage Debt on the Period End Date . . . . . . . . . . . . . . . $__________ (iv) Aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under subsection 5.13A(xvii) on the Period End Date . . . . . . . . . . . . . $__________ (v) Actual sum under subsections 5.13A(xiv), (xv), (xvi) and (xvii) on the Period End Date (Item (e)(ii) plus Item e(iii) plus Item (e)(iv)) . . . $__________ E. Incurrence of Debt ------------------ (a) Maximum aggregate principal amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred by BEI's Subsidiaries (other than Borrower) in connection with early termination of leases permitted pursuant to subsection 5.15(b) . . . . . . . . . . . . . . . . . . . . . . . . $20,000,000 (b) Actual aggregate principal amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding on the Period End Date . . . . . . $___________ (c) Maximum aggregate principal amount of all Permitted Commercial Paper permitted pursuant to subsection 5.15(e) . . . . . . . . . . . . . . . . . . . . . . . . $100,000,000 (d) Actual aggregate principal amount of all Permitted Commercial Paper outstanding on the Period End Date . . . $___________
D-2 36 (e) Maximum aggregate principal amount of Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of subsection 5.15 . . . . . . . . . . . . . . . . . . . . . . $50,000,000 (f) Actual aggregate principal amount of Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of subsection 5.15 on the Period End Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . $__________
D-3 37 Exhibit E Matters to be Covered by Opinion of Counsel to Loan Parties 1. Each of the Loan Parties is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted except where the failure to obtain such governmental licenses, authorizations, consents and approvals would not, in my/our reasonable judgment, have a material adverse effect on the business operations, properties, assets, business prospects or condition of the Loan Parties taken as a whole. 2. The execution, delivery and performance by each of the Loan Parties of the Amendment and performance by each Loan Party party thereto of the Credit Agreement, as amended by the Amendment (the "Amended Credit Agreement") (i) are within the corporate powers of each of the Loan Parties and have been duly authorized by all necessary corporate action, (ii) require no action by or in respect of, or filing with any Federal, New York, California, Michigan or Delaware governmental body, agency or official, (iii) do not contravene the articles or certificate of incorporation or by-laws or each Loan Party, (iv) to the best of my/our knowledge, do not contravene any provision of Delaware corporate, Federal, New York, California or Michigan law or regulation applicable to each Loan Party, (v) to the best of my/our knowledge, do not contravene or constitute a default under any agreement, judgment, injunction, order, decree or other instrument that is material individually or in the aggregate and that is binding upon each Loan Party and (vi) to the best of my/our knowledge, will not result in the creation or imposition of any Lien on any asset of the Loan Parties. 3. The Amendment has been duly executed and delivered by the Loan Parties. 4. Each of the Amendment and the Amended Credit Agreement constitutes the legal, valid and binding obligation of each Loan Party party thereto, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). E-1 EX-10.37 4 2ND AMEND TO NIPPON CREDIT AGREEMENT 1 EXHIBIT 10.37 SECOND AMENDMENT TO CREDIT AGREEMENT AMONG BEVERLY ENTERPRISES, INC., BEVERLY CALIFORNIA CORPORATION, THE SUBSIDIARY GUARANTORS LISTED HEREIN, THE LENDERS LISTED HEREIN, AND THE NIPPON CREDIT BANK, LTD. LOS ANGELES AGENCY, AS AGENT DATED AS OF MAY 19, 1994 THIS SECOND AMENDMENT dated as of May 19, 1994 (this "AMENDMENT"), is entered into by and among BEVERLY ENTERPRISES, INC., a Delaware corporation ("BEI"), BEVERLY CALIFORNIA CORPORATION, a California corporation ("BORROWER"), the SUBSIDIARY GUARANTORS listed on the signature pages hereof (together with BEI, the "GUARANTORS"), the LENDERS listed on the signature pages hereof (such lenders, together with each Person that may or has become a party to the Credit Agreement (as defined below) pursuant to subsection 10.8 thereof, are referred to herein individually as a "LENDER" and collectively as the "LENDERS"), and THE NIPPON CREDIT BANK, LTD., Los Angeles Agency ("NIPPON"), as agent for the Lenders (in such capacity, the "AGENT"). This Amendment amends the Credit Agreement dated as of March 2, 1993 by and among BEI, Borrower, Agent and Lenders (as amended by that certain First Amendment to Credit Agreement dated as of May 6, 1994, the "CREDIT AGREEMENT"), as set forth herein. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrower desires to amend the Credit Agreement in certain respects; WHEREAS, Lenders and Agent have agreed to approve such amendments; WHEREAS, Guarantors desire to reaffirm the effectiveness respectively of the Subsidiary Guaranty Agreement and the BEI Guaranty Agreement; NOW, THEREFORE, in consideration of the terms and conditions herein contained, BEI, Borrower, Guarantors, Agent and Lenders agree as follows: 2 AGREEMENT SECTION 1. AMENDMENTS TO DEFINITIONS (a) Subsection 1.1 of the Credit Agreement is hereby amended by the addition of the following definitions in alphabetical order: "'APPLICABLE MARGIN' means, for any day, the rate per annum set forth under the column heading 'Applicable Margin' below for the higher of the S&P Rating or the Moody's Rating in effect on such day:
Higher of S&P Rating or Moody's Rating ------------------- S&P Rating Moody's Rating Applicable Margin ---------- -------------- ----------------- BBB+(or higher) Baa1(or higher) O.75% BBB Baa2 1.00% BBB- Baa3 1.25% BB+ Ba1 1.75% BB OR BB- Ba2 OR Ba3 2.00% B+(or lower) or no rating B1(or lower) or no rating 2.50%
Any change in the Applicable Margin shall become effective on the day on which a change in the Moody's Rating or the S&P Rating that requires a change in the Applicable Margin in accordance with this definition shall be announced publicly by the respective rating agency. 'APPRAISED VALUE' means, with respect to any asset subjected to or released from any Lien securing any Designated Obligations or any Pooled Mortgage Debt, the value of such asset as determined by an independent appraisal performed within 90 days of, and as of a date not less than 90 days prior to, the date upon which such asset is subjected to or released from such Lien. 'BEI 1992 DISPOSITION PLAN' means the disposition plan announced by BEI on November 9, 1992 relating to the proposed disposition of certain facilities and the establishment of reserves therefor, in each case, as summarized in Schedule VII to the Morgan Credit Agreement as in effect as of March 1, 1993. 'COMMERCIAL PAPER BACKSTOP FACILITY' means a credit facility entered into by a Special Purpose Commercial Paper Issuer for the purposes of providing liquidity with respect to commercial paper issued by such Special Purpose Commercial Paper Issuer and of financing transactions of the 2 3 type intended to be financed with the proceeds of such commercial paper. 'COMMERCIAL PAPER PROGRAM' means a program pursuant to which a Special Purpose Commercial Paper Issuer issues commercial paper secured by (i) Medicaid, Medicare or other patient accounts receivable purchased from BEI and its Subsidiaries or (ii) security interests in Medicaid, Medicare or other patient accounts receivable granted by BEI and its Subsidiaries. 'CONSOLIDATED CAPITAL EXPENDITURES' means, for any period, the sum, without duplication, of (i) the total amount of additions to property and equipment of BEI and its Consolidated Subsidiaries during such period of the types classified as "Capital expenditures" or "Payments for acquisitions, net of cash acquired" on the consolidated statement of cash flows included in the Coverage Base Financials and (ii) all investments (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) made by BEI or any of its Subsidiaries during such period in Beverly Japan Corporation; provided that "Consolidated Capital Expenditures" shall exclude (A) the application of insurance or condemnation proceeds to rebuilding facilities as permitted by the Morgan Credit Agreement and the Security Documents (as defined in the Morgan Credit Agreement), (B) any acquisition by BEI or any of its Subsidiaries of any assets in connection with and as part of a Workout Transaction and (C) any acquisition by BEI or any of its Subsidiaries of any assets as part of a Lease Termination Acquisition. 'CONSOLIDATED RENTAL EXPENSE' means, for any period, the gross rental expense of BEI and its Consolidated Subsidiaries with respect to leases of real property and improvements of real property less, with respect to any facility identified in the BEI 1992 Disposition Plan, the amount of such gross rental expense with respect to such facility for such period to the extent, but only to the extent, that such expense is charged against the reserves established in respect of such facility as part of the BEI 1992 Disposition Plan prior to March 1, 1993, determined on a consolidated basis for such period. 'COVERAGE BASE FINANCIALS' means the consolidated balance sheet of BEI and its Consolidated Subsidiaries as of December 31, 1991 and the related consolidated statements of operation, stockholders' equity and cash flows for the year then ended, together with the notes thereto, included in BEI's 1991 Form 10-K and reported on without qualification by Ernst & Young. 'COVERAGE CONSOLIDATED EBIDA' means, for any period, Coverage Consolidated Net Income of BEI and its Consolidated 3 4 Subsidiaries for such period plus, without duplication, any amounts deducted in determining such consolidated net income (loss) in respect of (a) Consolidated Interest Charges for such period and (b) expenses for such period of the types classified as "depreciation and amortization" on the consolidated statements of operation included in the Coverage Base Financials. 'COVERAGE CONSOLIDATED NET INCOME' means, for any period, the net income (calculated (a) before preferred and common stock dividends, and (b) exclusive of the effect of any extraordinary or other material nonrecurring gain or loss outside the ordinary course of business) of BEI and its Consolidated Subsidiaries, determined on a consolidated basis for such period. 'DESIGNATED OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'FIXED CHARGE COVERAGE RATIO' means, on any date, the ratio of (i) the sum of Coverage Consolidated EBIDA and Consolidated Rental Expense for the four consecutive fiscal quarters most recently ended on or prior to such date to (ii) the sum of Consolidated Interest Charges, Consolidated Rental Expense and Consolidated Capital Expenditures for such four fiscal quarters. 'INCREMENTAL POOLED MORTGAGE DEBT' means, at any time with respect to any Pooled Mortgage Debt, the excess (but not less than zero) of (i) the aggregate principal amount of such Pooled Mortgage Debt outstanding at such time over (ii) the sum, without duplication, of (A) an amount equal to 80% of the cost of acquisition or construction of any Initial Pooled Mortgage Assets that have been acquired or constructed by BEI or any of its Subsidiaries within 90 days of the incurrence of such Pooled Mortgage Debt and that are subject to a Lien securing such Pooled Mortgage Debt; (B) the aggregate principal amount of all Debt {including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations that had been secured by a Lien permitted under clauses (i), (v) (vi), (vii), (ix) or (x) of subsection 5.13A (or permitted under clause (xi) of subsection 5.13A as it relates to any of the foregoing clauses) on some or all of such Initial Pooled Mortgage Assets, which Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations either were refinanced by such Pooled Mortgage Debt or repaid within 180 days prior to the incurrence of such Pooled Mortgage Debt; and (C) the value of any Initial Cash Collateral at such time. 'INITIAL POOLED MORTGAGE ASSETS' means (i) assets from two or more facilities on which Liens securing Debt 4 5 (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations are created within 90 days after the incurrence of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ('INITIAL POOLED MORTGAGE FACILITIES') and (ii) cash proceeds of such Debt {including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations (and Temporary Cash Investments made with such proceeds) that are held by a trustee to secure such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ('INITIAL CASH COLLATERAL'). 'LEASE TERMINATION ACQUISITION' means any acquisition by BEI or any of its Subsidiaries of a facility and related property that is made in connection with the early termination of a leasehold interest of BEI or any of its Subsidiaries in such facility. 'LTCB' means The Long-Term Credit Bank of Japan, Ltd. and its successors. 'LTCB COLLATERAL' means the real property and related personal property that constitutes Collateral (as defined in the LTCB Credit Agreement) as of the Morgan Effective Date. 'LTCB CREDIT AGREEMENT' means that certain Credit Agreement, dated as of March 24, 1992, among Borrower, BEI, the lenders party thereto (the "LTCB Lenders"), Bank of Montreal, as co-agent, and LTCB, as agent, as amended, supplemented or modified. 'LTCB FINANCING DOCUMENTS' means the LTCB Credit Agreement, the LTCB Notes and the LTCB Mortgages. 'LTCB MORTGAGES' means the Mortgages (as defined in the LTCB Credit Agreement). 'LTCB NOTES' means the Notes (as defined in the LTCB Credit Agreement) in favor of the LTCB Lenders. 'LTCB OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'MATERIAL DEBT' means Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations (other than such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations that arise under this Agreement) of BEI and/or one or more of its Subsidiaries, 5 6 arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $15,000,000. 'MOODY's Rating' means, for any day, the rating of bei's senior unsecured indebtedness by Moody's Investors Service, Inc. in effect on such day. 'MORGAN' means Morgan Guaranty Trust Company of New York and its successors. 'MORGAN COLLATERAL' means the real property and related personal property that constitute Collateral (as defined in the Morgan Credit Agreement), as of the Morgan Effective Date. 'MORGAN EFFECTIVE DATE' means March 3, 1993. 'MORGAN FINANCING DOCUMENTS' means the Morgan Credit Agreement, the Notes (as defined in the Morgan Credit Agreement), the Subsidiary Guaranty (as defined in the Morgan Credit Agreement) and the Security Documents (as defined in the Morgan Credit Agreement). 'MORGAN OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'NEW ASSETS' shall have the meaning set forth in subsection 5.13. 'POOLED MORTGAGE ASSETS' means Initial Pooled Mortgage Assets or Substitute Pooled Mortgage Assets. 'POOLED MORTGAGE DEBT' means Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Pooled Mortgage Assets. 'REFINANCED DEBT' shall have the meaning set forth in subsection 5.15. 'REFINANCING DEBT' shall have the meaning set forth in subsection 5.15. 'S&P RATING' means, for any day, the rating of BEI'S senior unsecured indebtedness by Standard & Poor's Corporation on such day. 'SENIOR NOTE AGREEMENT' means that certain Indenture, dated as of December 27, 1990, among Borrower, BEI and Yasuda Bank and Trust Company (U.S.A.), as Trustee, as amended, supplemented or modified. 'SENIOR NOTE COLLATERAL' means the real property and related personal property described in Exhibit A to the 6 7 Collateral Release Agreement (as defined in the Morgan Credit Agreement). 'SENIOR NOTE DOCUMENTS' means the Senior Notes (as defined in the Senior Note Agreement), the Senior Note Agreement, the Trust Agreement (as defined in the Senior Note Agreement) and the Senior Note Mortgages. 'SENIOR NOTE MORTGAGES' means the mortgages related to the Senior Note Collateral. 'SENIOR NOTE OBLIGATIONS' shall have the meaning set forth in subsection 5.13. 'SPECIAL PURPOSE COMMERCIAL PAPER ISSUER' means A Wholly-Owned Subsidiary of BEI the sole purpose of which is to issue commercial paper and to purchase Medicare, Medicaid or other patient accounts receivable of BEI and its Subsidiaries and make advances to BEI and its Subsidiaries secured by security interests in such Medicare, Medicaid or other patient accounts receivable, which accounts receivable and security interests therein are to be pledged to secure such commercial paper and borrowings by such Special Purpose Commercial Paper Issuer under a Commercial Paper Backstop Facility. 'SUBSTITUTE POOLED MORTGAGE ASSETS' means assets on which Liens are created in substitution of, or in addition to, any Initial Pooled Mortgage Facilities to secure Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations that are secured by such Initial Pooled Mortgage Assets. 'TEMPORARY CASH INVESTMENT' means any investment (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) in (i) direct obligations of the united states or any agency thereof, or obligations guaranteed by the united states or any agency thereof, (ii) commercial paper with maturities of not more than 180 days rated an least P-1 by Moody's Investors Service or A-1 by Standard & Poor's Corporation, (iii) deposit accounts in, and certificates of deposit, repurchase agreements and bankers' acceptances of, Wilmington Trust Company or United States branches of other commercial banks whose unsecured senior long-term debt is rated A or better by Moody's Investors Service or Standard & Poor's Corporation, in each case maturing within one year from the date of acquisition thereof or (iv) in addition to the accounts and instruments referred to in clause (iii), deposit accounts and certificates of deposit in United States branches of banks insured by the Federal Deposit Insurance Corporation that do not aggregate more than $100,000 in any one bank. 7 8 'WORKOUT TRANSACTION' means any adjustment, renegotiation, exchange, subordination, amendment, sale or other disposition of any note receivable, investment in any Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) or other similar asset of BEI or any of its Subsidiaries, any release, subordination, renegotiation or other adjustment of any Lien securing any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation of any Person held by or owed to BEI or any of its Subsidiaries, any acquisition of any asset by BEI or any of its Subsidiaries or the making of any investment in any Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) by BEI or any of its Subsidiaries, in each case in connection with (i) the foreclosure, enforcement or realization by BEI or any such Subsidiary on any Lien securing any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation of any Person held by or owed to BEI or any such Subsidiary or (ii) any renegotiation, composition, adjustment, amendment or restructuring of, or any other similar arrangement with respect to, any such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation, in each case in connection with the bankruptcy, insolvency, financial distress or other similar condition of such Person; provided that any such adjustment, renegotiation, exchange, subordination, amendment, sale, disposition, release or acquisition or the making of any such investment in any Person (whether by means of share purchase, capital contribution, loan, time deposit or otherwise) (A) will, in the reasonable opinion of an Authorized Financial Officer of BEI, in light of the circumstances affecting the relevant obligor, be likely to maximize the amount to be realized by BEI and its Subsidiaries with respect to such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligation or other obligation or (B) is imposed on BEI or any of its Subsidiaries pursuant to voting arrangements mandated by any law or contract arrangements binding upon BEI or such Subsidiary.'" (b) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Permitted Commercial Paper" and replacing such definition with the following: "'PERMITTED COMMERCIAL PAPER' means commercial paper issued by a Special Purpose Commercial Paper Issuer pursuant to a Commercial Paper Program and borrowings by a Special 8 9 Purpose Commercial Paper Issuer under a related Commercial Paper Backstop Facility." (c) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "Permitted Liens" and replacing such definition with the following: "'PERMITTED LIENS' means, with respect to any Collateral, those Liens set forth below: (i) Liens created or permitted by the Collateral Documents; (ii) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by subsection 5.17; (iii) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iv) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; (vi) Easements, rights-of-way, restrictions, other similar charges or encumbrances, in each case that do not interfere with the ordinary conduct of the business of BEI or any of its Subsidiaries; and (vii) Liens (excluding Liens securing Debt) set forth on the title insurance policies delivered in connection with the Mortgages that the Agent may approve in its sole discretion." (d) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of 9 10 "Consolidated Interest Charges" and replacing such definition with the following: "'CONSOLIDATED INTEREST CHARGES' means for any period all items for such period of the types classified as 'interest' on the consolidated statement of operations included in the Coverage Base Financials." (e) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definitions of "New Morgan Credit Agreement" and "Old Morgan Credit Agreement" and adding the following definition in alphabetical order: "'MORGAN CREDIT AGREEMENT' means that certain Credit Agreement, dated as of March 1, 1993, among Borrower, BEI, the banks party thereto, Morgan, as issuing bank and as agent, as amended, supplemented or modified." The Credit Agreement and other Loan Documents also are amended by changing all references to "New Morgan Credit Agreement" or "Old Morgan Credit Agreement" therein to "Morgan Credit Agreement." (f) Subsection 1.1 of the Credit Agreement is hereby further amended by deleting therefrom the definition of "LTCB Agreement." SECTION 2. AMENDMENTS WITH RESPECT TO THE ELIGIBLE COLLATERAL APPRAISAL VALUE (a) Subsection 2.6B of the Credit Agreement is hereby amended by deleting the references to "160%" in the second and sixteenth lines thereof and replacing such references with "125%" (b) Subsection 3.2D of the Credit Agreement is hereby amended by deleting the reference to "160%" in the eighth line thereof and replacing such reference with "125%" (c) Subsection 5.18A of the Credit Agreement is hereby amended by deleting the reference to "160%" in the third line thereof and replacing such reference with "125%" (d) Subsection 5.18D of the Credit Agreement is hereby amended by deleting the references to "160%" in the second and eleventh lines thereof and replacing such references with "125%" (e) Subsection 5.18E of the Credit Agreement is hereby amended by deleting the reference to "160%" in the third line thereof and replacing such reference with "125%" 10 11 SECTION 3. AMENDMENT TO SUBSECTION 2.7A OF THE CREDIT AGREEMENT Subsection 2.7A of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "A. EURODOLLAR RATE LOANS. During such periods as such Loan is a Eurodollar Rate Loan, at a rate per annum equal at all times during each Interest Period for such Loan to the Adjusted Eurodollar Rate for such Interest Period plus the Applicable Margin; provided, that after the occurrence and during the continuation of any Event of Default, the Eurodollar Rate Loans shall bear interest from the date on which such Event of Default shall have occurred until such amount is paid in full at a rate per annum equal at all times to 2.0% per annum above the rate of interest otherwise payable under this subsection 2.7A, in each case payable in arrears on each Interest Payment Date and on the date of any prepayment thereof, unless such amounts are past due, in which case they shall be payable on demand." SECTION 4. AMENDMENT TO SUBSECTION 5.1 OF THE CREDIT AGREEMENT Subsection 5.1 of the Credit Agreement is hereby amended by deleting the final word "and" from clause H thereof, relettering clause I thereof as clause "J" and inserting a new clause I as follows: "I. promptly upon the occurrence of any change in the S&P Rating or the Moody's Rating from such ratings last notified to the Lenders, a written notice of such change setting forth the details thereof; and" SECTION 5. AMENDMENT TO SUBSECTION 5.5 OF THE CREDIT AGREEMENT Subsection 5.5 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "5.5 FIXED CHARGE COVERAGE RATIO The Fixed Charge Coverage Ratio shall not be less than 1.00 to 1.00 at any time." 11 12 SECTION 6. AMENDMENT TO SUBSECTION 5.8 OF THE CREDIT AGREEMENT Subsection 5.8 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "5.8 CONSOLIDATED DEBT FOR BORROWED MONEY TO CONSOLIDATED EBITDA RATIO On the last day of each fiscal quarter, the ratio of (a) the quotient derived by dividing the sum of Consolidated Debt For Borrowed Money as of the last day of each of the four fiscal quarters ending on such date, by four, to (b) the sum of (i) Consolidated EBITDA and (ii) EBITDA for Sold Facility for each facility the Debt of which is guaranteed by BEI or a Subsidiary and which is included in Consolidated Debt for Borrowed Money for such four fiscal quarters shall be more than 6.00 to 1.00." SECTION 7. AMENDMENT TO SUBSECTION 5.13A OF THE CREDIT AGREEMENT Subsection 5.13A of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing it with the following: "A. Neither BEI nor any of its Subsidiaries will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except the following: (i) Liens existing on the Morgan Effective Date securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), contingent obligations and other obligations outstanding on the Morgan Effective Date; (ii) Liens created or permitted by the Collateral Documents; (iii) Liens on the LTCB Collateral securing the obligations ("LTCB OBLIGATIONS") of BEI and its Subsidiaries under the LTCB Financing Documents and Liens on the Morgan Collateral securing obligations ("MORGAN OBLIGATIONS") of BEI and its Subsidiaries under the Morgan Financing Documents; provided that, in each case, the amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured thereby does not exceed the amount that has been or may be borrowed thereunder as of the Morgan Effective Date; 12 13 (iv) Liens on the Senior Note Collateral securing the obligations ("SENIOR NOTE OBLIGATIONS" and, together with the LTCB Obligations and the Morgan Obligations, the "DESIGNATED OBLIGATIONS") of BEI and its Subsidiaries outstanding on the Morgan Effective Date under the Senior Note Documents; (v) any Lien on any asset of any corporation that becomes a Consolidated Subsidiary of BEI after the Morgan Effective Date that exists at the time such corporation becomes such a Consolidated Subsidiary and (other than in a Workout Transaction) not created in contemplation thereof; (vi) any Lien existing on any asset prior to the acquisition thereof, acquired after the Morgan Effective Date by BEI or a Subsidiary of BEI and (other than in a Workout Transaction) not created in contemplation thereof; (vii) any Lien on any asset securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset or reconstructing substantially all of such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (viii) any Lien on any asset securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred or assumed for the purpose of improving or making any addition to such asset, provided that (A) such Lien attaches to such asset concurrently with or within 180 days after the completion of the improvement thereof or addition thereto and (B) the aggregate principal amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by any such Lien shall not, at any time, exceed $20,000,000; (ix) Liens securing Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations incurred in connection with the early termination of a lease, provided that the aggregate amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured 13 14 by any such Lien shall not, at any time, exceed $20,000,000; (x) Liens securing industrial development revenue bonds (or securing contingent obligations to issuers of letters of credit issued to support industrial development revenue bonds) arising in connection with the conversion of the interest rate on such bonds from floating to long-term fixed rates or from fixed rates to other long-term fixed rates; (xi) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations secured by any Lien permitted by any of the foregoing clauses of this subsection 5.13A, provided that the principal amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations is not increased and such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations are not secured by any additional assets other than assets that relate directly to the facility subject to the original financing; (xii) Liens on Medicare, Medicaid or other patient accounts receivable of BEI or any of its Subsidiaries granted to secure Permitted Commercial Paper, provided that the net amount of all uncollected accounts receivable owing to BEI or any of its Subsidiaries over which such a Lien is granted, together, without duplication, with the net amount of all uncollected accounts receivable owing to BEI or any of its Subsidiaries that are assigned to secure such Permitted Commercial Paper, shall not exceed, at any time, 175% of the aggregate principal amount of all Permitted Commercial Paper then outstanding; (xiii) Liens incidental to the conduct of its business or the ownership of its assets that (A) do not secure Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or contingent obligations and (B) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (xiv) Liens on assets (other than LTCB Collateral) securing LTCB Obligations, Liens on assets (other than Morgan Collateral) securing Morgan Obligations or Liens on assets (other than Senior Note Collateral) securing Senior Note obligations (such assets collectively, "NEW 14 15 ASSETS"), provided that the sum of (A) the excess of the Appraised Value of all New Assets over the Appraised Value of all LTCB Collateral, Morgan Collateral and Senior Note Collateral no longer subject to any Lien securing any Designated Obligations, (B) the amount set forth in subclause (A) of clause (xvi) of this subsection 5.13A and (C) the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; (xv) Liens on Initial Pooled Mortgage Assets, provided that the sum of the amounts set forth in subclause (A) of each of clause (xiv) and clause (xvi) of this subsection 5.13A and the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; (xvi) Liens on Substitute Pooled Mortgage Assets, provided that the sum of (A) the excess of the Appraised Value of all Substitute Pooled Mortgage Assets over the Appraised Value of all Initial Pooled Mortgage Facilities no longer subject to any Lien securing any Pooled Mortgage Debt, (B) the amounts set forth in subclause (A) of clause (xiv) of this subsection 5.13A, (C) the aggregate principal amount of all Incremental Pooled Mortgage Debt and (D) all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under clause (xvii) of this subsection 5.13A shall not at any time exceed $50,000,000; and (xvii) Liens not otherwise permitted under clauses (i) through (xvi) of this subsection 5.13A, provided that the sum of the amounts set forth in subclause (A) of each of clause (xiv) and clause (xvi) of this subsection 5.13A and the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under this clause (xvii) shall not at any time exceed $50,000,000. 15 16 Notwithstanding the foregoing, neither BEI nor any of its Subsidiaries will create, assume or suffer to exist any Lien on any Collateral now owned or hereafter acquired by it, except the Permitted Liens." SECTION 8. AMENDMENT TO SUBSECTION 5.15 OF THE CREDIT AGREEMENT Subsection 5.15 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing with the following: "5.15 INCURRENCE OF DEBT BEI will not permit any of its Subsidiaries (other than the Borrower) to incur, assume or suffer to exist any Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) or any contingent obligation, except: (a) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding on March 1, 1993 and listed in Schedule II attached to the Morgan Credit Agreement as in effect as of March 1, 1993; (b) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred in connection with the early termination of a lease, provided that the aggregate principal amount of all such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding at any time shall not exceed $20,000,000; (c) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by a Lien permitted pursuant to clause (v) or (vi) of subsection 5.13; (d) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ("REFINANCING DEBT") incurred to refinance Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations ("Refinanced Debt") permitted under clauses (a) through (c) above, provided that (i) the principal amount of such Refinancing Debt shall not exceed the principal amount of such 16 17 Refinanced Debt and (ii) such Refinancing Debt shall have a weighted average life of not less than the remaining weighted average life of such Refinanced Debt or such Refinancing Debt shall not have any required payments of principal prior to February 15, 1997; (e) Permitted Commercial Paper, provided that the aggregate principal amount of all Permitted Commercial Paper outstanding at any time shall not exceed $100,000,000; (f) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred under the Loan Documents; (g) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred under the Morgan Financing Documents, the LTCB Financing Documents or the Senior Note Documents not in excess of the amounts specified in clauses (iii) and (iv) of subsection 5.13A; (h) Guarantees by any Subsidiary of BEI of any obligation of BEI or any of its other Subsidiaries that such guaranteeing Subsidiary would have been permitted to incur hereunder as a primary obligation; (i) Debt (including, without limitation, any obligation under any letter of credit or similar instrument) and contingent obligations consisting of advances from BEI or any of its Subsidiaries in connection with the normal operation of the business of BEI and its Subsidiaries; (j) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred in connection with and as part of a Workout Transaction; (k) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred or assumed for the purpose of financing the cost of acquiring, constructing or improving an asset of BEI or any of its Subsidiaries; (l) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Pooled Mortgage Assets, provided that the aggregate principal amount of all Incremental Pooled Mortgage 17 18 Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of this subsection 5.15 shall not at any time exceed $50,000,000; and (m) Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument), and contingent obligations not otherwise permitted under clauses (a) through (1) of this subsection 5.15, provided that the aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under this clause (m) shall not at any time exceed $50,000,000." SECTION 9. AMENDMENT TO SUBSECTION 6.4 OF THE CREDIT AGREEMENT Subsection 6.4 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and replacing with the following: "6.4 BREACH OF OTHER AGREEMENTS Any event or condition shall occur that results in the acceleration of the maturity, or requires the early redemption or prepayment, of any Material Debt or any event or condition shall occur and be continuing that enables (or, with the giving of notice or lapse of time or both, would enable the holder of any Material Debt or any Person acting on such holder's behalf to accelerate the maturity, or require the early redemption or prepayment, thereof (unless such event or condition shall have been waived and any acceleration or required redemption or prepayment rescinded), provided that the fact that the interest paid on any industrial development revenue bonds ceases to be exempt from federal income taxation shall not constitute an Event of Default under this subsection 6.4 unless such industrial development revenue bonds are accelerated, redeemed or prepaid or the aggregate principal amount of industrial development revenue bonds subject to acceleration or early redemption or prepayment as a result of such event or condition shall be at least $15,000,000; or" SECTION 10. AMENDMENT TO EXHIBIT VIII OF THE CREDIT AGREEMENT (a) Exhibit VIII of the Credit Agreement is hereby amended by deleting section A.1 of Attachment No. 1 thereof in 18 19 its entirety and replacing it with section A.1 set forth in Exhibit A attached hereto. (b) Exhibit VIII of the Credit Agreement is hereby further amended by deleting section A.4(a) of Attachment No. 1 thereof in its entirety and replacing it with section A.4(a) set forth in Exhibit B attached hereto. (c) Exhibit VIII of the Credit Agreement is hereby further amended by deleting section C(a) of Attachment No. 1 thereof in its entirety and replacing it with section C(a) set forth in Exhibit C attached hereto. (d) Exhibit VIII of the Credit Agreement is hereby further amended by (i) adding immediately after section C of Attachment No. 1 thereof new sections D and E set forth in Exhibit D attached hereto, (ii) relettering current section D of Attachment No. 1 thereof to section "F" and (iii) deleting in its entirety current section E of Attachment No. 1 thereof. SECTION 11. REPRESENTATIONS AND WARRANTIES In order to induce Agent and Lenders to enter into this Amendment, each of BEI and Borrower represents and warrants to Agent and Lenders that: (a) The representations and warranties of each Loan Party contained in the Credit Agreement are true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of the date hereof except to the extent that such representations and warranties specifically relate to an earlier date, in which case they are true, correct and complete in all material respects as of such earlier date; (b) No event has occurred and is continuing or would result from the execution of this Amendment that constitutes an Event of Default or Potential Event of Default; (c) Each Loan Party has performed in all material respects all agreements and satisfied all conditions that the Credit Agreement and this Amendment provide shall be performed by it on or before the date hereof; (d) The execution, delivery and performance of this Amendment and the Credit Agreement as amended by this Amendment, by each Loan Party are within the corporate power and authority of each such Loan Party and, as of the Second Amendment Effective Date (as hereinafter defined), will be duly authorized by all necessary corporate action on the part of each Loan Party, and this Amendment, as of the Second Amendment Effective Date, is duly executed and delivered by each of such Loan Parties and will constitute a valid and binding agreement of each of such Loan 19 20 Parties, enforceable against such Loan Parties in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The Credit Agreement constitutes and, as of the Second Amendment Effective Date, the Credit Agreement, as amended by this Amendment, will constitute, a valid and binding agreement of BEI and Borrower, enforceable against BEI and Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles, relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. (e) The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of the Credit Agreement as amended by this Amendment, do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to any Loan Party, the Certificate or Articles of Incorporation or Bylaws of any Loan Party or any order, judgment or decree of any court or other agency of government binding on any Loan Party, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any instrument that is material, individually or in the aggregate, and that is binding on such Loan Party, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of any Loan Party (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any approval or consent of any Person under any instrument that is material, individually or in the aggregate, and that is binding on such Loan Party. (f) The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of the Credit Agreement as amended by this Amendment, do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. SECTION 12. CONDITIONS TO EFFECTIVENESS Sections 1 through 10 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Second Amendment Effective Date"): A. On or before the Second Amendment Effective Date, BEI, Borrower and each Subsidiary Guarantor shall deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies, as appropriate, for each Lender and its counsel) 20 21 the following, each, unless otherwise noted, dated the Second Amendment Effective Date: (i) Resolutions of its Board of Directors approving and authorizing the execution, delivery, and performance of this Amendment, certified as of the Second Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (ii) Signature and incumbency certificates of its officers executing this Amendment certified by its secretary or an assistant secretary; and (iii) Executed counterparts of this Amendment. B. Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of Robert W. Pommerville, general counsel for BEI, and Weil, Gotshal & Manges, counsel for BEI, Borrower and each Subsidiary Guarantor, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Second Amendment Effective Date and setting forth substantially the matters in the opinions designated in Exhibit E to this Amendment and as to such other matters as Agent acting on behalf of Lenders may reasonably request. C. On or before the Second Amendment Effective Date, each Lender shall have delivered to Agent a counterpart of this Amendment originally executed by a duly authorized officer of such Lender or by telex or telephonic confirmation. D. On or before the Second Amendment Effective Date: (i) Borrower shall have caused payment to each Lender of an amendment fee equal to 0.25% of the aggregate principal amount of Loans of such Lender outstanding on the Second Amendment Effective Date; (ii) Borrower shall have caused payment to Agent of all amounts regarding the costs and expenses reasonably incurred by Agent in connection with this Amendment which Borrower has agreed to pay; (iii) Borrower shall have delivered to Agent (with sufficient copies for each Lender) an Appraisal dated on or a recent date prior to the Second Amendment Effective Date covering all Collateral (other than Collateral which will be released after taking into account the provisions of this Amendment and after taking into account the prepayment of Loans made on or prior to the Second Amendment Effective Date), which Appraisal shall show that the Eligible Collateral Appraisal Value of all Eligible Collateral (other than any such Collateral which will be so released) is 21 22 greater than 125% of the aggregate outstanding principal amount of the Loans; (iv) Amendment No. 3 dated as of March 15, 1994 to the Morgan Credit Agreement (as defined in the Credit Agreement as amended by this Amendment) shall have become effective in all respects; and (v) An amendment to the LTCB Credit Agreement (as defined in the Credit Agreement as amended by this Amendment), which amendment decreases the minimum ratio of (x) the appraised value of the Collateral (as defined in the LTCB Credit Agreement) to (y) the aggregate principal amount of Debt outstanding under the LTCB Credit Agreement to 1.25 to 1.00, shall have become effective in all respects. E. On or before the Second Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. SECTION 13. THE GUARANTIES Each Guarantor acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Guarantor hereby confirms that the Guaranty Agreement and the Collateral Documents to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the full extent possible the payment and performance of all Obligations, Guarantied Obligations (as defined in the applicable Guaranty Agreements) and Secured Obligations (as defined in the Collateral Documents), as the case may be, including, without limitation, the payment and performance of all Obligations of Borrower now or hereafter existing under or in respect of the Credit Agreement as amended by this Amendment and the Notes defined therein. Each Guarantor acknowledges and agrees that any of the Guaranty Agreements and the Collateral Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Guarantor represents and warrants that all representations and warranties contained in the Credit Agreement as amended by this Amendment and the Guaranty Agreements and the Collateral Documents to which it is a 22 23 party or otherwise bound are true, correct and complete in all material respects on and as of the Second Amendment Effective Date to the same extent as though made on and as of that date except to the extent that such representations and warranties specifically relate to an earlier date, in which case they are true, correct and complete in all material respects as of such earlier date. Each Guarantor acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment or any other Loan Document and (ii) that neither the terms of the Credit Agreement, any other Loan Document nor this Amendment shall be deemed to require the consent of any Guarantor to any future amendments to the Credit Agreement. SECTION 14. COUNTERPARTS; EFFECTIVENESS This Amendment may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Amendment (other than the provisions of Sections 1 through 10 hereof) shall become effective upon the execution of a counterpart hereof by all Lenders and each of the Loan Parties and receipt of written or telephonic notification of such execution and authorization of delivery thereof. SECTION 15. FEES AND EXPENSES Borrower acknowledges that all costs, fees and expenses as described in subsection 10.4 of the Credit Agreement incurred by Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. SECTION 16. EFFECT OF AMENDMENT It is hereby agreed that, except as specifically provided herein, this Amendment does not in any way affect or impair the terms and conditions of the Credit Agreement, and all terms and conditions of the Credit Agreement are to remain in full force and effect unless otherwise specifically amended or changed pursuant to the terms and conditions of this Amendment. 23 24 SECTION 17. APPLICABLE LAW This Amendment and the rights and obligations of the parties hereto and all other aspects hereof shall be deemed to be made under, shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. 24 25 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BEI: BEVERLY ENTERPRISES, Inc. By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Borrower: BEVERLY CALIFORNIA CORPORATION By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Agent: NIPPON CREDIT BANK, LTD. LOS ANGELES AGENCY, as Agent and as a Lender By: /s/ BERNARDO CORREA-HENSCHKE Title: Lenders: THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY, as Agent and as a Lender By: /s/ BERNARDO CORREA-HENSCHKE Title: S-2 26 The Subsidiary Guarantors: Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arkansas, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Minnesota, Inc. Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - North Carolina, Inc Beverly Enterprises - Oregon Beverly Enterprises - Wisconsin, Inc. S-3 27 Commercial Management, Inc. Hallmark Convalescent Homes, Inc. Hospital Facilities Corporation Moderncare of Lumberton, Inc. Nebraska City S-C-H, Inc. South Dakota - Beverly Enterprises, Inc. Vantage Healthcare Corporation AGI - Camelot, Inc. AGI-McDonald County Health Care, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Kansas, Inc. S-4 28 Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Indemnity, Ltd. Beverly Manor Inc. of Hawaii Beverly Savana Cay Manor, Inc. Columbia-Valley Nursing Home, Inc. Computran Systems, Inc. S-5 29 Continental Care Centers of Council Bluffs, Inc. Forest City Building Ltd. Home Medical Systems, Inc. Kenwood View Nursing Home, Inc. Liberty Nursing Homes, Incorporated Medical Arts Health Facility of Lawrenceville, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. Pharmacy Corporation of America Salem No. 1, Inc. South Alabama Nursing Home, Inc. Taylor County Health Facility, Incorporated By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: S-6 30 Exhibit A 1. (a) Minimum Fixed Charge Coverage Ratio permitted for the Applicable Period pursuant to subsection 5.5 . . . . . . . . . . 1.00:1.00 (b) (i) Coverage Consolidated EBIDA for the four consecutive fiscal quarters immediately preceding and including the Period End Date (the "APPLICABLE PERIOD") . . . . . . . . . . . . . . $________ (ii) Consolidated Rental Expense for the Applicable Period . . . . . . . . . . . . . . . . . . . . . . . . . . $________ (iii) Sum of Coverage Consolidated EBIDA and Consolidated Rental Expense for the Applicable Period (Item (b)(i) plus Item (b)(ii)) . . . . . . . . . . . . . . . . . . . . $________ (c) (i) Consolidated Interest Charges for the Applicable Period . . . . . . . . . . . . . . . . . . . . . . . . . . $________ (ii) Consolidated Rental Expense for the Applicable Period . . . . . . . . . . . . . . . . . . . . . . . . . . $________ (iii) Consolidated Capital Expenditures for the Applicable Period . . . . . . . . . . . . . . . . . . . . . . . . . . $________ (iv) Sum of Consolidated Interest Charges, Consolidated Rental Expense and Consolidated Capital Expenditures for the Applicable Period (Item (c)(i) plus Item (c)(ii) plus Item(c)(iii)) . . . . . . . . . . . . . . . . . . . . . . $________ (d) Actual Fixed Charge Coverage Ratio for the Applicable Period (ratio of Item (b)(iii) to Item (c)(iv)) . . . . . . . . . . . . . ____:1.00
A-1 31 Exhibit B 4. (a) Maximum Consolidated Debt for Borrowed Money to Consolidated EBITDA ratio permitted for the Applicable Period pursuant to subsection 5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . 6.00: 1.00
B-1 32 Exhibit C 1. (a) Minimum Eligible Collateral Appraisal Value percentage as permitted and described in subsection 5.18A . . . . . . . . . . . . 125%
C-1 33 Exhibit D D. Negative Pledge --------------- (a) Maximum aggregate principal amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens on assets permitted pursuant to subsection 5.13A(viii) . . . . . . . . . . . . . . . . . . . . $20,000,000 (b) Actual aggregate principal amount of all such Debt (including, without limitation, any obligation with respect any letter of credit or similar instrument) and contingent obligations on the Period End Date . . . . . . . . . . . . . . . . . . . . . . . $__________ (c) Maximum aggregate amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by any Lien and incurred in connection with early termination of leases permitted pursuant to subsection 5.13A(ix) . . . . . . . . . . . $20,000,000 (d) Actual aggregate amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations on the Period End Date . . . . . . . . . . . . . . . . . . . . . $__________ (e) (i) Maximum excess Appraised Value of all New Assets plus excess Appraised Value of Substitute Pooled Mortgage Assets plus aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under subsection 5.13A(xvii) . . . . . . . . . . $50,000,000 (ii) Excess of the Appraised Value of all New Assets over the Appraised Value of all LTCB Collateral, Morgan Collateral, and Senior Note Collateral no longer subject to any Lien securing Designated Obligations on the Period End Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . $__________
D-1 34 (iii) Excess of the Appraised Value of all Substitute Pooled Mortgage Assets over the Appraised Value of all Initial Pooled Mortgage Facilities no longer subject to any Lien securing any Pooled Mortgage Debt on the Period End Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . $__________ (iv) Aggregate principal amount of all Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations secured by Liens permitted under subsection 5.13A(xvii) on the Period End Date . . . . . . . . . . . . . . . . . . . . . . . . . . . $__________ (v) Actual sum under subsections 5.13A(xiv), (xv), (xvi) and (xvii) on the Period End Date (Item (e)(ii) plus Item e(iii) plus Item (e)(iv)) . . . . . . . . . . . . . . . . . . . $_________ E. Incurrence of Debt ------------------ (a) Maximum aggregate principal amount of Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations incurred by BEI's Subsidiaries (other than Borrower) in connection with early termination of leases permitted pursuant to subsection 5.15(b) . . . . . . . . $20,000,000 (b) Actual aggregate principal amount of such Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations outstanding on the Period End Date. . . . . . . . . $__________ (c) Maximum aggregate principal amount of all Permitted Commercial Paper permitted pursuant to subsection 5.15(e) . . . $100,000,000 (d) Actual aggregate principal amount of all Permitted Commercial Paper outstanding on the Period End Date . . . . . . $__________ (e) Maximum aggregate principal amount of Incremental Pooled Mortgage Debt and all debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of subsection 5.15 . . . . . . . . . . . . . . $50,000,000
D-2 35 (F) Actual aggregate principal amount of Incremental Pooled Mortgage Debt and all Debt (including, without limitation, any obligation with respect to any letter of credit or similar instrument) and contingent obligations permitted under clause (m) of subsection 5.15 on the Period End Date . . $__________
D-3 36 Exhibit E Matters to be Covered by Opinion of Counsel to Loan Parties 1. Each of the Loan Parties is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted except where the failure to obtain such governmental licenses, authorizations, consents and approvals would not, in my/our reasonable judgment, have a material adverse effect on the business operations, properties, assets, business prospects or condition of the Loan Parties taken as a whole. 2. The execution, delivery and performance by each of the Loan Parties of the Amendment and performance by each Loan Party party thereto of the Credit Agreement, as amended by the Amendment (the "Amended Credit Agreement") (i) are within the corporate powers of each of the Loan Parties and have been duly authorized by all necessary corporate action, (ii) require no action by or in respect of, or filing with any Federal, New York, California, Michigan or Delaware governmental body, agency or official, (iii) do not contravene the articles or certificate of incorporation or by-laws or each Loan Party, (iv) to the best of my/our knowledge, do not contravene any provision of Delaware corporate, Federal, New York, California or Michigan law or regulation applicable to each Loan Party, (v) to the best of my/our knowledge, do not contravene or constitute a default under any agreement, judgment, injunction, order, decree or other instrument that is material individually or in the aggregate and that is binding upon each Loan Party and (vi) to the best of my/our knowledge, will not result in the creation or imposition of any Lien on any asset of the Loan Parties. 3. The Amendment has been duly executed and delivered by the Loan Parties. 4. Each of the Amendment and the Amended Credit Agreement constitutes the legal, valid and binding obligation of each Loan Party party thereto, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). E-1 EX-10.41 5 3RD AMEND TO MORGAN CREDIT AGREEMENT 1 EXHIBIT 10.41 AMENDMENT NO. 3 TO CREDIT AGREEMENT AMENDMENT dated as of April 6, 1994 among BEVERLY CALIFORNIA CORPORATION, a California corporation (the "Borrower"), BEVERLY ENTERPRISES, INC., a Delaware corporation (the "Guarantor"), the BANKS listed on the signature pages hereof (the "Banks"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Issuing Bank (the "Issuing Bank"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H : WHEREAS, the Borrower, the Guarantor, the Banks, the Issuing Bank and the Agent have heretofore entered into a Credit Agreement dated as of March 1, 1993 (as amended, the "Credit Agreement"); and WHEREAS, the Borrower, the Guarantor, the Banks, the Issuing Bank and the Agent desire to amend the Credit Agreement as hereinafter provided; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. SECTION 2. Amendment to Section 1.01 of the Credit Agreement. Section 1.01 of the Credit Agreement is hereby amended by deleting, from the second line of the definition of "Security Documents" contained therein, the expression "and the Mortgages". SECTION 3. Amendment to Section 2.06(b) of the Credit Agreement. Section 2.06(b) of the Credit Agreement is hereby amended by replacing the expression "1-1/4%" contained in the definition of "Margin" included therein with the expression "1-3/8%". 2 SECTION 4. Amendment to Section 2.07(f) of the Credit Agreement. Section 2.07(f) of the Credit Agreement is hereby amended by: (i) replacing the expressing "1-1/2%" on the seventh line thereof with the expression "1-5/8%"; and (ii) replacing the expression "1-1/4%" on the eleventh line thereof with the expression "1-3/8%". SECTION 5. Amendment to Article V of the Credit Agreement. Article V of the Credit Agreement is hereby amended by deleting in its entirety Section 5.08 thereof. SECTION 6. Amendment to Section 6.01(n) of the Credit Agreement. Section 6.01(n) of the Credit Agreement is hereby amended by (a) adding, following the word "no" on the seventh line thereof, the word "other"; (b) adding a semicolon following the word "Liens" on the seventh line thereof; and (c) deleting all of such Section following such word "Liens". SECTION 7. Amendment of Schedule I to the Pledge Agreement. Schedule I to the Pledge Agreement is hereby amended by replacing such Schedule I in its entirety by Exhibit A hereto. SECTION 8. Termination and Release of Mortgages. Each Bank hereby consents to the termination of each Mortgage and the release of all Liens created thereunder. In furtherance thereof, each Bank hereby consents to the execution and delivery by the Agent and any Trustee under any Mortgage to the Grantor under such Mortgage, at the expense of the Borrower, of such documents as the Borrower or such Grantor shall reasonably request to evidence the termination of such Mortgage and the release of the Liens created thereunder. SECTION 9. Release of certain Collateral under the Pledge Agreement. (a) each Bank hereby consents to the release from the Liens created under the Pledge Agreement, of all Subsidiary Shares (as defined in the Pledge Agreement) other than Subsidiary Shares issued by Pharmacy. (b) Each Bank hereby consents to the delivery by the Agent to the Obligors of all certificates in the possession of the Agent evidencing Subsidiary Shares owned 2 3 by the Obligors (other than Subsidiary Shares issued by Pharmacy). (c) Each Bank hereby consents to the execution and delivery by the Agent to the applicable Obligors, at the expense of the Borrower, of such documents as the Borrower or any applicable Obligor shall reasonably request to evidence the release of the Subsidiary Shares (other than the Subsidiary Shares issued by Pharmacy) from the Liens created under the Pledge Agreement. SECTION 10. Representations and Warranties. (a) The Borrower and the Guarantor hereby represent and warrant that each of the representations and warranties made by them in the Financing Documents are true in all material respects on and as of the date hereof. (b) The Borrower and the Guarantor hereby represent and warrant that no Default has occurred and is continuing as of the date hereof. SECTION 11. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 12. Counterparts; Effectiveness. (a) This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (b) This Amendment shall become effective on and as of the date (the "Amendment Effective Date") (which date may not be later than June 15, 1994) upon which the Agent shall have received: (i) duly executed counterparts hereof signed by the Borrower, the Guarantor, each Subsidiary Guarantor, the Issuing Bank, the Agent and each of the Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); and (ii) evidence satisfactory to the Required Banks that neither (A) the ratio of (x) the appraised value (determined on the basis of (x) for any portion of such Collateral as to which the Borrower and its Subsidiaries shall not have received more recent appraisals, the appraisals used in connection with the closing of the LTCB Credit Agreement and (y) for any portion of such Collateral as to which the Borrower or 3 4 any of its Subsidiaries shall have received more recent appraisals, the most recent appraisals thereof so received) of the Collateral (as defined in the LTCB Credit Agreement) existing on the Amendment Effective Date to (y) the aggregate principal amount of Debt outstanding under the LTCB Credit Agreement on the Amendment Effective Date nor (B) the ratio of (x) the appraised value (determined on the basis of (x) for any portion of such Collateral as to which the Borrower and its Subsidiaries shall not have received more recent appraisals, the appraisals used in connection with the closing of the Nippon Credit Agreement and (y) for any portion of such Collateral as to which the Borrower or any of its Subsidiaries shall have received more recent appraisals, the most recent appraisals thereof so received) of the Collateral (as defined in the Nippon Credit Agreement) existing on the Amendment Effective Date to (y) the aggregate principal amount of Debt outstanding under the Nippon Credit Agreement on the Amendment Effective Date, is greater than 1.25:100. 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. BORROWER BEVERLY CALIFORNIA CORPORATION By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title: Senior Vice President and Treasurer GUARANTOR BEVERLY ENTERPRISES, INC. By: /s/ SCHUYLER HOLLINGSWORTH, JR. Title BANKS MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ MICHAEL C. MAUER Title: Vice President THE BANK OF NEW YORK By: /s/ LISA A. BROWN Title: Vice President CHEMICAL BANK By: /s/ WILLIAM J. CAGGIANO Title: Managing Director 5 6 NATIONSBANK OF TEXAS, N.A. By: /s/ BIANCA HEMMEN Title: Vice President BHF - BANK BERLINER HANDELS UND FRANKFURTER BANK By: /s/ ROBERT SUEHNHOLZ Title: Senior Vice President By: /s/ PETER J. BECKER Title: Assistant Vice President BANK OF HAWAII By: /s/ JOSEPH T. DONALDSON Title: Vice President PNC BANK, NATIONAL ASSOCIATION By: /s/ STEPHEN V. PROSTOR Title: Assistant Vice President THE LONG TERM CREDIT BANK OF JAPAN LTD., LOS ANGELES AGENCY By: /s/ Y. KAMISAWA Title: Deputy General Manager 6 7 ISSUING BANK MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Issuing Bank By: /s/ MICHAEL C. MAUER Title: Vice President AGENT MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By: /s/ MICHAEL C. MAUER Title: Vice President Consented and Agreed to as of the Amendment Effective Date: SUBSIDIARY GUARANTORS AGI-Camelot, Inc. AGI-McDonald County Health Care, Inc. AHP, Inc. Associated Healthcare Professionals, Inc. Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Kansas, Inc. Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - Minnesota, Inc. 7 8 Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - North Carolina, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Oregon, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Enterprises - Wisconsin, Inc. Beverly Enterprises Japan Limited Beverly Indemnity Limited Beverly Manor Inc. of Hawaii Beverly Savana Cay Manor, Inc. Columbia-Valley Nursing Home, Inc. Commercial Management, Inc. Computran Systems, Inc. Continental Care Centers of Council Bluffs, Inc. Forest City Building Ltd. Hallmark Convalescent Homes, Inc. Hospital Facilities Corporation Home Medical Systems, Inc. Kenwood View Nursing Home, Inc. Liberty Nursing Homes, Incorporated Medical Arts Health Facility of Lawrenceville, Inc. Moderncare of Lumberton, Inc. Nebraska City S-C-H, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. Pharmacy Corporation of America Salem No. 1, Inc. South Alabama Nursing Home, Inc. South Dakota - Beverly Enterprises, Inc. Taylor County Health Facility, Incorporated Vantage Healthcare Corporation North Shore Rehab. Association, Inc. All by /s/ SCHUYLER HOLLINGSWORTH, JR. Title: 8 9 EXHIBIT A
Number of Number of Authorized Issued Percent Name of (Common) (Common) Name of Owned by Subsidiary Shares Shares Holder Holder - ---------- ------ ------ ------ ------ Pharmacy 1,000 1,000 Beverly 100% Corporation California of America Corporation
EX-11.1 6 COMPUTATION OF NET INCOME PER SHARE 1 BEVERLY ENTERPRISES, INC. EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1994 AND 1993 (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, -------- 1994 1993 ---- ---- PRIMARY: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,578 $ 14,536 Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . (2,063) -- ----------- ----------- Net income applicable to common shares . . . . . . . . . . . . . . . $ 17,515 $ 14,536 =========== =========== Applicable common shares: Weighted average outstanding shares during the period . . . . . . 83,081 74,483 Assumed conversion of Series A preferred stock . . . . . . . . . -- 5,300 Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally stock options) using the "treasury stock" method . . . . . . . . . . . . . . . . . . 1,440 1,516 ----------- ----------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,521 81,299 =========== =========== Net income per share of common stock . . . . . . . . . . . . . . . . $ 0.21 $ 0.18 =========== =========== FULLY DILUTED: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,578 $ 14,536 Reduction of interest and amortization expenses resulting from assumed conversion of 7.625% convertible subordinated debentures . . . . . . . . . . . . . . . --(a) --(a) Reduction of interest and amortization expenses resulting from assumed conversion of 9% convertible subordinated debentures . . . . . . . . . . . . . . . --(b) 1,089 Reduction of interest and amortization expenses resulting from assumed conversion of zero coupon notes . . . . . --(a) --(a) Less applicable income taxes . . . . . . . . . . . . . . . . . . . . -- (359) ----------- ----------- Adjusted net income applicable to common shares . . . . . . . . . . $ 19,578 $ 15,266 =========== =========== Applicable common shares: Weighted average outstanding shares during the period . . . . . . 83,081 74,483 Assumed conversion of Series A preferred stock . . . . . . . . . -- 5,300 Assumed conversion of Series B preferred stock . . . . . . . . . 11,253 -- Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally stock options) using the "treasury stock" method . . . . . . . 1,440 1,567 Assumed conversion of 7.625% convertible subordinated debentures . . . . . . . . . . . . . . . . . . . . --(a) --(a) Assumed conversion of 9% convertible subordinated debentures . . . . . . . . . . . . . . . . . . . . --(b) 7,131 Assumed conversion of zero coupon notes . . . . . . . . . . . . . --(a) --(a) ----------- ----------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,774 88,481 =========== =========== Net income per share of common stock . . . . . . . . . . . . . . $ 0.20 $ 0.17 =========== ===========
________________ (a) Conversion would be anti-dilutive and is therefore not assumed in the computation of primary or fully diluted net income per share of common stock. (b) The 9% convertible subordinated debentures were converted to common stock during the third quarter of 1993. 2 BEVERLY ENTERPRISES, INC. EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE (Continued) THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1994 AND 1993 (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, -------- 1994 1993 ---- ---- PRIMARY: Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,031 $ 24,893 Preferred stock dividends . . . . . . . . . . . . . . . . . (4,125) -- ------------- -------------- Net income applicable to common shares . . . . . . . . . . . $ 30,906 $ 24,893 ============= ============== Applicable common shares: Weighted average outstanding shares during the period . . 82,896 74,445 Assumed conversion of Series A preferred stock . . . . . . -- 5,300 Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally stock options) using the "treasury stock" method . . . . . . . . . . . . . . . . 1,548 1,563 ------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . 84,444 81,308 ============= ============== Net income per share of common stock . . . . . . . . . . . . . $ 0.37 $ 0.31 ============= ============== FULLY DILUTED: Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,031 $ 24,893 Reduction of interest and amortization expenses resulting from assumed conversion of 7.625% convertible subordinated debentures . . . . . . . . . . . --(a) --(a) Reduction of interest and amortization expenses resulting from assumed conversion of 9% convertible subordinated debentures . . . . . . . . . . . --(b) 2,178 Reduction of interest and amortization expenses resulting from assumed conversion of zero coupon notes . . --(a) --(a) Less applicable income taxes . . . . . . . . . . . . . . . . -- (719) ------------- -------------- Adjusted net income . . . . . . . . . . . . . . . . . . . . 35,031 26,352 Preferred stock dividends . . . . . . . . . . . . . . . . . (4,125) -- ------------- -------------- Adjusted net income applicable to common shares . . . . . . $ 30,906 $ 26,352 ============= ============== Applicable common shares: Weighted average outstanding shares during the period . . 82,896 74,445 Assumed conversion of Series A preferred stock . . . . . . -- 5,300 Assumed conversion of Series B preferred stock . . . . . . --(a) -- Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally stock options) using the "treasury stock" method . . . . . . . . . . . . . . . . 1,547 1,589 Assumed conversion of 7.625% convertible subordinated debentures . . . . . . . . . . . . . . . . --(a) --(a) Assumed conversion of 9% convertible subordinated debentures . . . . . . . . . . . . . . . . --(b) 7,131 Assumed conversion of zero coupon notes . . . . . . . . . --(a) --(a) ------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . 84,443 88,465 ============= ============== Net income per share of common stock . . . . . . . . . . . $ 0.37 $ 0.30 ============= ==============
_________________ (a) Conversion would be anti-dilutive and is therefore not assumed in the computation of primary or fully diluted net income per share of common stock. (b) The 9% convertible subordinated debentures were converted to common stock during the third quarter of 1993. -----END PRIVACY-ENHANCED MESSAGE-----