-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G3I91pxeiakVuLFTtLG3hpEpMHfeYHGI8UesW/4VWDCq1IagFWp1Kfcgp56Rx8N8 MZkqi3q9vOZNkNuJN+Lb+Q== 0000950137-01-501947.txt : 20010621 0000950137-01-501947.hdr.sgml : 20010621 ACCESSION NUMBER: 0000950137-01-501947 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 19 REFERENCES 429: 333-52708 FILED AS OF DATE: 20010620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES INC CENTRAL INDEX KEY: 0001040441 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 621691861 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414 FILM NUMBER: 1663862 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FORMER COMPANY: FORMER CONFORMED NAME: NEW BEVERLY HOLDINGS INC DATE OF NAME CHANGE: 19970604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES INTERNATIONAL LTD CENTRAL INDEX KEY: 0000872289 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953982125 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-01 FILM NUMBER: 1663863 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY ENTERPRISES JAPAN LIMITED DATE OF NAME CHANGE: 19951120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES ALABAMA INC CENTRAL INDEX KEY: 0000872299 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742145 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-02 FILM NUMBER: 1663864 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES ARIZONA INC CENTRAL INDEX KEY: 0000872300 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750871 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-03 FILM NUMBER: 1663865 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES ARKANSAS INC CENTRAL INDEX KEY: 0000872301 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953751272 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-04 FILM NUMBER: 1663866 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY HEALTHCARE CALIFORNIA INC CENTRAL INDEX KEY: 0000872302 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750879 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-05 FILM NUMBER: 1663867 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY ENTERPRISES CALIFORNIA INC DATE OF NAME CHANGE: 19951120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES COLORADO INC CENTRAL INDEX KEY: 0000872303 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750882 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-06 FILM NUMBER: 1663868 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES CONNECTICUT INC CENTRAL INDEX KEY: 0000872304 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849642 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-07 FILM NUMBER: 1663869 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES DELAWARE INC CENTRAL INDEX KEY: 0000872305 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849628 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-08 FILM NUMBER: 1663870 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES DISTRICT OF COLUMBIA CENTRAL INDEX KEY: 0000872306 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750889 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-09 FILM NUMBER: 1663871 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES FLORIDA INC CENTRAL INDEX KEY: 0000872307 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742251 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-10 FILM NUMBER: 1663872 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES GARDEN TERRACE INC CENTRAL INDEX KEY: 0000872308 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849648 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-11 FILM NUMBER: 1663873 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES GEORGIA INC CENTRAL INDEX KEY: 0000872310 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750880 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-12 FILM NUMBER: 1663874 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES HAWAII INC CENTRAL INDEX KEY: 0000872311 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750890 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-13 FILM NUMBER: 1663875 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES IDAHO INC CENTRAL INDEX KEY: 0000872312 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750886 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-14 FILM NUMBER: 1663876 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES ILLINOIS INC CENTRAL INDEX KEY: 0000872313 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750883 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-15 FILM NUMBER: 1663877 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES INDIANA INC CENTRAL INDEX KEY: 0000872314 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953744258 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-16 FILM NUMBER: 1663878 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES IOWA INC CENTRAL INDEX KEY: 0000872315 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953751271 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-17 FILM NUMBER: 1663879 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES KANSAS INC CENTRAL INDEX KEY: 0000872316 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953751269 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-18 FILM NUMBER: 1663880 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES KENTUCKY INC CENTRAL INDEX KEY: 0000872317 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750894 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-19 FILM NUMBER: 1663881 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES LOUISIANA INC CENTRAL INDEX KEY: 0000872319 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849633 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-20 FILM NUMBER: 1663882 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MAINE INC CENTRAL INDEX KEY: 0000872320 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849627 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-21 FILM NUMBER: 1663883 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MARYLAND INC CENTRAL INDEX KEY: 0000872321 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750892 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-22 FILM NUMBER: 1663884 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERL WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MASSACHUSETTS INC CENTRAL INDEX KEY: 0000872330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750893 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-23 FILM NUMBER: 1663885 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MICHIGAN INC CENTRAL INDEX KEY: 0000872332 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953898661 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-24 FILM NUMBER: 1663886 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MINNESOTA INC CENTRAL INDEX KEY: 0000872333 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742698 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-25 FILM NUMBER: 1663887 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MISSISSIPPI INC CENTRAL INDEX KEY: 0000872334 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742144 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-26 FILM NUMBER: 1663888 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MISSOURI INC CENTRAL INDEX KEY: 0000872335 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953740895 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-27 FILM NUMBER: 1663889 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES MONTANA INC CENTRAL INDEX KEY: 0000872336 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849636 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-28 FILM NUMBER: 1663890 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NEBRASKA INC CENTRAL INDEX KEY: 0000872339 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750873 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-29 FILM NUMBER: 1663891 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NEVADA INC CENTRAL INDEX KEY: 0000872340 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750896 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-30 FILM NUMBER: 1663892 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NEW HAMPSHIRE INC CENTRAL INDEX KEY: 0000872342 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849630 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-31 FILM NUMBER: 1663893 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012014832 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NEW JERSEY INC CENTRAL INDEX KEY: 0000872343 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750884 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-32 FILM NUMBER: 1663894 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NEW MEXICO INC CENTRAL INDEX KEY: 0000872345 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750869 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-33 FILM NUMBER: 1663895 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NORTH CAROLINA INC CENTRAL INDEX KEY: 0000872348 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742257 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-34 FILM NUMBER: 1663896 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES NORTH DAKOTA INC CENTRAL INDEX KEY: 0000872354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953751270 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-35 FILM NUMBER: 1663897 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES OHIO INC CENTRAL INDEX KEY: 0000872356 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750867 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-36 FILM NUMBER: 1663898 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES OKLAHOMA INC CENTRAL INDEX KEY: 0000872360 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 953849624 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-37 FILM NUMBER: 1663899 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES OREGON INC CENTRAL INDEX KEY: 0000872361 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750881 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-38 FILM NUMBER: 1663900 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES PENNSYLVANIA INC CENTRAL INDEX KEY: 0000872362 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750870 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-39 FILM NUMBER: 1663901 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES RHODE ISLAND INC CENTRAL INDEX KEY: 0000872364 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849621 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-40 FILM NUMBER: 1663902 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES SOUTH CAROLINA INC CENTRAL INDEX KEY: 0000872368 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750866 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-41 FILM NUMBER: 1663903 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES TENNESSEE INC CENTRAL INDEX KEY: 0000872371 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742261 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-42 FILM NUMBER: 1663904 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES TEXAS INC CENTRAL INDEX KEY: 0000872372 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953744256 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-43 FILM NUMBER: 1663905 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES UTAH INC CENTRAL INDEX KEY: 0000872373 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953751089 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-44 FILM NUMBER: 1663906 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORTSMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVENUE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES VIRGINIA INC CENTRAL INDEX KEY: 0000872388 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953742694 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-45 FILM NUMBER: 1663907 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES WASHINGTON INC CENTRAL INDEX KEY: 0000872390 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750868 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-46 FILM NUMBER: 1663908 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES WEST VIRGINIA INC CENTRAL INDEX KEY: 0000872391 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750888 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-47 FILM NUMBER: 1663909 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVENUE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES WISCONSIN INC CENTRAL INDEX KEY: 0000872392 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 953742696 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-48 FILM NUMBER: 1663910 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVENUE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES WYOMING INC CENTRAL INDEX KEY: 0000872393 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953849638 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-49 FILM NUMBER: 1663911 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD NO 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY INDEMNITY LTD CENTRAL INDEX KEY: 0000872396 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 710712927 STATE OF INCORPORATION: VT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-50 FILM NUMBER: 1663912 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY MANOR INC OF HAWAII CENTRAL INDEX KEY: 0000872397 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 990144750 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-51 FILM NUMBER: 1663913 BUSINESS ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY SAVANA CAY MANOR INC CENTRAL INDEX KEY: 0000872403 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 954217381 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-52 FILM NUMBER: 1663914 BUSINESS ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCIAL MANAGEMENT INC CENTRAL INDEX KEY: 0000872411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 420891358 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-53 FILM NUMBER: 1663915 BUSINESS ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALLMARK CONVALESCENT HOMES INC CENTRAL INDEX KEY: 0000872416 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 411413478 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-54 FILM NUMBER: 1663916 BUSINESS ADDRESS: STREET 1: 5111 ROGERS AVE SUITE 40-A CITY: FORT SMITH STATE: AR ZIP: 79219-0155 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: 5111 ROGERS AVENUE SUITE 40-A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTY NURSING HOMES INC CENTRAL INDEX KEY: 0000872422 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 540784334 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-55 FILM NUMBER: 1663917 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL ARTS HEALTH FACILITY OF LAWRENCEVILLE INC CENTRAL INDEX KEY: 0000872430 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 581329700 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-56 FILM NUMBER: 1663918 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODERNCARE OF LUMBERTON INC CENTRAL INDEX KEY: 0000872431 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 561217025 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-57 FILM NUMBER: 1663919 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEBRASKA CITY S-C-H INC CENTRAL INDEX KEY: 0000872432 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 411413481 STATE OF INCORPORATION: NE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-58 FILM NUMBER: 1663920 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NURSING HOME OPERATORS INC CENTRAL INDEX KEY: 0000872434 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 340949279 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-59 FILM NUMBER: 1663921 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH ALABAMA NURSING HOME INC CENTRAL INDEX KEY: 0000872439 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953809397 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-60 FILM NUMBER: 1663922 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012022000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH DAKOTA BEVERLY ENTERPRISES INC CENTRAL INDEX KEY: 0000872442 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953750887 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-61 FILM NUMBER: 1663923 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES VERMONT INC CENTRAL INDEX KEY: 0000878030 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-62 FILM NUMBER: 1663924 BUSINESS ADDRESS: STREET 1: 120 S WALDRON RD #150 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 2: 5111 ROGERS AVE SUITE 40 A CITY: FORT SMITH STATE: AR ZIP: 729190155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPHYSICS CORP CENTRAL INDEX KEY: 0000934909 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133643705 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-63 FILM NUMBER: 1663925 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETERSEN HEALTH CARE INC CENTRAL INDEX KEY: 0001003660 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 592043392 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-64 FILM NUMBER: 1663926 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AK ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TMD DISPOSITION CO CENTRAL INDEX KEY: 0001003689 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-65 FILM NUMBER: 1663927 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AK ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANTAGE HEALTHCARE CORP CENTRAL INDEX KEY: 0001003690 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 351572998 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-66 FILM NUMBER: 1663928 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY HEALTH & REHABILITATION SERVICES INC CENTRAL INDEX KEY: 0001003697 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 952301514 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-67 FILM NUMBER: 1663929 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD STREET 2: STE 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 MAIL ADDRESS: STREET 1: 5111 ROGERS AVENUE STREET 2: SUITE 40-A CITY: FORT SMITH STATE: AR ZIP: 72919-0155 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ASSISTED LIVING INC CENTRAL INDEX KEY: 0001003698 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 71077901 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-68 FILM NUMBER: 1663930 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOSPICE PREFERRED CHOICE INC CENTRAL INDEX KEY: 0001003701 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-69 FILM NUMBER: 1663931 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD STREET 2: STE 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES CALIFORNIA INC/ CENTRAL INDEX KEY: 0001003707 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 952499218 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-70 FILM NUMBER: 1663932 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FORMER COMPANY: FORMER CONFORMED NAME: HOSPITAL FACILITIES CORP DATE OF NAME CHANGE: 19951120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGI CAMELOT INC/ CENTRAL INDEX KEY: 0001003727 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 431253376 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-71 FILM NUMBER: 1663933 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY HOLDINGS I INC CENTRAL INDEX KEY: 0001003748 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-72 FILM NUMBER: 1663934 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD STREET 2: STE 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY REAL ESTATE HOLDINGS INC CENTRAL INDEX KEY: 0001003750 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-73 FILM NUMBER: 1663935 BUSINESS ADDRESS: STREET 1: 1200 S WALDRON RD STREET 2: STE 155 CITY: FORT SMITH STATE: AR ZIP: 72903 BUSINESS PHONE: 5014526712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY ENTERPRISES DISTRIBUTION SERVICES INC CENTRAL INDEX KEY: 0001003766 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 954081567 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-74 FILM NUMBER: 1663936 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY STREET 2: XXXXXXX CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY CARE INC CENTRAL INDEX KEY: 0001061579 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561487367 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-75 FILM NUMBER: 1663937 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEGIS THERAPIES INC CENTRAL INDEX KEY: 0001142642 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710811574 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-76 FILM NUMBER: 1663938 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARBORLAND MANAGEMENT CO INC CENTRAL INDEX KEY: 0001142643 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582340689 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-77 FILM NUMBER: 1663939 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATED PHYSICAL THERAPY PRACTITIONERS INC CENTRAL INDEX KEY: 0001142644 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232648708 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-78 FILM NUMBER: 1663940 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY BELLA VISTA HOLDING INC CENTRAL INDEX KEY: 0001142645 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710797481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-79 FILM NUMBER: 1663941 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY BRANSON HOLDINGS INC CENTRAL INDEX KEY: 0001142646 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817008 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-80 FILM NUMBER: 1663942 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY INDIANAPOLIS LLC CENTRAL INDEX KEY: 0001142647 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710824184 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-81 FILM NUMBER: 1663943 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY MISSOURI VALLEY HOLDING INC CENTRAL INDEX KEY: 0001142648 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710797485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-82 FILM NUMBER: 1663944 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY PLANT CITY HOLDINGS INC CENTRAL INDEX KEY: 0001142649 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817010 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-83 FILM NUMBER: 1663945 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY RAPID CITY HOLDING INC CENTRAL INDEX KEY: 0001142650 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710797483 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-84 FILM NUMBER: 1663946 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY TAMARAC HOLDINGS INC CENTRAL INDEX KEY: 0001142651 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817009 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-85 FILM NUMBER: 1663947 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN HOME HEALTH SUPPLY & EQUIPMENT CO INC CENTRAL INDEX KEY: 0001142652 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561581980 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-86 FILM NUMBER: 1663948 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENVILLE REHABILITATION SERVICES INC CENTRAL INDEX KEY: 0001142653 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752059145 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-87 FILM NUMBER: 1663949 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMECARE PREFERRED CHOICE INC CENTRAL INDEX KEY: 0001142654 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621702864 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-88 FILM NUMBER: 1663950 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME HEALTH & REHABILITATION SERVICES INC CENTRAL INDEX KEY: 0001142655 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752012280 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-89 FILM NUMBER: 1663951 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOSPICE OF EASTERN CAROLINA INC CENTRAL INDEX KEY: 0001142656 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561951841 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-90 FILM NUMBER: 1663952 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HTHC HOLDINGS INC CENTRAL INDEX KEY: 0001142657 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710807323 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-91 FILM NUMBER: 1663953 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAS COLINAS PHYSICAL THERAPY CENTER INC CENTRAL INDEX KEY: 0001142660 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752402177 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-92 FILM NUMBER: 1663954 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX OCCUPATIONAL HEALTH INC CENTRAL INDEX KEY: 0001142663 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582380955 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-93 FILM NUMBER: 1663955 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION INC CENTRAL INDEX KEY: 0001142665 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710783147 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-94 FILM NUMBER: 1663956 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPASSION & PERSONAL CARE SERVICES INC CENTRAL INDEX KEY: 0001142666 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561904822 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-95 FILM NUMBER: 1663957 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARROLLTON PHYSICAL THERAPY CLINIC INC CENTRAL INDEX KEY: 0001142667 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752102832 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-96 FILM NUMBER: 1663958 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY TAMPA HOLDINGS INC CENTRAL INDEX KEY: 0001142668 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-97 FILM NUMBER: 1663959 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY CLINICAL INC CENTRAL INDEX KEY: 0001142669 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710796035 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-98 FILM NUMBER: 1663960 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY HEALTHCARE LLC CENTRAL INDEX KEY: 0001142670 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817438 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663961 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION GEORGIA INC CENTRAL INDEX KEY: 0001142671 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582554073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663962 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVERLY HEALTHCARE ACQUISITION INC CENTRAL INDEX KEY: 0001142672 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710812407 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663963 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION WASHINGTON INC CENTRAL INDEX KEY: 0001142673 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582554074 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663964 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION TEXAS INC CENTRAL INDEX KEY: 0001142674 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 731589542 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663965 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION SOUTH CAROLINA INC CENTRAL INDEX KEY: 0001142675 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 731575603 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663966 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION OHIO INC CENTRAL INDEX KEY: 0001142676 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710842505 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663967 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION MARYLAND INC CENTRAL INDEX KEY: 0001142677 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710842503 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663968 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRA HEALTHCARE ALLIANCE INC CENTRAL INDEX KEY: 0001142678 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710759298 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663969 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAR HEEL INFUSION CO INC CENTRAL INDEX KEY: 0001142679 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 561767308 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663970 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARKS PHYSICAL THERAPY & WORK HARDENING CENTER INC CENTRAL INDEX KEY: 0001142680 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752452926 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663971 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPHYSICS OF NEW YORK IPA INC CENTRAL INDEX KEY: 0001142681 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710817011 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663972 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPHYSICS PARTNERS OF COLORADO INC CENTRAL INDEX KEY: 0001142682 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 510372115 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663973 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPHYSICS PARTNERS OF TEXAS INC CENTRAL INDEX KEY: 0001142683 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621659976 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663974 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPHYSICS PARTNERS OF WESTERN PENNSYLVANIA INC CENTRAL INDEX KEY: 0001142684 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232901884 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663975 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH DALLAS PHYSICAL THERAPY ASSOCIATES INC CENTRAL INDEX KEY: 0001142686 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752075331 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663976 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK FOR PHYSICAL THERAPY INC CENTRAL INDEX KEY: 0001142687 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 742453469 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663977 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATRIX REHABILITATION DELAWARE INC CENTRAL INDEX KEY: 0001142688 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 710842504 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663978 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PT NET INC CENTRAL INDEX KEY: 0001142689 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621575533 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663979 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PT NET COLORADO INC CENTRAL INDEX KEY: 0001142690 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841277912 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663980 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REHABILITATION ASSOCIATES OF LAFAYETTE INC CENTRAL INDEX KEY: 0001142692 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 721118473 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-63414-99 FILM NUMBER: 1663981 BUSINESS ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 BUSINESS PHONE: 5012012000 MAIL ADDRESS: STREET 1: ONE THOUSAND BEVERLY WAY CITY: FORT SMITH STATE: AR ZIP: 72919 S-4 1 c63210s-4.txt FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------------ BEVERLY ENTERPRISES, INC. (Exact name of the registrant as specified in its charter) DELAWARE 8051 62-1691861 (State or other (Primary Standard Industrial Classification Code (I.R.S. Employer jurisdiction of Number) Identification No.) incorporation or organization)
ONE THOUSAND BEVERLY WAY FORT SMITH, ARKANSAS 72919 (501) 201-2000 (Address, including zip code, and telephone number, including area code, of the registrants' principal executive offices) ------------------------------------ SEE TABLE OF ADDITIONAL CO-REGISTRANTS INCLUDED IN THIS REGISTRATION ------------------------------------ DOUGLAS J. BABB, ESQ. EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY BEVERLY ENTERPRISES, INC. ONE THOUSAND BEVERLY WAY FORT SMITH, ARKANSAS 72919 (501) 201-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------------ COPY TO: MICHAEL D. LEVIN, ESQ. LATHAM & WATKINS 233 S. WACKER, SUITE 5800 CHICAGO, ILLINOIS 60606 (312) 876-7700 ------------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED NEW NOTES OFFERING PRICE(1) FEE(2) - --------------------------------------------------------------------------------------------------------------------------------- 9 5/8% Senior Notes due April 15, 2009............................ $200,000,000 100% $200,000,000 $50,000 - ---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended. (2) Calculated pursuant to Section 6(b) and Rule 457 of the Securities Act. Pursuant to Rule 459(p) of the Securities Act, the registration fee of $50,000 is offset against the $75,000 registration fee that was previously paid to the Commission relating to 300,000,000 of Debt Securities, Preferred Stock, Common Stock and Warrants previously registered by Beverly Enterprises, Inc. pursuant to Registration Statement No. 333-52708 (filed December 22, 2000), which remain unissued at the close of business on June 19, 2001. PURSUANT TO RULE 429 OF THE SECURITIES ACT, THE PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO REGISTRANT'S REGISTRATION STATEMENT NO. 333-52708, PREVIOUSLY FILED BY THE REGISTRANT ON FORM S-3. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF ADDITIONAL CO-REGISTRANTS
(PRIMARY (STATE OR OTHER STANDARD JURISDICTION OF INDUSTRIAL (EXACT NAME OF THE CO-REGISTRANT (I.R.S. EMPLOYER INCORPORATION OR CLASSIFICATION AS SPECIFIED IN ITS CHARTER) IDENTIFICATION NO.) ORGANIZATION) CODE NUMBER) -------------------------------- ------------------- ---------------- -------------- AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.)..................... 71-0811574 Delaware 8093 AGI-Camelot, Inc............................ 43-1253376 Missouri 8051 Arborland Management Company, Inc........... 58-2340689 South Carolina 8049 Associated Physical Therapy Practitioners, Inc....................................... 23-2638708 Pennsylvania 8049 Beverly Assisted Living, Inc................ 71-0777901 Delaware 8051 Beverly -- Bella Vista Holding, Inc......... 71-0797481 Delaware 8051 Beverly -- Branson Holdings, Inc............ 71-0817008 Delaware 8051 Beverly -- Indianapolis, LLC................ 71-0824184 Indiana 8051 Beverly -- Missouri Valley Holding, Inc..... 71-0797485 Delaware 8051 Beverly -- Plant City Holdings, Inc......... 71-0817010 Delaware 8051 Beverly -- Rapid City Holding, Inc.......... 71-0797483 Delaware 8051 Beverly -- Tamarac Holdings, Inc............ 71-0817009 Delaware 8051 Beverly -- Tampa Holdings, Inc.............. 71-0817007 Delaware 8051 Beverly Clinical, Inc....................... 71-0796035 Delaware 8051 Beverly Enterprises International Limited... 95-3982125 California AUX1 Beverly Enterprises -- Alabama, Inc......... 95-3742145 California 8051 Beverly Enterprises -- Arizona, Inc......... 95-3750871 California 8051 Beverly Enterprises -- Arkansas, Inc........ 95-3751272 California 8051 Beverly Enterprises -- California, Inc...... 95-2499218 California 8051 Beverly Enterprises -- Colorado, Inc........ 95-3750882 California 8051 Beverly Enterprises -- Connecticut, Inc..... 95-3849642 California 8051 Beverly Enterprises -- Delaware, Inc........ 95-3849628 California 8051 Beverly Enterprises -- Distribution Services, Inc............................. 95-4081567 California 8051 Beverly Enterprises -- District of Columbia, Inc....................................... 95-3750889 California 8051 Beverly Enterprises -- Florida, Inc......... 95-3742251 California 8051 Beverly Enterprises -- Garden Terrace, Inc....................................... 95-3849648 California 8051 Beverly Enterprises -- Georgia, Inc......... 95-3750880 California 8051 Beverly Enterprises -- Hawaii, Inc.......... 95-3750890 California 8051 Beverly Enterprises -- Idaho, Inc........... 95-3750886 California 8051 Beverly Enterprises -- Illinois, Inc........ 95-3750883 California 8051 Beverly Enterprises -- Indiana, Inc......... 95-3744258 California 8051 Beverly Enterprises -- Iowa, Inc............ 95-3751271 California 8051 Beverly Enterprises -- Kansas, Inc.......... 95-3751269 California 8051 Beverly Enterprises -- Kentucky, Inc........ 95-3750894 California 8051 Beverly Enterprises -- Louisiana, Inc....... 95-3849633 California 8051 Beverly Enterprises -- Maine, Inc........... 95-3849627 California 8051 Beverly Enterprises -- Maryland, Inc........ 95-3750892 California 8051 Beverly Enterprises -- Massachusetts, Inc....................................... 95-3750893 California 8051 Beverly Enterprises -- Michigan, Inc........ 95-3898661 California 8051 Beverly Enterprises -- Minnesota, Inc....... 95-3742698 California 8051 Beverly Enterprises -- Mississippi, Inc..... 95-3742144 California 8051 Beverly Enterprises -- Missouri, Inc........ 95-3750895 California 8051 Beverly Enterprises -- Montana, Inc......... 95-3849636 California 8051 Beverly Enterprises -- Nebraska, Inc........ 95-3750873 California 8051 Beverly Enterprises -- Nevada, Inc.......... 95-3750896 California 8051 Beverly Enterprises -- New Hampshire, Inc....................................... 95-3849630 California 8051
3
(PRIMARY (STATE OR OTHER STANDARD JURISDICTION OF INDUSTRIAL (EXACT NAME OF THE CO-REGISTRANT (I.R.S. EMPLOYER INCORPORATION OR CLASSIFICATION AS SPECIFIED IN ITS CHARTER) IDENTIFICATION NO.) ORGANIZATION) CODE NUMBER) -------------------------------- ------------------- ---------------- -------------- Beverly Enterprises -- New Jersey, Inc...... 95-3750884 California 8051 Beverly Enterprises -- New Mexico, Inc...... 95-3750869 California 8051 Beverly Enterprises -- North Carolina, Inc....................................... 95-3742257 California 8051 Beverly Enterprises -- North Dakota, Inc.... 95-3751270 California 8051 Beverly Enterprises -- Ohio, Inc............ 95-3750867 California 8051 Beverly Enterprises -- Oklahoma, Inc........ 95-3849624 California 8051 Beverly Enterprises -- Oregon, Inc.......... 95-3750881 California 8051 Beverly Enterprises -- Pennsylvania, Inc.... 95-3750870 California 8051 Beverly Enterprises -- Rhode Island, Inc.... 95-3849621 California 8051 Beverly Enterprises -- South Carolina, Inc....................................... 95-3750866 California 8051 Beverly Enterprises -- Tennessee, Inc....... 95-3742261 California 8051 Beverly Enterprises -- Texas, Inc........... 95-3744256 California 8051 Beverly Enterprises -- Utah, Inc............ 95-3751089 California 8051 Beverly Enterprises -- Vermont, Inc......... 95-3750885 California 8051 Beverly Enterprises -- Virginia, Inc........ 95-3742694 California 8051 Beverly Enterprises -- Washington, Inc...... 95-3750868 California 8051 Beverly Enterprises -- West Virginia, Inc....................................... 95-3750888 California 8051 Beverly Enterprises -- Wisconsin, Inc....... 95-3742696 California 8051 Beverly Enterprises -- Wyoming, Inc......... 95-3849638 California 8051 Beverly Health and Rehabilitation Services, Inc....................................... 95-2301514 California 8051 Beverly Healthcare, LLC..................... 71-0817438 Indiana 8051 Beverly Healthcare Acquisition, Inc......... 71-0812407 Delaware 8051 Beverly Healthcare -- California, Inc....... 95-3750879 California 8051 Beverly Holdings I, Inc..................... 71-0768985 Delaware 8051 Beverly Indemnity, Ltd...................... 71-0712927 Vermont H63 Beverly Manor Inc. of Hawaii................ 99-0144750 California 8051 Beverly Real Estate Holdings, Inc........... 71-0768984 Delaware 8051 Beverly Savana Cay Manor, Inc............... 95-4217381 California 8051 Carrollton Physical Therapy Clinic, Inc..... 75-2102832 Texas 8049 Commercial Management, Inc.................. 42-0891358 Iowa 8051 Community Care, Inc......................... 56-1487367 North Carolina 8082 Compassion and Personal Care Services, Inc....................................... 56-1904822 North Carolina 8082 Eastern Home Health Supply & Equipment Co., Inc....................................... 56-1581980 North Carolina 8082 Greenville Rehabilitation Services, Inc..... 75-2059145 Texas 8049 Hallmark Convalescent Homes, Inc............ 41-1413478 Michigan 8051 HomeCare Preferred Choice, Inc.............. 62-1702864 Delaware 8082 Home Health and Rehabilitation Services, Inc....................................... 75-2012280 Texas 8049 Hospice of Eastern Carolina, Inc............ 56-1951841 North Carolina 8082 Hospice Preferred Choice, Inc............... 71-0761314 Delaware 8082 HTHC Holdings, Inc.......................... 71-0807323 Delaware 8082 Las Colinas Physical Therapy Center, Inc.... 75-2402177 Texas 8049 Liberty Nursing Homes, Incorporated......... 54-0784334 Virginia 8051 MATRIX Occupational Health, Inc............. 58-2380955 Delaware 8049
4
(PRIMARY (STATE OR OTHER STANDARD JURISDICTION OF INDUSTRIAL (EXACT NAME OF THE CO-REGISTRANT (I.R.S. EMPLOYER INCORPORATION OR CLASSIFICATION AS SPECIFIED IN ITS CHARTER) IDENTIFICATION NO.) ORGANIZATION) CODE NUMBER) -------------------------------- ------------------- ---------------- -------------- MATRIX Rehabilitation, Inc.................. 71-0783147 Delaware 8049 MATRIX Rehabilitation -- Delaware, Inc...... 71-0842504 Delaware 8049 MATRIX Rehabilitation -- Georgia, Inc....... 58-2554073 Delaware 8049 MATRIX Rehabilitation -- Maryland, Inc...... 71-0842503 Delaware 8049 MATRIX Rehabilitation -- Ohio, Inc.......... 71-0842505 Delaware 8049 MATRIX Rehabilitation -- South Carolina, Inc....................................... 73-1575603 Delaware 8049 MATRIX Rehabilitation -- Texas, Inc......... 73-1589542 Delaware 8049 MATRIX Rehabilitation -- Washington, Inc.... 58-2554074 Delaware 8049 Medical Arts Health Facility of Lawrenceville, Inc........................ 58-1329700 Georgia 8051 Moderncare of Lumberton, Inc................ 56-1217025 North Carolina 8051 Nebraska City S-C-H, Inc.................... 41-1413481 Nebraska 8051 Network for Physical Therapy, Inc........... 74-2453469 Texas 8049 North Dallas Physical Therapy Associates, Inc....................................... 75-2075331 Texas 8049 Nursing Home Operators, Inc................. 34-0949279 Ohio 8051 Petersen Health Care, Inc................... 59-2043392 Florida 8051 PT NET, Inc................................. 62-1575533 Tennessee 8049 PT Net (Colorado), Inc...................... 84-1277912 Colorado 8049 Rehabilitation Associates of Lafayette, Inc....................................... 72-1118473 Louisiana 8049 South Alabama Nursing Home, Inc............. 95-3809397 Alabama 8051 South Dakota -- Beverly Enterprises, Inc.... 95-3750887 California 8051 Spectra Healthcare Alliance, Inc............ 71-0759298 Delaware AUX1 Tar Heel Infusion Company, Inc.............. 56-1767308 North Carolina 8082 The Parks Physical Therapy and Work Hardening Center, Inc..................... 75-2452926 Texas 8049 Theraphysics Corp........................... 13-3643705 Delaware 8049 Theraphysics of New York IPA, Inc........... 71-0817011 New York 8049 Theraphysics Partners of Colorado, Inc...... 51-0372115 Delaware 8049 Theraphysics Partners of Texas, Inc......... 62-1659976 Delaware 8049 Theraphysics Partners of Western Pennsylvania, Inc......................... 23-2901884 Delaware 8049 TMD Disposition Company..................... 59-3151568 Florida AUX1 Vantage Healthcare Corporation.............. 35-1572998 Delaware 8051
5 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY SECURITIES IN ANY PLACE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JUNE 20, 2001 PRELIMINARY PROSPECTUS BEVERLY ENTERPRISES, INC. Offer to Exchange All Our Outstanding 9 5/8% Senior Notes due 2009 $200,000,000 aggregate principal amount In Exchange for 9 5/8% Senior Notes Due 2009 Which Have Been Registered Under the Securities Act of 1933 We are offering to exchange all of our outstanding 9 5/8% Senior Notes due 2009, which we refer to as the old notes, for our registered 9 5/8% Senior Notes due 2009, which we refer to as the new notes. We refer to the old notes and new notes collectively as the notes. We issued the old notes on April 25, 2001. The terms of the new notes are identical to the terms of the old notes except that we will register the new notes under the Securities Act of 1933. * PLEASE CONSIDER THE FOLLOWING: - ------------------------------------------------------ - - You should carefully review the Risk Factors beginning on page 18 of this prospectus. - - Our offer to exchange the old notes for the new notes will be open until 5:00 p.m., New York City time, on , 2001, unless we extend the offer. - - You should carefully review the procedures for tendering the old notes beginning on page 10 of this prospectus. - - If you fail to tender your old notes, you will continue to hold unregistered securities and your ability to transfer them could be adversely affected. - - No public market currently exists for the notes. We do not intend to list the new notes on any securities exchange and, therefore we do not anticipate that an active public market will develop for the new notes. INFORMATION ABOUT THE NOTES: - - The notes will mature on April 15, 2009. - - Interest on the notes will accrue from April 25, 2001. - - We will pay interest on the notes semi-annually on April 15 and October 15 of each year beginning October 15, 2001, at the rate of 9 5/8% per year. - - We may redeem some or all of the notes at any time. The redemption price is described beginning on page 13. - - The notes will be guaranteed on a senior unsecured basis by substantially all of our existing and future subsidiaries. - - These guarantees will be senior obligations of our subsidiary guarantors. If we fail to make payments on the notes, our subsidiary guarantors must make them instead. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS JUNE , 2001 6 IN MAKING YOUR INVESTMENT DECISION, YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. EACH BROKER-DEALER THAT RECEIVES NEW NOTES FOR ITS OWN ACCOUNT IN CONNECTION WITH THE EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A PROSPECTUS IF IT RESELLS THOSE NEW NOTES. THE TRANSMITTAL LETTER STATES THAT BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, A BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED. THIS PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A BROKER-DEALER IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES ACQUIRED BY THE BROKER-DEALER AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. WE HAVE AGREED THAT, FOR A PERIOD ENDING ON THE EARLIER OF: - 180 days after the date of this prospectus; or - the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities, WE WILL MAKE THIS PROSPECTUS AVAILABLE TO ANY BROKER-DEALER FOR USE IN CONNECTION WITH ANY SUCH RESALE. SEE "PLAN OF DISTRIBUTION." TABLE OF CONTENTS
PAGE ---- Where You Can Find More Information......................... 3 Documents Incorporated By Reference......................... 3 Forward-Looking Statements.................................. 4 Prospectus Summary.......................................... 6 Risk Factors................................................ 18 Use Of Proceeds............................................. 25 Capitalization.............................................. 26 Selected Historical Consolidated Financial Data............. 27 The Exchange Offer.......................................... 29 The New Notes............................................... 38 Description Of Certain Indebtedness......................... 52 United States Federal Income Tax Considerations............. 53 Plan Of Distribution........................................ 54 Legal Matters............................................... 54 Experts..................................................... 54 Glossary.................................................... 55
2 7 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements, and other documents with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Our SEC filings are available to the public at the SEC's website at http://www.sec.gov. You may also read and copy any document we file at the following SEC public reference rooms: Judiciary Plaza, Room 1024 Citicorp Center, Suite 1400 7 World Trade Center 450 Fifth Street, N.W. 500 West Madison Street Suite 1300 Washington, D.C. 20549 Chicago, Illinois 60621 New York, New York 10048
You may obtain information regarding the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, because our common stock is listed on the New York Stock Exchange, you may read our reports, proxy statements, and other documents at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. This prospectus is part of a registration statement on Form S-4 we have filed with the SEC under the Securities Act of 1933, as amended. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the notes, you should refer to the registration statement. In this prospectus we summarize material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement. This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. This information is available without charge to you upon written or oral request. If you would like a copy of any of this information, please submit your request to Beverly Enterprises, Inc., One Thousand Beverly Way, Fort Smith, Arkansas, 72919, Attention: Legal Department, or call (501) 201-2000 and ask to speak to someone in our legal department. IN ADDITION, TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU REQUEST, YOU MUST SUBMIT YOUR REQUEST NO LATER THAN , 2001, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE THE EXCHANGE OFFER EXPIRES. DOCUMENTS INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" certain documents, which means that we can disclose important information to you by referring you to those documents. The information in the documents incorporated by reference is considered to be part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act: - Our Annual Report on Form 10-K for the year ended December 31, 2000, which we filed with the SEC on March 30, 2001; - Our proxy statement for the annual stockholders' meeting held on May 24, 2001, which we filed with the SEC on April 9, 2001; - Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, which we filed with the SEC on May 15, 2001; and - Our Current Reports on Form 8-K, which we filed with the SEC on June 14, 2001 and June 18, 2001. We will provide to you, at no charge, a copy of the documents we incorporate by reference in this prospectus. To request a copy of any or all of these documents, you should write or telephone us at the following address and telephone number: One Thousand Beverly Way, Fort Smith, Arkansas, 72919, Attention: Legal Department. Our telephone number is: (501) 201-2000. To obtain timely delivery of any 3 8 information you request, you must submit your request no later than , 2001, which is five business days before the date the exchange offer expires. FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. We identify forward-looking statements in this prospectus by using words or phrases such as "anticipate," "believe," "contemplate," "continue," "estimate," "expect," "intend," "may," "objective," "plan," "predict," "potential," "project," "should," and "will" and similar words or phrases, or the negative of those words or phrases. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by us in those statements include, among others, the following: - national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials; - the effect of government regulations and changes in regulations governing the health care industry, including our compliance with such regulations; and regulators', law enforcement agencies' and courts' interpretations thereof; - changes in payment levels by private payors; - changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the U.S. government and its fiscal intermediaries and any changes in the timing or receipt of Medicare, Medicaid and other payments; - liabilities and other claims asserted against us, including patient care liabilities (including any increases in the frequency or severity of patient care liabilities claims in Florida or elsewhere), and the resolution of various securities laws class action and derivative lawsuits brought against us; - our ability to execute our strategic plan; - our ability to consummate a divestiture transaction (and the terms of any such transaction) with respect to our Florida nursing home operations; - our ability to refinance debt obligations; - our ability to attract and retain qualified personnel; - the availability and terms of capital to fund acquisitions, capital improvements and working capital; - the competitive environment in which we operate; - the availability and cost of liability insurance coverage; - our ability to maintain and increase census levels; and - demographic changes. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this prospectus to reflect any change in our expectations with regard to these statements or any change in events, conditions or circumstances on which any such statement is based. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth or referred to above. ------------------------ 4 9 INDUSTRY AND MARKET DATA In this prospectus we rely on and refer to information and statistics regarding the health care industry. We obtained this information and statistics from various third-party sources, discussions with our customers and our own internal estimates. We believe that these sources and estimates are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness. ------------------------ INTELLECTUAL PROPERTY We own or have rights to various trademarks, copyrights, service marks and tradenames used in our business, including the following: Beverly(R), Aegis Therapies(SM) and Matrix Rehabilitation(R). 5 10 PROSPECTUS SUMMARY This summary highlights the information contained elsewhere in or incorporated by reference into this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus and the documents to which we refer you. You should read the following summary together with the more detailed information and consolidated financial statements and the notes to those statements included elsewhere in or incorporated by reference into this prospectus. In this prospectus, "Company," "Beverly Enterprises," "we," "our," and "us" refer to Beverly Enterprises, Inc. and its subsidiaries. SUMMARY COMPANY OVERVIEW We are one of the leading long-term health care providers and one of the largest operators of nursing facilities in the United States. We provide health care services through our nursing home facilities, assisted living centers, hospice and home care operations, outpatient therapy clinics and contract rehabilitation therapy services. As of March 31, 2001, we owned or operated 528 nursing home facilities with a total of 59,265 licensed beds, ranging in size from 20 to 355 licensed beds per facility. Our nursing home facilities are located in 29 states and the District of Columbia. We also operate 34 assisted living centers containing 1,132 units, 163 outpatient therapy clinics, and 58 hospice and home care centers. For the year ended December 31, 2000, we reported net operating revenues of $2.6 billion. We are pursuing the sale of our facilities-based eldercare operations in Florida, where we operate 50 nursing home facilities, with a total of 6,185 licensed beds and four assisted living centers containing 315 units, with net operating revenues of $267.0 million for the year ended December 31, 2000. OPERATIONS AND SERVICES We recently reorganized into three operating segments: facilities-based eldercare operations, service-based health care operations and Matrix/Theraphysics. Our facilities-based eldercare operations, our largest operating segment, consists of our nursing home facilities and assisted living centers and accounted for approximately 92% of our net operating revenues in 2000. Our facilities-based eldercare operations provide residents with routine long-term care services, including daily nursing, dietary, social and recreational services. Our dedicated and skilled staff can also provide complex and intensive medical services to patients with higher acuity disorders outside the traditional acute care hospital setting. Additionally, we provide a full range of pharmacy services and medical supplies. Our assisted living centers are designed to provide residents with a greater degree of independence while still offering routine care services and, if required, medical care. Our service-based health care operations consists of contract rehabilitative therapy services, home care and hospice services and accounted for approximately 4% of our net operating revenues for 2000. Our contract rehabilitative therapy services, operated primarily under the brand name Aegis Therapies, offer recuperative assistance, such as occupational, physical and speech therapy, to ease and speed recovery from surgery, accidents and other disabling events. We provide contract rehabilitative therapy services in our nursing facilities and in facilities operated by other health care providers. Our home care services provide our clients with necessary periodic medical attention and daily living assistance, as well as medical equipment, medications and supplies, while allowing them to reside in their own homes. This is an increasingly popular way to provide for eldercare, offering patients a comfortable environment while ensuring that their medical needs can be met. Our hospice services provide palliative care for terminally ill patients. We provide hospice services within our nursing facilities, in facilities operated by other health care providers and in our clients' homes. 6 11 Matrix/Theraphysics provides outpatient therapy services through its stand-alone clinics, as well as managed care advisory services. This segment accounted for approximately 4% of our net operating revenues in 2000. INDUSTRY OVERVIEW According to the Health Care Financing Administration (the "HCFA"), total U.S. health care spending is estimated to grow at an annual average rate of 8.6% in 2001 and at an average annual rate of 7.1% from 2001 through 2010. By these estimates, health care expenditures will account for approximately $2.6 trillion, or 15.9%, of the total U.S. gross domestic product by 2010. The nursing home care segment of the U.S. health care industry encompasses a broad range of health care services provided in skilled nursing facilities, including traditional skilled nursing care and specialty medical services. Total revenues generated by the nursing home industry in 2000 were estimated at $96.2 billion and have grown at a compound annual growth rate of 4.8% from 1996 to 2000. According to HCFA, nursing home care industry revenues are projected to grow at an average annual rate of 6.7% from 2000 to 2010. According to Managed Care Digest, the long-term care industry is highly-fragmented and consisted of approximately 15,130 skilled nursing facilities and 1,707,234 nursing home beds at December 31, 1999. According to the United States Census Bureau, there are approximately 34.9 million people over the age of 65 in the U.S. and this number is expected to grow by 14.0% to 39.7 million by 2010. The fastest growing segment of the population is comprised of people over the age of 85. There are approximately 4.4 million people 85 years of age or older today and growth rates for this segment are expected to average 2.2% per year. We believe that demand for long-term care will continue to grow due to the growth in these segments of the population and cost-containment efforts by payors, which encourage shorter stays in acute care facilities. Throughout the 1990s, there were numerous initiatives on the federal and state levels to achieve comprehensive reforms affecting the payment for, and availability of, health care services. Aspects of these initiatives included changes in reimbursement regulations by HCFA and enhanced pressure to contain health care costs by Medicare, Medicaid and other payors. The passage of the Balanced Budget Act of 1997 ("1997 Act") was designed to reduce and control the rate of increase in Medicare expenditures for services rendered by various providers. Specifically, the 1997 Act eliminated the prior "cost-based" reimbursement system and implemented a prospective payment system ("PPS") that reimburses nursing home providers based on health care services required by various categories of patients. The implementation of the 1997 Act resulted in greater than expected reductions in Medicare reimbursement and created an extremely difficult operating environment for many long-term care, rehabilitative care and general health care providers. In 1999, Congress passed the Medicare, Medicaid and State Child Health Insurance Program ("SCHIP") Balanced Budget Refinement Act of 1999 ("BBRA 99") which restored a portion of the lost Medicare reimbursement resulting from the implementation of the 1997 Act. The 1997 Act required that for each year within a three-year phase-in period a facility would be reimbursed based upon a combination of percentages of the facility's specific base rate and the federal rate. In all subsequent years a facility would then be reimbursed based upon the full federal rates. Under BBRA 99, however, skilled nursing facilities received a 20% reimbursement increase for 15 service categories beginning in April 2000, a 4% across-the-board increase for both fiscal 2001 and 2002, and the option to elect to be reimbursed, beginning with the start of the facility's next cost report period, the full federal per diem rates rather than to continue with the three year phase-in mandated by the 1997 Act. Additionally, Congress passed the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act in December 2000 ("BIPA") which restored an additional $2.0 billion to the nursing home industry over a five-year period, with many of its key long-term care provisions becoming effective on April 1, 2001. In 2000, Medicare, Medicaid and private and other revenue constituted 21%, 53% and 26%, respectively, of our net operating revenues. As a result of the positive trends in the Medicare reimbursement environment over the past two years, we believe the outlook for the long-term health care industry has become more favorable for providers. 7 12 BUSINESS STRATEGY We believe our extensive facility network, our ability to offer a broad range of high quality services and our experienced management team form a strong foundation which will enable us to enhance our status as one of the nation's leading long-term health care providers. Additionally, we believe the recently announced reorganization of our operations, as well as the promotion of William R. Floyd to Chief Executive Officer, will facilitate the implementation of our business strategy and allow us to capitalize on favorable industry trends and changes to reimbursement rates. The primary components of our business strategy are: STREAMLINE OUR NURSING HOME PORTFOLIO. After an extensive review of our facilities-based eldercare operations, we have classified these operations into three divisions. Our first division encompasses those facilities that we believe offer the most attractive opportunities for growth and continued strong financial performance. This attractiveness is due in large measure to demographics, the applicable states' Medicaid reimbursement rates, and regulatory and legal environments. Our second division represents the facilities located in those states that, in our view, currently have a less favorable regulatory and legal environment. This group of facilities generally has had below-average financial performance. Our third division is comprised of our nursing home facilities and assisted living centers located in the State of Florida. We have recently developed and are in the process of implementing business strategies for each division that we believe will enable us to improve the utilization of our existing asset base and maximize each division's financial performance. For the first division, our objective is to increase occupancy and revenues, and improve our payor mix. For the second division, our objective is to improve overall operating performance within the current operating environment, primarily through cost control measures, implementing best practices and increasing management incentives. We intend to continue reviewing these strategies and classifications, based on future financial performance and other future events. We may, from time to time, dispose of, or close, certain of our facilities or exit from certain regions or states to further strengthen our long-term financial prospects. In that regard, we have recently undertaken to dispose of our Florida division primarily due to an unfavorable patient care liability environment in that state. EXPAND OUR SERVICE BUSINESSES. Because of our extensive experience in outpatient therapy services, contract rehabilitation therapy, hospice and home care, we believe we are well-positioned to meet the needs of a growing number of patients who prefer to have health care services provided on an as-needed/where-needed basis. For example, we believe that contract rehabilitation therapy is a rapidly growing industry with a high quality payor mix and is a service that we currently do not provide on a significant basis outside of our nursing home facilities. To improve our market position, we recently renamed our contract rehabilitation therapy business "Aegis Therapies" and we plan to hire more than 900 new full-time equivalent therapists in 2001. We believe our experience in contract rehabilitation therapy combined with a focused sales effort and expanded operations will enable us to significantly increase our contract rehabilitation therapy services revenue. By expanding and developing our service businesses, through internal growth and targeted acquisitions, we believe we will be able to take advantage of favorable market trends in this segment of our industry. FOCUS ON ELDERCARE INNOVATION. We are committed to being a leader in eldercare innovation. We have created a distinct, yet integrated, research and development function that is focused on developing new business strategies, products and services. This function will generate, screen, test and launch new products and services for the eldercare market, as well as identify and implement best practices for our operations. We have already seen initial success in the area of Alzheimer's care. Over the past two years we have designed and tested a prototype Alzheimer's care unit that we opened in 29 of our existing facilities. Since these units opened, the host facilities have experienced increased occupancy rates and improved payor mix. We intend to open over 40 additional Alzheimer's care units in our existing facilities during 2001. RE-ENGINEERING FOR IMPROVED PERFORMANCE. We have recently re-engineered our management structure and streamlined reporting relationships to increase control at the local level and increase overall accountability 8 13 and, in certain circumstances, to eliminate non-critical positions. These changes are aimed at focusing our resources on five key drivers to our success: - deliver quality care; - increase occupancy/revenues; - collect cash; - influence public policy; and - recruit, retain and develop quality people. We believe these changes, among others, will make the Company more effective in providing quality care to our patients and improving our financial performance. RECENT DEVELOPMENTS During the first quarter of 2001, a formal plan was initiated by management to pursue the sale of our nursing home operations in Florida. Such decision was made due to the excessive patient care liability costs that we have been incurring in recent periods in the state of Florida. Accordingly, the property and equipment, identifiable intangibles and operating supplies of our Florida nursing home operations at March 31, 2001 were considered assets to be disposed of, as that term is defined in Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). Management estimated the fair value less selling costs of such assets based upon verbal and non-binding purchase prices from potential buyers and determined that an impairment write-down was necessary as of March 31, 2001. The pre-tax charge related to this write-down was approximately $68,900,000. In addition, we recorded a pre-tax charge of approximately $17,200,000 for certain costs to exit the Florida facilities (as defined below). These costs relate to severance agreements, termination payments on certain contracts and various other items. Such pre-tax charges have been included in the condensed consolidated statement of operations caption "Asset impairments, workforce reductions and other unusual items." At March 31, 2001, the assets held for sale totaled approximately $122,100,000 and are classified as current assets in the condensed consolidated balance sheet, as we expect to close a transaction on the Florida facilities in 2001. Our Florida nursing home operations include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities") currently being marketed as a group, as well as one additional nursing facility (56 beds) and certain other assets which we plan to sell in separate transactions. All of these assets are included in the total assets of our nursing facilities segment. We are currently negotiating with a potential purchaser of all of the Florida facilities. Other potential purchasers have expressed an interest in purchasing all or portions of the Florida facilities. During the three months ended March 31, 2001, our Florida nursing home operations recorded a pre-tax loss of approximately $1,100,000. Included in this pre-tax loss was depreciation and amortization expense of approximately $2,600,000. In accordance with SFAS No. 121, depreciation and amortization expense will be excluded from our consolidated statement of operations during the period these assets are held for sale, as these assets are now recorded at their estimated net realizable value. 9 14 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER Old Notes.................. On April 25, 2001 we completed a private offering of the old notes, which consist of $200,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2009. In connection with the initial sale of the old notes, we entered into a registration rights agreement in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer. The Exchange Offer......... We are offering to issue up to $200,000,000 aggregate principal amount of our 9 5/8% Senior Notes due 2009, which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), in exchange for an equal aggregate principal amount of our outstanding unregistered notes. The terms of the new notes are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidation damages provisions and the transfer restrictions that apply to the old notes, do not apply to the new notes. You may tender old notes only in $1,000 increments. Subject to the satisfaction or waiver of specified conditions, we will exchange the new notes for all old notes that are validly tendered and not withdrawn before the exchange offer expires. We discuss these conditions in "The Exchange Offer -- Terms of the Exchange Offer." We will cause the exchange to be effected promptly after the exchange offer expires. Resale Of The New Notes.... We believe that the new notes issued in the exchange offer may be offered for sale, resold or otherwise transferred by you, without compliance with the registration and prospectus delivery requirements of the Securities Act, if you: - acquire the new notes in the ordinary course of your business; - are not engaging in, and do not intend to engage in, a distribution of the new notes; - do not have an arrangement or understanding with any person to participate in a distribution of the new notes; - are not an affiliate of ours within the meaning of Rule 405 under the Securities Act; and - are not a broker-dealer that acquired the old notes directly from us. If any of these conditions is not satisfied and you transfer any new notes without delivering a proper prospectus or without qualifying for an exemption from registration, you may incur liability under the Securities Act. In addition, if you are a broker-dealer seeking to receive new notes for your own account in exchange for old notes that you acquired as a result of market-making or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any offer to resell, or any resale or other transfer of the new notes that you receive in the exchange offer. See "Plan of Distribution." Expiration Date............ The exchange offer will expire at 5:00 p.m., New York City time, on , 2001, unless we extend it. 10 15 Withdrawal................. You may withdraw the tender of your old notes at any time before the exchange offer expires. We will return to you any of your old notes that we do not accept for exchange for any reason, without expense to you, promptly after the exchange offer expires or terminates. Interest on the New Notes and the Old Notes.......... The new notes will bear interest at the rate of 9 5/8% per year beginning April 25, 2001. This interest will be payable semi-annually on each April 15 and October 15, with the first payment on October 15, 2001. We will not pay interest on the old notes after we accept them for exchange. See "The New Notes." Conditions to the Exchange Offer...................... THE EXCHANGE OFFER IS SUBJECT TO VARIOUS CONDITIONS. WE RESERVE THE RIGHT TO TERMINATE OR AMEND THE EXCHANGE OFFER AT ANY TIME BEFORE THE EXPIRATION DATE IF VARIOUS SPECIFIED EVENTS OCCUR. THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT OF OUTSTANDING OLD NOTES BEING TENDERED. SEE "THE EXCHANGE OFFER -- CONDITIONS OF THE EXCHANGE OFFER." Procedures for Tendering Old Notes................ If you wish to tender your old notes, you must cause the following to be transmitted to, and received by, the exchange agent no later than 5:00 p.m., New York City time, on the expiration date: - a confirmation of the book-entry transfer of the tendered old notes into the exchange agent's account at The Depository Trust Company; - a properly completed and duly executed transmittal letter in the form accompanying this prospectus, with any required signature guarantees, or, at your option in the case of a book-entry tender, an agent's message in lieu of the transmittal letter; and - any other documents required by the transmittal letter. Guaranteed Delivery Procedures............... If you wish to tender your old notes and you cannot cause the old notes or any other required documents to be transmitted to and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date, you may tender your old notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." Special Procedures for Beneficial Owners.......... If you are the beneficial owner of old notes that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the exchange offer, you should promptly contact the person in whose name your outstanding old notes are registered and instruct that person to tender your old notes on your behalf. See "The Exchange Offer -- Procedures for Tendering." Representations of Tendering Holders.......... By tendering old notes pursuant to the exchange offer, you will, in addition to other customary representations, represent to us that you: - are acquiring the new notes in the ordinary course of business; - are not engaging in a distribution of the new notes; 11 16 - have no arrangement or understanding with any person to participate in a distribution of the new notes; - are not an affiliate of ours, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act; and - are not a broker-dealer tendering old notes acquired directly from us. Acceptance of Old Notes and Delivery of New Notes.... Subject to the satisfaction or waiver of the conditions to the exchange offer, we will accept for exchange any and all old notes that are properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date. We will cause the exchange to be effected promptly after the exchange offer expires. Exchange Agent............. The Bank of New York is serving as exchange agent for the exchange offer. Federal Income Tax Considerations........... The exchange of old notes for new notes pursuant to the exchange offer will not be a taxable event for United States federal income tax purposes. See "United States Federal Income Tax Considerations." Consequences of Failing to Exchange Your Old Notes.................... The exchange offer satisfies our obligations and your rights under the registration rights agreement. After the exchange offer is completed, you will not be entitled to any registration rights with respect to your old notes. Therefore, if you do not exchange your old notes, you will not be able to reoffer, resell or otherwise dispose of your old notes unless: - you comply with the registration and prospectus delivery requirements of the Securities Act; or - you qualify for an exemption from the Securities Act registration requirements. Appraisal or Dissenters' Rights..................... You will have no appraisal or dissenters' rights in connection with the exchange offer. Use of Proceeds............ We will not receive any proceeds from the issuance of the new notes pursuant to the exchange offer. We will pay all expenses incident to the exchange offer. 12 17 SUMMARY OF THE TERMS OF THE NEW NOTES The terms of the new notes will be identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes do not apply to the new notes. The new notes will evidence the same debt as the old notes. The new notes and the old notes will be governed by the same indenture. The following summary contains basic information about the new notes and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of the new notes, please refer to the section of this prospectus entitled "The New Notes." For purposes of the description of the notes included in this prospectus, references to the "Company," "Issuer," "us," "we" and "our" refer only to Beverly Enterprises, Inc. and do not include our subsidiaries. Issuer..................... Beverly Enterprises, Inc. Securities................. $200,000,000 in principal amount of 9 5/8% Senior Notes due 2009. Maturity Date.............. April 15, 2009 Interest Payment Dates..... April 15 and October 15 of each year, commencing October 15, 2001. Optional Redemption........ The new notes will be redeemable, at our option, in whole at any time or in part from time to time, at a redemption price equal to the greater of: 1. 100% of their principal amount plus accrued but unpaid interest to the date of redemption; or 2. (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity, except for currently accrued but unpaid interest, discounted to the date of redemption, on a semi-annual basis, at the U.S. treasury rate plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. When we refer to the U.S. treasury rate, we mean the U.S. treasury rate at the time of redemption for U.S. treasury notes with a maturity comparable to the remaining term of the notes, determined as described in "The New Notes." Change of Control.......... Upon a change of control, you may require us to repurchase your notes, in whole or in part, at a purchase price equal to 101% of the principal amount of your notes plus accrued but unpaid interest to the purchase date. Guarantees................. The new notes will be guaranteed by substantially all of our existing and future subsidiaries on a senior unsecured basis. The guarantees are unsecured senior debt of our subsidiary guarantors. Ranking.................... The notes will rank equally in right of payment with all our existing and future unsecured senior debt (including other notes that may be issued under the indenture) and are senior in right of payment to any future subordinated debt. As of March 31, 2001, on a pro forma basis after giving effect to the offering of the old notes and the use of the estimated net proceeds therefrom, the aggregate outstanding principal amount of senior indebtedness of the Company (including the old notes) would have been $784,496,000, of which approximately $388,068,000 would 13 18 have been secured indebtedness that would effectively rank senior to the old notes and other unsecured indebtedness of the Company. The guarantees will rank equally in right of payment with the existing unsecured senior debt of our subsidiary guarantors and will be senior in right of payment to any future subordinated debt of our subsidiaries. The notes and the guarantees will effectively rank junior to any secured debt of the Company or the subsidiary guarantors, to the extent of the assets securing such indebtedness. Certain Covenants.......... We will issue the notes under an indenture with The Bank of New York, as trustee. The indenture, among other things, restricts our ability to: - incur additional debt; - pay dividends and redeem our capital stock; - incur or permit to exist liens; - engage in transactions with our affiliates; and - merge or consolidate with or into other companies. The covenants listed above are subject to certain exceptions and limitations described in the indenture. Use of Proceeds............ We will not receive any proceeds from the exchange offer. For a description of the use of proceeds from the offering of the old notes, see "Use of Proceeds." Form of the New Notes...... The new notes will be represented by one or more permanent global securities in registered form deposited with The Bank of New York, as custodian, for the benefit of The Depository Trust Company. You will not receive notes in registered form unless one of the events set forth under the heading "Book-Entry, Delivery and Form" occurs. Instead, beneficial interests in the new notes will be shown on, and transfers of these interests will be effected only through, records maintained in book-entry form by The Depository Trust Company for its participants. Transfer Restrictions; Absence Of A Public Market For The Notes............ There has been no public market for the old notes, and we do not anticipate that an active market for the new notes will develop. We do not intend to apply to list the new notes on any securities exchange or to include them in any automated quotation system. We cannot make any assurances regarding the liquidity of the market for the new notes, your ability to sell your new notes or the price at which you may sell your new notes. See "Plan of Distribution." 14 19 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary sets forth: (i) historical consolidated financial information of the Company with respect to the years ended December 31, 1998, 1999 and 2000, (ii) consolidated financial information of the Company on an adjusted basis to give effect to the offering of the old notes and the refinancing of our senior secured credit facility for the year ended December 31, 2000 and the three months ended March 31, 2001, and (iii) unaudited consolidated financial information of the Company with respect to the three months ended March 31, 2000 and 2001. This summary information should be read in conjunction with "Selected Historical Consolidated Financial Data" beginning on page 27 and our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2000 and in our Quarterly Report on Form 10-Q for the three months ended March 31, 2001, which are incorporated by reference into this prospectus. See "Documents Incorporated by Reference."
AT OR FOR THE YEARS ENDED AT OR FOR THE THREE MONTHS ENDED DECEMBER 31, MARCH 31, -------------------------------------------- --------------------------------- 2000 2001 1998 1999 2000 AS ADJUSTED 2000 2001 AS ADJUSTED -------- -------- -------- ----------- -------- -------- ----------- (DOLLARS IN MILLIONS) RESULTS OF OPERATIONS DATA Net operating revenues................. $2,812.2 $2,546.7 $2,625.6 $2,625.6 $ 646.1 $ 659.5 $ 659.5 Interest income(1)..................... 10.7 4.3 2.6 3.9 0.8 0.4 0.4 -------- -------- -------- -------- -------- -------- -------- Total revenues................. 2,822.9 2,551.0 2,628.2 2,629.5 646.9 659.9 659.9 Costs and expenses: Operating and administrative: Wages and related.................. 1,664.7 1,542.1 1,591.5 1,591.5 389.7 397.9 397.9 Provision for insurance and related items............................ 154.3 88.4 120.9 120.9 20.5 27.2 27.2 Other.............................. 814.1 723.8 769.5 769.5 181.7 178.5 178.5 Interest(1).......................... 65.9 72.6 80.0 84.7 19.6 19.1 19.6 Depreciation and amortization........ 93.7 99.2 100.1 100.1 25.3 24.5 24.5 Asset impairments, workforce reductions and other unusual items.............................. 69.5 23.8 43.0 43.0 -- 107.7 107.7 Special charges related to settlements of federal government investigations..................... 1.9 202.4 -- -- -- -- -- Year 2000 remediation................ 9.7 12.4 -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Total costs and expenses....... 2,873.8 2,764.7 2,705.0 2,709.7 636.8 754.9 755.4 Income (loss) before provision for (benefit from) income taxes, extraordinary charge and cumulative effect of change in accounting for start-up costs....................... $ (50.9) $ (213.7) $ (76.8) $ (80.2) $ 10.1 $ (95.0) $ (95.5) ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA Total assets........................... $2,160.5 $1,982.9 $1,876.0 $1,906.2 $1,992.8 $1,843.6 $1,856.4 Total debt............................. 906.0 780.2 791.4 827.4 828.7 766.5 784.5 Other liabilities and deferred items... 33.9 178.6 195.0 195.0 183.1 237.9 237.9 Total stockholders' equity............. 776.2 641.1 584.0 581.6 643.0 537.5 537.3 OTHER DATA Net cash provided by (used for): Operating activities................. $ 6.8 $ 189.1 $ 37.0 $ 33.6 $ (36.2) $ 29.6 $ 29.1 Investing activities................. (230.6) (71.5) (42.2) (42.2) (13.4) (9.2) (9.2) Financing activities................. 135.8 (110.2) 6.5 36.7 45.1 (20.4) (7.7) Capital expenditures................... 150.5 95.4 76.0 76.0 20.0 13.9 13.9 Adjusted EBITDA(2)..................... 278.1 228.6 235.3 235.3 54.2 55.9 55.9 Ratio of Adjusted EBITDA to interest expense.............................. 4.2x 3.1x 2.9x 2.8x 2.8x 2.9x 2.9x Number of nursing home facilities...... 562 561 534 534 560 528 528 Number of licensed nursing home beds... 62,293 62,217 59,799 59,799 62,045 59,265 59,265 Average occupancy(3)................... 88.7% 87.2% 87.0% 87.0% 87.3% 86.4% 86.4%
- --------------- 15 20 (1) The interest expense for 2000 As Adjusted and March 31, 2001 As Adjusted reflects a coupon rate on the notes of 9 5/8%. The interest income for 2000 As Adjusted reflects a rate of return of 4 1/3% on the excess proceeds from the issuance and sale of the old notes. (2) Adjusted EBITDA (unaudited) has been calculated for the periods presented as follows:
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, --------------------------------------- ---------------------------- 2000 2001 1998 1999 2000 AS ADJUSTED 2000 2001 AS ADJUSTED ------ ------- ------ ----------- ----- ------ ----------- (DOLLARS IN MILLIONS) Income (loss) before provision for (benefit from) income taxes, extraordinary charge and cumulative effect of change in accounting for start-up costs.......................... $(50.9) $(213.7) $(76.8) $(80.2) $10.1 $(95.0) $(95.5) Plus: Interest.................................. 65.9 72.6 80.0 84.7 19.6 19.1 19.6 Depreciation and amortization............. 93.7 99.2 100.1 100.1 25.3 24.5 24.5 Year 2000 remediation..................... 9.7 12.4 -- -- -- -- -- Special charges related to settlements of federal government investigations....... 1.9 202.4 -- -- -- -- -- Provision for insurance and other claims related to (i) a loss portfolio transfer in 1998 and (ii) changes in actuarial estimates for insurance reserves for prior years(a).......................... 82.2 31.6 44.4 44.4 -- -- -- Asset impairments, workforce reductions, and other unusual items(b).............. 69.5 23.8 43.0 43.0 -- 107.7 107.7 Increase in accounts receivable related allowances(c)........................... -- -- 43.6 43.6 -- -- -- Other..................................... 16.8 4.6 3.6 3.6 -- -- -- ------ ------- ------ ------ ----- ------ ------ Total additions:.......................... 339.7 446.6 314.7 319.4 44.9 151.3 151.8 Less: Interest income........................... 10.7 4.3 2.6 3.9 0.8 0.4 0.4 ------ ------- ------ ------ ----- ------ ------ Adjusted EBITDA............................... $278.1 $ 228.6 $235.3 $235.3 $54.2 $ 55.9 $ 55.9 ====== ======= ====== ====== ===== ====== ======
- --------------- (a) See Note 1 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2000. (b) See Note 3 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2000 and Notes 3, 4 and 7 to Notes to Condensed Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the three months ended March 31, 2001. (c) Includes changes in estimates related to: $31.3 million of additional allowances for uncollectible patient accounts receivable primarily related to our nursing facilities; and $12.3 million of increased contractual allowances related to our outpatient therapy business. We have included information concerning Adjusted EBITDA because management believes that Adjusted EBITDA most accurately reflects the Company's ability to service its debt and other obligations. You should not, however, consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles, or as a measure of our profitability or liquidity. Adjusted EBITDA in a period is not reduced by cash outlays in such period for federal government investigation settlement costs, patient care liabilities or future cash payments with respect to our loss portfolio transfer or other expenditures, where an accrual on our income statement was made in a prior period. See "Risk Factors -- Our Adjusted EBITDA is not necessarily a measure of our cash flow from operations." (3) Average occupancy for 1998, 1999 and 2000, and the three months ended March 31, 2000 and 2001, was based on operational beds. Average occupancy for 1998, 1999 and 2000, and the three months ended March 31, 2000 and 2001, based on licensed beds was 86.9%, 85.3%, 84.9%, 85.3% and 84.3%, respectively. 16 21 GENERAL Beverly Enterprises, Inc. is incorporated in Delaware. Our principal executive offices are located at One Thousand Beverly Way, Fort Smith, Arkansas, 72919. Our telephone number is (501) 201-2000. 17 22 RISK FACTORS Our business, operations and financial condition are subject to various risks. Some of these risks are described below and under "Forward-Looking Statements," and you should take these risks into account in evaluating us or any investment decision involving us or in deciding whether to participate in the exchange offer proposed in this prospectus. This section does not describe all risks applicable to us or our industry, and it is intended only as a summary of certain material factors. OUR SUBSTANTIAL INDEBTEDNESS AND OTHER OBLIGATIONS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. We have a significant amount of indebtedness. At March 31, 2001, we would have had approximately $784.5 million of outstanding indebtedness for money borrowed on our balance sheet on a pro forma basis after giving effect to the offering of the old notes and use of proceeds and the refinancing of our senior secured credit facility. This outstanding indebtedness does not include approximately $92.8 million ($124.1 million on an undiscounted basis) of amounts we owe to the federal government over the next eight years under a civil settlement agreement (see "Business -- Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2000) and $155.4 million of other liabilities and deferred items (principally patient care liability claims), as well as certain other off-balance sheet obligations. Our substantial indebtedness and other obligations could: - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness and other liabilities, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate activities; - limit our flexibility in planning for, or reacting to, changes in our business or industry; - place us at a competitive disadvantage compared to competitors with less indebtedness or lower fixed costs; - increase our vulnerability to general adverse economic and industry conditions; or - limit our ability to pursue business opportunities that may be in our interest. If we incur additional indebtedness or other obligations, these related risks could increase. IF WE ARE UNABLE TO GENERATE SUFFICIENT CASH FLOW TO SERVICE OUR INDEBTEDNESS OR OTHER OBLIGATIONS, OUR BUSINESS AND FINANCIAL CONDITION COULD SUFFER. Our ability to make payments on our indebtedness and other obligations, and to fund planned capital expenditures, depends on our ability to generate future cash flow. This, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds under our $150.0 million senior secured credit facility, which matures on April 25, 2004, depends on our satisfying various covenants. These covenants, as well as similar covenants under certain of our other obligations with maturities beyond that of the new senior secured credit facility, have the following effects on us and our subsidiaries: - limit our ability to borrow and place liens on assets; - require us to comply with a coverage ratio test; - require us to maintain a minimum consolidated net worth; - limit our ability to merge with other parties or sell all or substantially all of our assets; and - limit our ability to make investments. The covenants governing the notes are substantially the same as the covenants contained in the indenture governing the 9% senior notes due February 15, 2006. We calculate that under such covenants we currently have approximately $87.7 million (which amount includes the $20.0 million basket described under "Description of Notes-Certain Covenants-Restricted Payments") of Restricted Payment capacity. 18 23 We cannot assure you that our business will generate cash flow from operations or that future borrowings will be available to us under our senior secured credit facility or otherwise. If the need arises, inability to refinance our existing senior secured credit facility could have a material adverse effect on our consolidated financial position, results of operations or cash flows. WE ARE SUBJECT TO INCREASINGLY EXPENSIVE AND UNPREDICTABLE PATIENT CARE LIABILITY COSTS, ESPECIALLY IN FLORIDA. General liability and professional liability costs for the long-term care industry, especially in the state of Florida, have become increasingly expensive and difficult to estimate. We, along with most of our competitors, are experiencing substantial increases in both the number of claims and lawsuits, as well as the size of the typical claim and lawsuit. This phenomenon is most evident in the state of Florida, where well-intended patient rights' statutes tend, in our view, to be exploited by plaintiffs' attorneys. These statutes allow for actual damages, punitive damages and plaintiff attorney fees to be included in any proven violation of these rights. Industry statistics show that Florida long-term care providers: - incur more than four times the number of general liability claims as compared to the rest of the country; - have an average claim size that is approximately three times higher than the rest of the country; and - incur 44% of the total general liability losses for the country, but represent only approximately 10% of the total nursing facility beds. Insurance companies are exiting the state of Florida, or severely restricting their capacity to write long-term care general liability insurance. Insurers cannot provide coverage when faced with the magnitude of losses and the explosive growth of claims. Our overall general liability costs per bed in Florida are severely out of line with the rest of the country and continue to escalate. During the first quarter of 2001, a formal plan was initiated by management to pursue the sale of our nursing home operations in Florida. Such decision was made due to the excessive patient care liability costs that we have been incurring in recent periods in the state of Florida. Accordingly, the property and equipment, identifiable intangibles and operating supplies of our Florida nursing home operations at March 31, 2001 were considered assets to be disposed of, as that term is defined in Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). Management estimated the fair value less selling costs of such assets based upon verbal and non-binding purchase prices from potential buyers and determined that an impairment write-down was necessary as of March 31, 2001. The pre-tax charge related to this write-down was approximately $68,900,000. In addition, we recorded a pre-tax charge of approximately $17,200,000 for certain costs to exit the Florida facilities (as defined below). These costs relate to severance agreements, termination payments on certain contracts and various other items. Such pre-tax charges have been included in the condensed consolidated statement of operations caption "Asset impairments, workforce reductions and other unusual items." At March 31, 2001, the assets held for sale totaled approximately $122,100,000 and are classified as current assets in the condensed consolidated balance sheet, as we expect to close a transaction on the Florida facilities in 2001. Our Florida nursing home operations include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities") currently being marketed as a group, as well as one additional nursing facility (56 beds) and certain other assets which we plan to sell in separate transactions. All of these assets are included in the total assets of our nursing facilities segment. We are currently negotiating with a potential purchaser of all of the Florida facilities. Other potential purchasers have expressed an interest in purchasing all or portions of the Florida facilities. During the three months ended March 31, 2001, our Florida nursing home operations recorded a pre-tax loss of approximately $1,100,000. Included in this pre-tax loss was depreciation and amortization expense of approximately $2,600,000. In accordance with SFAS No. 121, depreciation and amortization expense will be 19 24 excluded from our consolidated statement of operations during the period these assets are held for sale, as these assets are now recorded at their estimated net realizable value. OUR CIVIL SETTLEMENT AGREEMENT WITH THE U.S. GOVERNMENT WITH RESPECT TO ALLEGED VIOLATIONS OF COST ALLOCATIONS UNDER MEDICARE NEGATIVELY IMPACTS OUR CASH FLOWS. On February 3, 2000, we entered into a series of separate agreements with the U.S. Department of Justice and the Office of Inspector General (the "OIG") of the Department of Health and Human Services ("HHS"), which are described in detail under "Business -- Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2000. Under the civil settlement agreement, we paid the federal government $25.0 million during the first quarter of 2000 and agreed to reimburse the federal government an additional $145.0 million through withholdings from our biweekly Medicare periodic interim payments in equal installments through the first quarter of 2008, of which $124.1 million remained to be paid at March 31, 2001. As a result of such withholdings, our cash flows from operations were negatively impacted by approximately $4.2 million during the three months ended March 31, 2001, and are expected to be negatively impacted at an annual rate of approximately $18.1 million through the first quarter of 2008. In addition, we have resubmitted certain filings for 1996 to reflect reduced labor costs allocated to the Medicare program. We are also awaiting results of recently-completed audits for 1997 and 1998. We have reserved $39.0 million in connection with such matters. WE ARE SUBJECT TO CERTAIN CLASS ACTION AND STOCKHOLDER DERIVATIVE LAWSUITS. A purported class action lawsuit is pending against the Company and certain of our officers in the United States District Court for the Eastern District of Arkansas. In addition, various stockholders have filed derivative actions against us. See "Business -- Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2000. These actions allege various claims and generally arose from the matters that were the subject of the settlements with the OIG. Because of the preliminary state of these actions, we are unable at this time to assess the probable outcome of these actions or the materiality of the risk of loss. Therefore, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. OUR ADJUSTED EBITDA IS NOT NECESSARILY A MEASURE OF OUR CASH FLOW FROM OPERATIONS. We have incurred significant charges as a result of the OIG investigation settlements, liabilities arising out of the provision of patient care services (and related insurance expenses, including the loss portfolio transfer), workforce reductions and other unusual items. The charges incurred in periods prior to 2001 require cash payments to be made in subsequent years. Primarily because of these charges, Adjusted EBITDA (as presented herein) does not necessarily reflect cash flow from operations or net cash provided by operating activities (as commonly understood under generally accepted accounting principles). See Note 2 to "Summary Consolidated Financial Data" and Notes 1, 2 and 3 of "Notes to Consolidated Financial Statements" in our Annual Report on Form 10-K for the year ended December 31, 2000 and Notes 3, 4 and 7 of "Notes to Condensed Consolidated Financial Statements" in our Quarterly Report on Form 10-Q for the three months ended March 31, 2001. WE RELY ON REIMBURSEMENT FROM GOVERNMENTAL PROGRAMS FOR A MAJORITY OF OUR REVENUES. Changes in the reimbursement policies of Medicaid and Medicare as a result of budget cuts by federal and state governments or other legislative and regulatory actions could have a material adverse effect on our consolidated financial position, results of operations and cash flows. In the past, states have curtailed their Medicaid payments as a result of budget considerations. No assurance can be given that states will not do so in the future or that the future funding of Medicaid programs will remain at levels comparable to the present levels. The 1997 Act authorized states to develop their own standards for setting payment rates. It requires each state to use a public process for establishing proposed rates whereby the methodologies and justifications used for setting such rates are available for public review 20 25 and comment. This requires facilities to become more involved in the rate setting process since failure to do so may interfere with a facility's ability to challenge rates later. Currently, a few states in which we operate are experiencing deficits in their fiscal operating budgets. There can be no assurance that those states in which we operate that are experiencing budget deficits, as well as other states in which we operate, will not reduce payment rates. OUR INDUSTRY IS HEAVILY REGULATED BY THE GOVERNMENT WHICH REQUIRES OUR COMPLIANCE WITH A VARIETY OF LAWS. The operation of our facilities and the services we provide are subject to periodic inspection by governmental authorities to ensure that we are complying with various standards established for continued licensure under state law and certification for participation under the Medicare and Medicaid programs. Additionally, in certain states, certificates of need or other similar approvals are required for expansion of our operations. We could be adversely affected if we cannot obtain these approvals, if the standards applicable to approvals or the interpretation of those standards change and by possible delays and expenses associated with obtaining approvals. Our failure to obtain, retain or renew any required regulatory approvals, licenses or certificates could prevent us from being reimbursed for our services. In addition, compliance with new regulations, including regulations related to electronic data interchange and confidentiality and security of health data, could result in increased cost to us. See "Business -- Our Industry is Heavily Regulated by the Government which Requires Our Compliance with a Variety of Laws" in our Annual Report on Form 10-K for the year ended December 31, 2000. In the ordinary course of our business and like others in the health care industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority and notices of deficiencies for failure to comply with various regulatory requirements. We review such requests and notices and take appropriate corrective action. In most cases, with respect to the notices, the facility and the reviewing agency will agree upon the steps to be taken to bring the facility into compliance with regulatory requirements. In some cases or upon repeat violations, the reviewing agency may take a number of adverse actions against a facility. These adverse actions include: - the imposition of fines; - temporary suspension of admission of new patients to the facility; - decertification from participation in the Medicaid or Medicare programs; or - in extreme circumstances, revocation of a facility's license. We have been subject to certain of these adverse actions in the past and could be subject to adverse actions in the future which could result in significant penalties, as well as adverse publicity. The results of any current or future investigation or actions could have a material adverse effect on our operations or financial position. OUR FAILURE TO ATTRACT QUALIFIED PERSONNEL COULD HARM OUR BUSINESS. Due to nationwide low unemployment rates, we are currently experiencing difficulty attracting and retaining nursing assistants, nurses' aides and other facility-based personnel. Our weighted average wage rate and use of contract nursing personnel have increased, indicating the difficulty our facilities are having in attracting these personnel. Although we are addressing this challenge through recruiting and retention programs and training initiatives, these programs and initiatives may not stabilize or improve our ability to attract and retain these personnel. Our inability to control labor availability and cost could have a material adverse affect on our future operating results. 21 26 CERTAIN TRENDS IN THE HEALTH CARE INDUSTRY ARE PUTTING PRESSURE ON OUR ABILITY TO MAINTAIN NURSING FACILITY CENSUS. Over the past decade a number of trends have developed that have negatively impacted our census. These trends include: - overbuilding of nursing facilities, particularly in states that have eliminated the certificate of need process for new construction; - creation of nursing facilities by acute care hospitals to retain discharged patients within their facility; - rapid growth of assisted living facilities, which sometimes are more attractive to less medically complex patients; and - the development of the scope and availability of health services delivered to the home. These factors and others could adversely affect our ability to maintain or increase occupancy rates at our facilities. Lower occupancy rates could have a negative impact on our cash flows, results of operations and overall financial condition. ALTHOUGH THE NOTES ARE REFERRED TO AS "SENIOR NOTES," AND THE SUBSIDIARY GUARANTEES ARE SENIOR OBLIGATIONS OF OUR SUBSIDIARIES, EACH WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT AND ANY SECURED LIABILITIES OF OUR SUBSIDIARIES. The notes will be general unsecured obligations of the Company that rank senior in right of payment to all existing and future debt that is expressly subordinated in right of payment to the notes. The notes will rank equally in right of payment with all existing and future liabilities of the Company that are not so subordinated. The notes will effectively rank junior to any secured indebtedness of the Company or its subsidiaries, to the extent of the assets securing such indebtedness. In the event of bankruptcy, liquidation, reorganization or other winding up of the Company, the assets of the Company that are collateral for our secured debt will be available to pay obligations on the notes only after all debt under such secured debt has been repaid in full from such assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all the notes then outstanding. The guarantees of the notes will have a similar ranking with respect to secured and unsecured senior debt of the subsidiaries as the notes do with respect to secured and unsecured senior debt of the Company, as well as with respect to any unsecured obligations expressly subordinated in right of payment to the guarantees. In addition, neither Beverly Funding Corporation, a non-consolidated subsidiary of the Company, nor any of its successors will guarantee the notes. Beverly Funding Corporation has issued $70.0 million of medium-term notes that, as of December 31, 2000, were secured by approximately $107.2 million of net patient accounts receivable that are purchased from our subsidiaries' operating nursing homes. These accounts receivable, in addition to the other assets of Beverly Funding Corporation, are not available as a source of payment to holders of the notes. Furthermore, the change in control provisions may, in certain circumstances, make more difficult, or discourage a takeover of our company and the removal of incumbent management. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE HOLDERS OF THE NOTES TO RETURN PAYMENTS RECEIVED FROM US OR OUR SUBSIDIARY GUARANTORS. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee: - issued the guarantee to delay, hinder or defraud present or future creditors; or - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee, 22 27 and at the time it issued the guarantee: - was insolvent or rendered insolvent by reason of such incurrence; - was engaged, or about to engage, in a business or transaction for which the guarantor's remaining unencumbered assets constituted unreasonably small capital to carry on its business; or - intended to incur, or believed that it would incur, debts beyond its ability to pay the debts as they mature. Any payment by that guarantor pursuant to its guarantee determined to be a fraudulent transfer could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if, at the time it incurred the debt: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; - if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. We cannot be sure as to the standards that a court would use to determine whether or not the subsidiary guarantors were solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of the guarantee of the notes would not be voided or the guarantee of the notes would not be subordinated to that subsidiary guarantor's other debt. If a case were to occur, any guarantee of the notes incurred by one or more of the subsidiary guarantors could also be subject to the claim that the obligations of the applicable guarantor were incurred for less than fair consideration because the guarantee was incurred for our benefit, and only indirectly for the benefit of the subsidiary guarantor. A court could thus void the obligations under the guarantee or subordinate the guarantee to the applicable guarantor's other debt or take other action detrimental to holders of the notes. In that case, the holders of the notes would be effectively subordinated to all claims of creditors against our subsidiaries. Our operations are conducted through our subsidiaries. As a result, we depend on dividends, loans or advances, or payments from our subsidiaries to satisfy our financial obligations and to make payments to our investors. The ability of our subsidiaries to pay dividends and make other payments to us is restricted by, among other things, applicable corporate and other laws and regulations as well as, in the future, agreements to which our subsidiaries may be a party. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE AND SUBSTANTIALLY ALL OF OUR OTHER DEBT INSTRUMENTS. The terms of substantially all of our debt instruments require that we repay or refinance indebtedness under such debt instruments in the event of a change of control, as defined in such debt instruments. Such change of control provisions may be triggered under such debt instruments prior to the occurrence of a change of control as defined in the indenture relating to the notes, thereby requiring that the indebtedness under such debt instruments be repaid or refinanced prior to our repurchasing any notes upon the occurrence of a change of control. As such, we may not be able to satisfy our obligations to repurchase the notes unless we are able to refinance or obtain waivers with respect to such debt instruments. There can be no assurance that we will have the financial resources to repurchase the notes in the event of a change of control. 23 28 YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THESE NOTES. We have been informed by the initial purchasers that they intend to make a market in the notes after the exchange offer is completed. However, the initial purchasers may cease their market-making at any time. In addition, the liquidity of the trading market in the notes, and the market price quoted for the notes, may be adversely affected by changes in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. In addition, such market- making activities will be subject to limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result, you cannot be sure that an active trading market will develop for the notes. 24 29 USE OF PROCEEDS We intend the exchange offer to satisfy our obligations under the registration rights agreement that we entered into in connection with the private offering of the old notes. We will not receive any cash proceeds from the issuance of the new notes pursuant to the exchange offer. Old notes surrendered in exchange for the new notes will be retired and canceled and cannot be reissued. As a result, the issuance of the new notes will not result in any increase or decrease in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer. The net proceeds from the issuance and sale of the old notes was approximately $194.8 million. We used the net proceeds to repay borrowings under our senior secured credit facility and permanently reduce our commitment thereunder. Excess proceeds were used for general corporate purposes. Simultaneously with the consummation of the initial offering, we refinanced our $375.0 million senior secured credit facility with a new $150.0 million senior secured credit facility. The new senior secured credit facility is described under "Description of Certain Indebtedness." As of May 31, 2001, the interest rate under the new senior secured credit facility was 9.38% and $117.0 million was available for future borrowing. 25 30 CAPITALIZATION The following table sets forth the unaudited consolidated capitalization of the Company at March 31, 2001 on an actual basis and an as adjusted basis to give effect to the offering of the old notes and the use of net proceeds to refinance the senior secured credit facility. This table should be read in conjunction with "Selected Historical Consolidated Financial Data" and the historical financial statements and related notes in our Annual and Quarterly reports filed with the SEC and incorporated by reference into this prospectus, as well as the section of our Annual and Quarterly reports titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."
AT MARCH 31, 2001 ------------------------- ACTUAL AS ADJUSTED ---------- ----------- (DOLLARS IN THOUSANDS) Total debt (including current portion of long-term debt)(1): Existing senior secured credit facility................... $ 182,000 $ -- New senior secured credit facility(2)..................... -- -- 9% senior notes due 2006.................................. 180,000 180,000 9 5/8% senior notes due 2009.............................. -- 200,000 Notes and mortgages....................................... 262,861 262,861 Industrial development revenue bonds...................... 130,705 130,705 Capital lease obligations................................. 10,930 10,930 ---------- ---------- Total debt............................................. 766,496 784,496 Stockholders' equity: Preferred stock, shares authorized: 25,000,000............ -- -- Common stock, shares issued: 112,157,746.................. 11,216 11,216 Additional paid-in capital................................ 880,918 880,918 Accumulated deficit....................................... (246,205) (246,474) Accumulated other comprehensive income.................... 896 896 Treasury stock, at cost: 8,515,758 shares................. (109,278) (109,278) ---------- ---------- Total stockholders' equity............................. 537,547 537,278 ---------- ---------- Total capitalization...................................... $1,304,043 $1,321,774 ========== ==========
- --------------- (1) The Company has significant obligations that are not reflected in this table, including, but not limited to, obligations under our civil settlement agreement and liabilities related to insurance. See "Description of Certain Indebtedness" and Notes 1 and 2 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2000. (2) Total availability under the new senior secured credit facility is $150.0 million, of which up to $75.0 million is available for letters of credit. See "Description of Certain Indebtedness." 26 31 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA In the table below, we provide you with selected historical consolidated financial information of the Company. We have prepared this information using the consolidated financial statements for the Company for each of the five years in the period ended December 31, 2000 and for the three-month periods ended March 31, 2001 and 2000. The financial statements for each of the five years in the period ended December 31, 2000 have been audited by Ernst & Young LLP, our independent auditors. The financial statements for the three-month periods ended March 31, 2001 and 2000 have not been audited. When you read this selected historical consolidated financial data, it is important that you read along with it the historical financial statements and related notes in our Annual and Quarterly reports filed with the SEC, as well as the section of our Annual and Quarterly reports titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have also provided other data for the periods presented.
AT OR FOR THE THREE MONTHS ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31, ----------------------- -------------------------------------------------------------- 2001 2000 2000 1999 1998(1) 1997(2) 1996 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net operating revenues............... $ 659,468 $ 646,102 $2,625,610 $2,546,672 $2,812,232 $3,217,099 $3,267,189 Interest income...................... 387 825 2,650 4,335 10,708 13,201 13,839 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total revenues............... 659,855 646,927 2,628,260 2,551,007 2,822,940 3,230,300 3,281,028 Costs and expenses: Operating and administrative....... 603,637 591,875 2,481,914 2,354,328 2,633,135 2,888,021 2,958,942 Interest........................... 19,110 19,618 80,016 72,578 65,938 82,713 91,111 Depreciation and amortization...... 24,464 25,336 100,061 99,160 93,722 107,060 105,468 Asset impairments, workforce reductions and other unusual items............................ 107,689 -- 43,033 23,818 69,443 44,000 -- Special charges related to settlements of federal government investigations................... -- -- -- 202,447 1,865 -- -- Year 2000 remediation.............. -- -- -- 12,402 9,719 -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total costs and expenses..... 754,900 636,829 2,705,024 2,764,733 2,873,822 3,121,794 3,155,521 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before provision for (benefit from) income taxes, extraordinary charge and cumulative effect of change in accounting for start-up costs..................... (95,045) 10,098 (76,764) (213,726) (50,882) 108,506 125,507 Provision for (benefit from) income taxes.............................. (42,771) 3,837 (22,262) (79,079) (25,936) 49,913 73,481 Extraordinary charge, net of income tax benefit of $1,057 in 1998 and $1,099 in 1996..................... -- -- -- -- (1,660) -- (1,726) Cumulative effect of change in accounting for start-up costs, net of income tax benefit of $2,811.... -- -- -- -- (4,415) -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss).................... $ (52,274) $ 6,261 $ (54,502) $ (134,647) $ (31,021) $ 58,593 $ 50,300 ========== ========== ========== ========== ========== ========== ========== CONSOLIDATED BALANCE SHEET DATA: Total assets......................... $1,843,599 $1,992,795 $1,875,993 $1,982,880 $2,160,511 $2,073,469 $2,525,082 Current portion of long-term debt.... 62,568 72,599 227,111 34,052 27,773 31,551 38,826 Long-term debt, excluding current portion............................ 703,928 756,057 564,247 746,164 878,270 686,941 1,106,256 Stockholders' equity................. 537,547 643,030 583,993 641,124 776,206 862,505 861,095 OTHER DATA: Average occupancy(3)................. 86.4% 87.3% 87.0% 87.2% 88.7% 88.9% 87.4% Number of licensed nursing home beds............................... 59,265 62,045 59,799 62,217 62,293 63,552 71,204 Ratios of earnings to fixed charges(4)......................... -- 1.32 -- -- -- 1.87 1.97
- --------------- (1) Amounts for 1998 include the operations of American Transitional Hospitals, Inc. through June 30, 1998. (2) Amounts for 1997 include the operations of Pharmacy Corporation of America through December 3, 1997. 27 32 (3) Average occupancy percentage for the three months ended March 31, 2001 and 2000 and for the years ended December 31, 2000, 1999, 1998 and 1997 was based on operational beds, and for the year ended December 31, 1996, such percentage was based on licensed beds. Average occupancy percentage for the three months ended March 31, 2001 and 2000 and for the years ended December 31, 2000, 1999, 1998 and 1997, based on licensed beds, was 84.9%, 85.3%, 86.9%, 87.1%, 84.3% and 85.3%, respectively. (4) Earnings were inadequate to cover fixed charges by $95.4 million for the three months ended March 31, 2001 and $79.1 million, $215.4 million and $52.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. For purposes of computing the ratios of earnings to fixed charges, earnings have been calculated by adding fixed charges (excluding capitalized interest during the periods) to pre-tax income (loss) from continuing operations. Fixed charges include interest costs, whether expensed or capitalized, the interest component of rental expense and amortization of debt discounts and issue costs. 28 33 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We sold the old notes to the initial purchasers in a private offering on April 25, 2001. These initial purchasers resold the old notes to qualified institutional buyers under Rule 144A and outside the United States pursuant to Regulation S under the Securities Act. As of the date of this prospectus, $200.0 million aggregate principal amount of old notes are outstanding. In connection with the private offering of the old notes, we and our subsidiary guarantors entered into an exchange and registration rights agreement in which we and our subsidiary guarantors agreed to file a registration statement with the Securities and Exchange Commission relating to an offer to exchange the old notes and the guarantees under the Securities Act for new notes and guarantees. We have filed the exchange and registration rights agreement as an exhibit to the registration statement of which this prospectus is a part. EFFECT OF THE EXCHANGE OFFER We believe that you may offer for resale, resell or otherwise transfer any new notes issued to you in the exchange offer without further registration under the Securities Act or delivery of a prospectus if you: - are acquiring the new notes in the ordinary course of your business; - are not participating, do not intend to participate and have no arrangement or understanding with any person to participate, in a distribution of the new notes; - are not an affiliate of ours as defined in Rule 405 under the Securities Act; and - are not a broker-dealer who acquired old notes from us. If you do not satisfy these criteria: - you will not be able to rely on the interpretations of the staff of the SEC in connection with any offer for resale, resale or other transfer of new notes; and - you must comply with the registration and prospectus delivery requirements of the Securities Act, or have an exemption available to you, in connection with any offer for resale, resale or other transfer of the new notes. Each broker-dealer that receives new notes for its own account in exchange for old notes it acquired as a result of market-making or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of its new notes. This will not be an admission by the broker-dealer that it is an underwriter within the meaning of the Securities Act. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER - We will accept all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. - You should read "-- Expiration Date; Extensions; Amendments" below for an explanation of how the expiration date may be amended. - We will issue and deliver $1,000 principal amount of new notes in exchange for each $1,000 principal amount of outstanding old notes accepted in the exchange offer. Holders may exchange some or all of their old notes in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. 29 34 - By tendering old notes in exchange for new notes and by signing the transmittal letter -- or delivering an agent's message in lieu of the transmittal letter, you will be representing that, among other things: (1) any new notes to be received by you will be acquired in the ordinary course of your business; (2) you are not engaged in, and do not intend to engage in, and you have no arrangement or understanding with any person to participate in, a distribution of the new notes; (3) you acknowledge and agree that any person who is a broker-dealer or is participating in the exchange offer for the purpose of distributing the new notes must comply with the registration and prospectus delivery requirements of the Securities Act; and (4) you are not an affiliate of ours within the meaning of Rule 405 under the Securities Act. - The terms of the new notes are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes do not apply to the new notes. The new notes will evidence the same debt as the old notes and will be entitled to the benefits of the indenture governing the old notes. - We are sending this prospectus and the transmittal letter to all registered holders of old notes as of the close of business on , 2001. - We are not conditioning the exchange offer upon the tender of any minimum amount of old notes. - The exchange offer is subject to the condition that the exchange offer not violate applicable law, rules or regulations, or applicable interpretations of the staff of the SEC. See "-- Conditions of the Exchange Offer." - We may accept tendered old notes by giving oral or written notice to the exchange agent. We must promptly confirm oral notice in writing. The exchange agent will act as your agent for the purpose of receiving the new notes from us and delivering them to you. - You will not be required to pay brokerage commissions or fees or, subject to the instructions in the transmittal letter, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses in connection with the exchange offer, other than taxes specified under "-- Transfer Taxes." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time, on, , 2001, unless we, in our sole discretion, extend it. We may extend the exchange offer at any time and from time to time by giving oral or written notice to the exchange agent and by publicly announcing the extension before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We must promptly confirm oral notice in writing. We may also accept all properly tendered old notes as of the expiration date and extend the expiration date in respect of the remaining outstanding old notes. We may, in our sole discretion: - amend the terms of the exchange offer in any manner; - delay acceptance of, or refuse to accept, any old notes not previously accepted; - extend the exchange offer; or - terminate the exchange offer. We will give prompt notice of any amendment to the registered holders of the old notes. If we materially amend the exchange offer, we will promptly disclose the amendment in a manner reasonably calculated to inform you of the amendment and we will extend the exchange offer to the extent required by law. 30 35 PROCEDURES FOR TENDERING Only a holder of old notes may tender them in the exchange offer. For purposes of the exchange offer, the term "holder" or "registered holder" includes any participant in The Depository Trust Company whose name appears on a security position listing as a holder of old notes. To tender in the exchange offer, you must cause the following to be transmitted to and received by the exchange agent no later than 5:00 p.m., New York City time, on the expiration date: - a confirmation of the book-entry transfer of the tendered old notes into the exchange agent's account at The Depository Trust Company; - a properly completed and duly executed transmittal letter in the form accompanying this prospectus, with any required signature guarantees, or, at the option of the tendering holder in the case of a book-entry tender, an agent's message in lieu of the transmittal letter; and - any other documents required by the transmittal letter. If you wish to tender your old notes and you cannot cause the old notes or any other required documents to be transmitted to and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date, you may tender your old notes according to the guaranteed delivery procedures described in this section under the heading "-- Guaranteed Delivery Procedures." If you beneficially own old notes that are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to participate in the exchange offer, you should promptly contact the person through which you beneficially own your old notes and instruct that person to tender your old notes on your behalf. See "Instructions Forming Part of the Terms and Conditions of the Exchange Offer" included with the transmittal letter. If you wish to tender on your own behalf, you must, before completing and executing the transmittal letter and delivering your old notes, either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. The tender by a holder of old notes will constitute an agreement between the holder, us and the exchange agent in accordance with the terms and subject to the conditions specified in this prospectus and in the transmittal letter. If a holder tenders less than all the old notes held, the holder should fill in the amount of old notes being tendered in the appropriate box on the transmittal letter. The exchange agent will deem the entire amount of old notes delivered to it to have been tendered unless the holder has indicated otherwise. The method of delivery of the transmittal letter and all other required documents to the exchange agent is at your election and risk. Instead of delivery by mail, we recommend that you use an overnight or hand delivery service. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND YOUR TRANSMITTAL LETTER OR OTHER REQUIRED DOCUMENTS TO US. SIGNATURE REQUIREMENTS AND SIGNATURE GUARANTEE You must arrange for an "eligible institution" to guarantee your signature on the transmittal letter or a notice of withdrawal, unless the old notes are tendered: - by the registered holder of the old notes; or - for the account of an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act. The following are "eligible institutions:" - a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; - a commercial bank or trust company having an office or correspondent in the United States; or - an eligible guarantor institution. 31 36 If a transmittal letter is signed by a person other than the registered holder of any old notes listed in the transmittal letter, the old notes must be endorsed or accompanied by a properly completed bond power and signed by the registered holder as the registered holder's name appears on the old notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, sign or endorse any required documents, they should so indicate when signing, and unless waived by us, submit evidence satisfactory to us of their authority to so act with the transmittal letter. BOOK-ENTRY TRANSFER The exchange agent will make a request promptly after the date of this prospectus to establish an account for the old notes. Once the exchange agent establishes the account, any financial institution that is a participant in The Depository Trust Company's system may make book-entry delivery of old notes by causing The Depository Trust Company to transfer them into the exchange agent's account for the old notes. However, the exchange agent will only exchange the old notes so tendered after it confirms their book-entry transfer into the exchange agent's account, and receives an agent's message and any other documents required by the transmittal letter in a timely manner. The term "agent's message" means a message, transmitted by The Depository Trust Company to, and received by, the exchange agent and forming part of the confirmation of a book-entry transfer, which states that: - The Depository Trust Company has received an express acknowledgment from a participant tendering old notes stating the aggregate principal amount of old notes that have been tendered by such participant; - the participant has received the transmittal letter and agrees to be bound by its terms; and - we may enforce this agreement against the participant. Although you may deliver old notes through The Depository Trust Company into the exchange agent's account at The Depository Trust Company, you must provide the exchange agent a completed and executed transmittal letter with any required signature guarantee -- or an agent's message in lieu thereof -- and all other required documents before the expiration date. If you comply with the guaranteed delivery procedures described below, you must provide the transmittal letter -- or an agent's message in lieu thereof -- to the exchange agent within the time period provided. DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. GUARANTEED DELIVERY PROCEDURES If you wish to tender your old notes and (1) you cannot deliver the transmittal letter or any other required documents to the exchange agent before the expiration date or (2) you cannot complete the procedure for book-entry transfer on a timely basis, you may instead effect a tender if: - you make the tender through an eligible guarantor institution; - before the expiration date, the exchange agent receives from the eligible guarantor institution, (a) a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery, specifying the name and address of the holder and the principal amount of the old notes tendered, stating that the tender is being made, and guaranteeing that, within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the old notes will be tendered, (b) a properly completed and duly executed transmittal letter or a confirmation of a book-entry transfer into the exchange agent's account at The Depository Trust Company, and (c) an agent's message and any other documents required by the transmittal letter, 32 37 will be deposited by the eligible guarantor institution with the exchange agent; and - the exchange agent receives the old notes and transmittal letter or confirmation of a book-entry transfer into its account at The Depository Trust Company and an agent's message and all other documents required by the transmittal letter within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, you may withdraw any old notes that you tender at any time before 5:00 p.m., New York City time, on the expiration date. To do so, you must provide the exchange agent with a written or facsimile transmission notice of withdrawal before 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must: - identify the old notes to be withdrawn, including the principal amount of the old notes and the name and number of the account at The Depository Trust Company to be credited; and - be signed by you in the same manner as the original signature on your transmittal letter, including any required signature guarantee, or be accompanied by transfer documents sufficient to permit the registrar to register the transfer of the withdrawn old notes into your name. Our determination shall be final and binding on all parties. We will not deem any old notes so withdrawn to be validly tendered for purposes of the exchange offer and will not issue new notes with respect to them unless the holder of these old notes validly retenders them. You may retender withdrawn old notes by following one of the procedures described above under " -- Procedures for Tendering" at any time before the expiration date. DETERMINATION OF VALIDITY We will determine all questions as to the validity, form, eligibility -- including time of receipt -- acceptance and withdrawal of the tendered old notes, and will interpret the terms and conditions of the exchange offer -- including any instructions in the transmittal letter -- in our sole discretion. Our determination will be final and binding. We may reject any and all old notes that are not properly tendered or any old notes that, in the opinion of our counsel, we cannot lawfully accept. We also may waive any irregularities or conditions of tender as to particular old notes. Unless we waive them, you must cure any defects or irregularities in your tender of old notes within such time as we shall determine. Although we intend to notify tendering holders of defects or irregularities with respect to tenders of old notes, neither we nor anyone else has any duty to do so. Neither we nor anyone else will incur any liability for failure to notify you of these defects or irregularities. Your old notes will not be deemed tendered until you have cured or we have waived any irregularities. As soon as practicable following the expiration date, the exchange agent will return any old notes that we reject due to improper tender or otherwise unless you cured all defects or irregularities or we waive them. We reserve the right in our sole discretion: - to purchase or make offers for any old notes that remain outstanding after the expiration date; - to terminate the exchange offer, as set forth in "-- Conditions of the Exchange Offer;" and - to the extent permitted by applicable law, to purchase old notes in the open market, in privately negotiated transactions or otherwise. The terms of any of these purchases or offers may differ from the terms of the exchange offer. CONDITIONS OF THE EXCHANGE OFFER Notwithstanding any other term of the exchange offer, if the exchange offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the SEC, we will not be required to accept for 33 38 exchange, or to issue new notes for, any old notes, and we may terminate or amend the exchange offer as provided in this prospectus before we accept old notes. If we reasonably determine that we cannot lawfully complete the exchange offer we may: - refuse to accept any old notes and return all tendered old notes to the tendering holders; or - extend the exchange offer and retain all old notes tendered before the expiration of the exchange offer, subject, however, to the rights of holders to withdraw such old notes. See " -- Withdrawal of Tenders." ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes that have been validly tendered and not withdrawn, and will issue the applicable new notes in exchange for such old notes promptly after our acceptance of such old notes. For purposes of the exchange offer, we will be deemed to have accepted validly tendered old notes for exchange when, as, and if we have given written notice of such acceptance to the exchange agent. For each old note accepted for exchange, the holder of the old note will receive a new note having a principal amount equal to that of the surrendered old note. The new notes will bear interest from the most recent date to which interest has been paid on the old notes or, if no interest has been paid on the old notes, from April 25, 2001. Accordingly, registered holders of new notes on the relevant record date for the first interest payment date following the completion of the exchange offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from April 25, 2001. Old notes accepted for exchange will cease to accrue interest from and after the date we accept them for exchange. You will not receive any payment for accrued interest on the old notes otherwise payable on any interest payment date if the record date occurs on or after date on which we accept the old notes for exchange and you will be deemed to have waived your rights to receive the accrued interest on the old notes. If we do not accept any tendered old notes for any reason or if you submit old notes for a greater principal amount than you desire to exchange, we will return the unaccepted or non-exchanged old notes at our expense or, if the old notes were tendered by book-entry transfer, the exchange agent will credit the non-exchanged old notes to an account maintained with the book-entry transfer facility. In either case, these old notes will be returned promptly after the expiration or termination of the exchange offer. REGISTRATION RIGHTS; LIQUIDATED DAMAGES Pursuant to the terms of the exchange and registration rights agreement, we agreed to use our best efforts to complete the exchange offer and issue the new notes in exchange for the old notes. The following description is a summary of the material provisions of the exchange and registration rights agreement. It does not restate that agreement in its entirety. We urge you to read the exchange and registration rights agreement. If - we are not permitted to effect the exchange offer as contemplated by this prospectus because of any change in law or applicable interpretations of the law by the staff of the Securities and Exchange Commission; - for any other reason we do not consummate the exchange offer within 150 days after we issued the old notes; - we do not exchange any old notes validly tendered pursuant to the exchange offer for new notes within 10 days after we accepted them in the exchange offer; - any initial purchaser so requests with respect to old notes held by the initial purchasers that are not eligible to be exchanged for new notes in the exchange offer; 34 39 - any applicable law or interpretation does not permit any holder of old notes to participate in the exchange offer; or - any holder of old notes that participates in the exchange offer does not receive freely transferable new notes in exchange for tendered old notes, then we will file with the Securities and Exchange Commission as promptly as practicable, but in no event more than 20 business days after so required or requested, a shelf registration statement to cover resales of Transfer Restricted Securities by those holders who provide the information required for the shelf registration statement. We will use our commercially reasonable efforts to have the exchange offer registration statement or, if applicable, the shelf registration statement declared effective by the Securities and Exchange Commission as promptly as practicable after it is filed. Unless the exchange offer would not be permitted by policy of the Securities and Exchange Commission, we will commence the exchange offer and will use our reasonable best efforts to consummate the exchange offer as promptly as practicable, but in any event before 150 days after the date we issued the old notes. If applicable, we will use our reasonable best efforts to keep the shelf registration statement effective for a period ending on the earlier of two years after the date we issued the old notes or the date all Transfer Restricted Securities become eligible for resale without volume restrictions under Rule 144 under the Securities Act. The occurrence of any of the following events is a registration default: - the exchange offer registration statement is not filed with the Securities and Exchange Commission on or before 60 days after the date of issuance of the notes or the shelf registration statement is not filed with the Securities and Exchange Commission on or before the shelf filing date; - the exchange offer registration statement is not declared effective within 120 days after the date we issued the old notes or the shelf registration statement is not declared effective within 90 days after the shelf filing date; - the exchange offer is not consummated on or before 150 days after the date we issued the old notes; or - the shelf registration statement is declared effective within 90 days after the shelf filing date but thereafter ceases to be effective, at any time that we and our subsidiary guarantors are obligated to maintain its effectiveness, without being succeeded within 30 days by an additional registration statement filed and declared effective. If a registration default occurs, we and our subsidiary guarantors will be obligated to pay additional interest to each holder of Transfer Restricted Securities, during the period of one or more registration defaults, in an amount equal to $0.05 per week per $1,000 principal amount of the old notes constituting Transfer Restricted Securities held by the holder until the applicable registration statement is filed, the exchange offer registration statement is declared effective and the exchange offer is consummated, or the shelf registration statement is declared effective or again becomes effective, as the case may be. This rate will be increased by an additional $0.05 per week per $1,000 principal amount of the old notes for each 90 day period that any additional interest described in this paragraph continues to accrue. However, the rate for additional interest will not exceed $0.15 per week per $1,000 principal amount of old notes. All accrued additional interest will be paid to holders in the same manner as interest payments on the old notes on semi-annual payment dates that correspond to interest payment dates for the old notes. Additional interest only accrues during a registration default. The exchange and registration rights agreement also provides that we will: - make available, for a period of 180 days after the consummation of the exchange offer, a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any new notes; and - pay all expenses incident to the exchange offer, including the expense of one counsel to the holders of the old notes, and will indemnify certain holders of the old notes, including any broker-dealer, against some liabilities, including liabilities under the Securities Act. 35 40 A broker-dealer that delivers a prospectus to purchasers in connection with resales of the new notes will be subject to civil liability provisions under the Securities Act and will be bound by the provisions of the exchange and registration rights agreement, including indemnification rights and obligations. You will be required to deliver information to be used in connection with the shelf registration statement in order to have your old notes included in the shelf registration statement and benefit from the provisions regarding additional interest set forth in the preceding paragraphs. If you sell old notes pursuant to the shelf registration statement you generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers. You will also be subject to civil liability provisions under the Securities Act in connection with these sales and will be bound by the provisions of the exchange and registration rights agreement that apply to you, including indemnification obligations. EXCHANGE AGENT We have appointed The Bank of New York as the exchange agent for the exchange offer. The Bank of New York also acts as trustee under the indenture. You should send all executed transmittal letters to the exchange agent and direct all communications with the exchange agent, including requests for assistance or for additional copies of this prospectus or of the transmittal letters as follows: THE BANK OF NEW YORK, EXCHANGE AGENT By Registered or Certified Mail: The Bank of New York Reorganization Unit 101 Barclay Street, 7 East New York, NY 10286 Attn: Mr. Santino Ginocchietti By Hand or Overnight Delivery: The Bank of New York 101 Barclay Street Corporate Trust Services Window New York, NY 10286 Attn: Reorganization Section/Mr. Santino Ginocchietti By Facsimile for Eligible Institutions: (212) 815-6339 For Information: (212) 815-6331
IF YOU DELIVER THE TRANSMITTAL LETTER TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMIT INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, YOUR DELIVERY OR INSTRUCTIONS WILL NOT BE EFFECTIVE. FEES AND EXPENSES We will bear all expenses of the exchange offer. We are making the principal solicitation pursuant to the exchange offer by mail. Our officers and employees and our affiliates may also make solicitations in person, by telegraph, telephone or facsimile transmission. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse its reasonable out-of-pocket costs and expenses and will indemnify the exchange agent for all losses and claims incurred by it as a result of the exchange offer. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the old notes and in handling or forwarding tenders for exchange. 36 41 TRANSFER TAXES We will pay any transfer taxes applicable to the exchange of old notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of old notes pursuant to the exchange offer, then the amount of any of these transfer taxes -- whether imposed on you or any other person -- will be payable by you. For example, you will pay transfer taxes, if: - new notes for principal amounts not tendered, or accepted for exchange are to be registered or issued in the name of any person other than the registered holder of the old notes tendered; or - tendered old notes are registered in the name of any person other than the person signing the transmittal letter. If you do not submit satisfactory evidence of payment of taxes for which you are liable or exemption from them with your transmittal letter, we will bill you for the amount of these transfer taxes directly. ACCOUNTING TREATMENT We will record the new notes at the same carrying value as the old notes, which is the principal amount as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will capitalize the expenses of the exchange offer or debt issuance costs for accounting purposes. We will classify these expenses as prepaid expenses and include them in other assets on our balance sheet. We will amortize these expenses on a straight line basis over the life of the new notes. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES If you do not exchange your old notes for new notes pursuant to the exchange offer, you will continue to be subject to the transfer restrictions of your old notes. The old notes were originally issued in a transaction exempt from registration under the Securities Act, and may be offered, sold, pledged, or otherwise transferred only: - in the United States to a person whom the seller reasonably believes is a qualified institutional buyer as defined in Rule 144A under the Securities Act; - outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act; - pursuant to an exemption from registration under the Securities Act provided by Rule 144, if available; or - pursuant to an effective registration statement under the Securities Act. The offer, sale, pledge or other transfer of old notes must also be made in accordance with any applicable securities laws of any state of the United States, and the seller must notify any purchaser of the old notes of the restrictions on transfer described above. We do not currently anticipate that we will register the old notes under the Securities Act. APPRAISAL OR DISSENTERS' RIGHTS You will not have appraisal or dissenters' rights in connection with the exchange offer. 37 42 THE NEW NOTES We will issue the new notes under an existing indenture dated as of April 25, 2001 between us and The Bank of New York, as trustee. The terms of the notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The following describes some general terms and provisions of the new notes, which are identical in all material respects to the terms of the old notes, except that the registration rights and related liquidated damages provisions, and the transfer restrictions that apply to the old notes, do not apply to the new notes. The new notes will be a separate series of securities under the indenture. This description of new notes is intended to be a useful overview of the material provisions of the notes and the indenture. Since this description is only a summary, you should refer to the indenture and the notes for a complete description of our obligations and your rights. For purposes of this description, references to "Beverly Enterprises," "we," "our," and "us" refer only to Beverly Enterprises, Inc. and not to our subsidiaries. For the purposes of this section, the term "notes" will refer to the new notes. GENERAL THE NOTES The notes: - are our general unsecured, senior obligations; - are limited to an aggregate principal amount of $200.0 million; - mature on April 15, 2009; - will be issued in denominations of $1,000 and integral multiples of $1,000; - will be represented by one or more registered notes in global form, but in certain limited circumstances may be represented by notes in definitive form. See "Book-Entry, Delivery and Form"; and - rank equally in right of payment to any of our future unsecured senior debt. INTEREST Interest on the notes will be computed semi-annually and: - accrue at the rate of 9 5/8% per year; - accrue from April 25, 2001, or the most recent interest payment date on which interest has been paid; - be payable in cash semi-annually in arrears on April 15 and October 15, with the first payment on October 15, 2001; - be payable to the holders of record on the April 1 and October 1 immediately preceding the related interest payment dates; and - be computed on the basis of a 360-day year comprised of twelve 30-day months. PAYMENTS ON THE NOTES; PAYING AGENT AND REGISTRAR We will pay principal of, premium, if any, and interest on the notes at the office or agency designated by us in the Borough of Manhattan, The City of New York, except that we may, at our option, pay interest on the notes by check mailed to holders of the notes at their registered address as it appears in the registrar's books; provided that if you have given wire transfer instructions to the paying agent on or before the relevant record date, then your interest payment will be made by wire transfer of immediately available funds to the account 38 43 specified in your instructions. We have initially designated The Bank of New York as our paying agent and registrar and its agency in New York, New York as a place where notes may be presented for payment or for registration of transfer. We may, however, change the paying agent or registrar without prior notice to you, and we may act as paying agent or registrar. We will pay principal of, premium, if any, and interest on, notes in global form registered in the name of or held by The Depository Trust Company or its nominee in immediately available funds to The Depository Trust Company or its nominee, as the case may be, as the registered holder of the global notes. OPTIONAL REDEMPTION We may redeem the notes, at our option, in whole at any time or in part from time to time, on at least 30 days, but not more than 60 days' prior notice mailed to the registered address of each holder of notes to be so redeemed, at a redemption price equal to the greater of (1) 100% of their principal amount plus accrued but unpaid interest to the date of redemption, or (2) (A) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the date of redemption to the date of maturity, except for currently accrued but unpaid interest, discounted to the date of redemption, on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, plus 50 basis points, plus (B) accrued but unpaid interest to the date of redemption. MANDATORY REDEMPTION Except as set forth below under "-- Repurchase at the Option of the Holders", we are not required to make mandatory redemption payments or sinking fund payments for the notes. REPURCHASE AT THE OPTION OF THE HOLDERS Change of Control The indenture provides that, if a Change of Control occurs, you will have the right to require us to offer to repurchase all or any part of your notes at a purchase price in cash equal to 101% of the principal amount of the notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date. We will only redeem notes in a amount of $1,000 or an integral multiple of $1,000. Within 45 days following any Change of Control, we will, or we will direct the trustee to, mail a notice (the "Change of Control Offer") to each registered holder with a copy to the trustee stating: (1) that a Change of Control has occurred and that you have the right to require us to purchase your notes at a purchase price in cash equal to 101% of the principal amount of your notes plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of holders of record on a record date to receive interest on the relevant interest payment date (the "Change of Control Payment"); (2) the repurchase date, which will not be earlier than 30 days from the date such notice is mailed, or later than 90 days from the date the Change of Control occurred (the "Change of Control Payment Date"); (3) that any notes not tendered will continue to accrue interest in accordance with the terms of the indenture; and (4) the procedures determined by us, consistent with the indenture, that you must follow to have your notes repurchased. 39 44 On the Change of Control Payment Date, we will, to the extent lawful: (1) accept for payment all notes or portions of notes in integral multiples of $1,000 properly tendered and not withdrawn under the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment for all notes or portions of notes so tendered; and (3) deliver or cause to be delivered to the trustee the notes so accepted together with an officers' certificate stating the aggregate principal amount of notes or portions of notes being purchased by us. The paying agent will promptly mail to each holder of notes so tendered the Change of Control Payment for the notes, and the trustee will promptly authenticate and mail, or cause to be transferred by book entry, to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such new note will be in a principal amount of $1,000 or an integral multiple of $1,000. We will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. If the Change of Control Payment Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, will be paid to the person in whose name a note is registered at the close of business on such record date, and no additional interest will be payable to holders who tender pursuant to the Change of Control Offer. The Change of Control provisions described above will apply whether or not any other provisions of the indenture apply. If we fail to comply with the provisions of the four preceding paragraphs, our failure will constitute an Event of Default. Except as described above for a Change of Control, the indenture does not contain provisions that permit you to require that we repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations that apply to the repurchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of the indenture, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations described in the indenture by virtue of the conflict. The terms of substantially all of our Debt Instruments require that we repay or refinance our indebtedness under them in the event of a change of control, as defined in those Debt Instruments. If one or more of the change of control provisions in our other Debt Instruments is triggered before a Change of Control occurs, then we will have to repay or refinance the triggered Debt Instrument(s) before we repurchase any notes. As such, we may not be able to satisfy our obligations to repurchase the notes unless we are able to refinance those Debt Instruments or obtain waivers from our creditors under those Debt Instruments. We can not assure you that we will have the financial resources to repurchase the notes in the event of a Change of Control. See "Description of Certain Indebtedness." Asset Sales The indenture provides that we will not, and will not permit any of our Subsidiaries to, consummate an Asset Sale unless: (1) we (or the Subsidiary, as the case may be) receive consideration at the time of such Asset Sale at least equal to the fair market value (as conclusively determined by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and (2) at least 75% of the consideration therefor that we or such Subsidiary receive is in the form of cash or Cash Equivalents, provided that for purposes of this provision, (A) the amount of: 40 45 (i) any of our or such Subsidiary's liabilities (as shown on our or such Subsidiary's most recent balance sheet or in the notes thereto), other than liabilities that are by their terms subordinated to the notes or the Guarantees, that are assumed by the transferee of any such assets, and (ii) any securities or other obligations that we or such Subsidiary receive from such transferee that we or such Subsidiary immediately convert into cash or Cash Equivalents (or as to which we or such Subsidiary have received at or prior to the consummation of the Asset Sale a commitment (which may be subject to customary conditions) from a nationally recognized investment, merchant or commercial bank to convert into cash or Cash Equivalents within 90 days of the consummation of such Asset Sale and which are thereafter actually converted into cash or Cash Equivalents within such 90-day period) will be deemed to be cash or Cash Equivalents (but shall not be deemed to be Net Proceeds for purposes of the following provisions until reduced to cash or Cash Equivalents), and (B) the fair market value of any Non-Cash Consideration that we or a Subsidiary receive in any Non-Qualified Asset Sale shall be deemed to be cash to the extent that the aggregate fair market value (as conclusively determined by resolution of the Board of Directors set forth in an Officers' Certificate delivered to the trustee) of all Non-Cash Consideration (measured at the time received and without giving effect to any subsequent changes in value) received by the Company or any of its Subsidiaries since the date of the indenture in all Non-Qualified Asset Sales does not exceed 6% of our Stockholders' Equity as of the date of such consummation. Notwithstanding the foregoing, to the extent we or any of our Subsidiaries receives Non-Cash Consideration as proceeds of an Asset Sale, such Non-Cash Consideration shall be deemed to be Net Proceeds for purposes of (and shall be applied in accordance with) the following provisions when the Company or such Subsidiary receives cash or Cash Equivalents from a sale, repayment, exchange, redemption or retirement of or extraordinary dividend or return of capital on such Non-Cash Consideration. Pursuant to the indenture, within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Subsidiary may apply such Net Proceeds: (1) to purchase one or more Nursing Facilities or Related Businesses and/or a controlling interest in the Capital Stock of a Person owning one or more Nursing Facilities and/or one or more Related Businesses, (2) to make a capital expenditure or to acquire other tangible assets, in each case, that are used or useful in any business in which we are permitted to be engaged pursuant to the covenant described below under the caption "-- Certain Covenants -- Limitation on Business Activities," or (3) to permanently reduce our or our Subsidiaries' Indebtedness (other than Subordinated Indebtedness). Pending the final application of any such Net Proceeds, we or such Subsidiary may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any manner that is not prohibited by the indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25.0 million, we will be required to make an offer to all holders of notes and holders of any of our other Indebtedness ranking on a parity with the notes from time to time outstanding with similar provisions that require us to make an offer to purchase or to redeem such Indebtedness with the proceeds from any Asset Sales, pro rata in proportion to the respective principal amounts of notes and such other Indebtedness then outstanding (a "Senior Asset Sale Offer") to purchase the maximum principal amount of the notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of purchase, in accordance with the procedures set forth in the indenture. To the extent that the aggregate amount of notes and such other Indebtedness tendered pursuant to a Senior Asset Sale Offer is less than the Excess Proceeds, we may use any remaining Excess Proceeds for general corporate purposes not prohibited at the time under 41 46 the indenture. If the aggregate principal amount of notes and such other Indebtedness surrendered by holders thereof exceeds the amount of Excess Proceeds, the notes and such other Indebtedness will be purchased on a pro rata basis. Upon completion of a Senior Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. CERTAIN COVENANTS Restricted Payments The indenture provides that we will not, and will not permit any of our Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution on account of the Equity Interests of the Company or any of its Subsidiaries (other than (x) dividends or distributions payable in Qualified Equity Interests of the Company, (y) dividends or distributions payable to the Company or any Subsidiary of the Company, and (z) dividends or distributions by any Subsidiary of the Company payable to all holders of a class of Equity Interests of such Subsidiary on a pro rata basis); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any of its Subsidiaries; (3) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Indebtedness, except at the original final maturity date thereof; or (4) make any Restricted Investment, all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments," unless, at the time of and after giving effect to such Restricted Payment (the amount of any such Restricted Payment, if other than cash or Cash Equivalents, shall be the fair market value (as conclusively evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the trustee within 60 days prior to the date of such Restricted Payment) of the asset(s) proposed to be transferred by the Company or such Subsidiary, as the case may be, pursuant to such Restricted Payment): (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) we would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the Reference Period immediately preceding the date of such Restricted Payment, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant in the indenture described below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (3) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Subsidiaries after December 31, 1995 (excluding Restricted Payments permitted by clauses (1), (2), (3) and (4) of the next succeeding paragraph), is less than the sum (without duplication) of: (A) 50% of our Consolidated Net Income for the period (taken as one accounting period) from the beginning of the fiscal quarter commencing after December 31, 1995 to the end of our most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (B) 100% of the aggregate net cash proceeds that we receive from the issue or sale (other than to one of our Subsidiaries) since December 31, 1995 of Qualified Equity Interests of the Company or of debt securities of the Company or any of its Subsidiaries that have been converted into or exchanged for such Qualified Equity Interests of the Company, plus 42 47 (C) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (net of taxes and the cost of disposition, if any) or (ii) the initial amount of such Restricted Investment, plus (D) $20.0 million. The foregoing provisions will not prohibit the following Restricted Payments: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have otherwise complied with the provisions of the indenture; (2) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Subsidiary in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of Qualified Equity Interests of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph; (3) the defeasance, redemption or repurchase of Subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or in exchange for or out of the net cash proceeds from the substantially concurrent sale (other than to one of our Subsidiaries) of Qualified Equity Interests of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph; and (4) any purchase or defeasance of Subordinated Indebtedness to the extent required upon a change of control or asset sale (as defined therein) by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued, but only if we (A) in the case of a Change of Control, have complied with our obligations under the provisions described under the covenant entitled "Repurchase at the Option of the Holders -- Change of Control" or (B) in the case of an Asset Sale, have applied the Net Proceeds from such Asset Sale in accordance with the provisions under the covenant entitled "Repurchase at the Option of the Holders -- Asset Sales;" provided, however, in the case of each of clauses (1), (2), (3) and (4) of this paragraph, no Default or Event of Default shall have occurred or be continuing at the time of such Restricted Payment or would occur as a consequence thereof. Not later than the date of making any Restricted Payment, we shall deliver to the trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed. Incurrence of Indebtedness and Issuance of Preferred Stock The indenture provides that we will not, and will not permit any of our Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") after the date of the indenture any Indebtedness (including Acquired Debt) and we will not permit any of our Subsidiaries, to issue any shares of preferred stock; provided, however, that we and our Subsidiaries may incur Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for the Reference Period immediately preceding the date on which such additional Indebtedness is incurred would have been at least 2.5 to 1, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred at the beginning of such Reference Period. Indebtedness consisting of reimbursement obligations in respect of a letter of credit will be deemed to be incurred when the letter of credit is first issued. 43 48 The foregoing provisions do not apply to: (1) the incurrence by the Company or any of its Subsidiaries of Indebtedness pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential reimbursement obligation of the Company or any Subsidiary with respect thereto) not to exceed an amount equal to $175.0 million; (2) the incurrence by the Company and the guarantors of Indebtedness represented by the notes offered hereby and the related exchange notes and any guarantees thereof; (3) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted by the indenture to be incurred (including, without limitation, Existing Indebtedness); (4) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Subsidiaries; provided that in the case of such Indebtedness of the Company, such obligations shall be unsecured; (5) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by the indenture to be outstanding or any receivable or liability the payment of which is determined by reference to a foreign currency; provided that the notional principal amount of any such Hedging Obligation does not exceed the principal amount of the Indebtedness or the amount of such receivable or liability to which such Hedging Obligation relates; (6) the incurrence by the Company or any of its Subsidiaries of Indebtedness represented by performance bonds, warranty or contractual service obligations, standby letters of credit or appeal bonds, in each case to the extent incurred in the ordinary course of business of the Company or such Subsidiary; (7) the incurrence by Receivables Subsidiaries of Indebtedness not to exceed $100.0 million in the aggregate at any time outstanding, provided that (x) the Company has received customary legal or accounting opinions (or advice from a nationally recognized rating agency) that such Receivables Subsidiary is "bankruptcy remote" or otherwise would not be consolidated with the Company in a bankruptcy proceeding and that the sale of receivables to such Receivables Subsidiary qualify as a "true sale" and (y) such Indebtedness is otherwise non-recourse to the assets of the Company and its Subsidiaries other than a Receivables Subsidiary; and (8) the incurrence by the Company or any of its Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount at any time outstanding not to exceed $100.0 million. For purposes of determining any particular amount of Indebtedness under this covenant, guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this covenant, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness permitted by the second paragraph of this covenant, the Company shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the categories of permitted Indebtedness described above, and (2) the outstanding principal amount on any date of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness on such date. 44 49 Limitation on Liens The indenture provides that we will not, and will not permit any of our Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom unless all payments due under the indenture and the notes are secured on an equal and ratable basis with the Obligations so secured until such time as such Obligations are no longer secured by a Lien. Dividend and other Payment Restrictions Affecting Subsidiaries The indenture provides that we will not, and will not permit any of our Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary, other than a Receivables Subsidiary, to: (1) (A) pay dividends or make any other distributions to the Company or any of its Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or (B) pay any Indebtedness owed to the Company or any of its Subsidiaries, (2) make loans or advances to the Company or any of its Subsidiaries, or (3) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (1) existing Indebtedness as in effect on the date of the indenture, (2) the indenture, (3) applicable law, (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition or in violation of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that the Consolidated Cash Flow of such Person is not taken into account in determining whether such acquisition was permitted by the terms of the indenture except to the extent that such Consolidated Cash Flow would be permitted to be dividended to the Company without the prior consent or approval of any third party, (5) customary non-assignment provisions in leases entered into in the ordinary course of business, (6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (3) in the preceding paragraph on the property so acquired, (7) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, or (8) the Credit Agreement and related documentation as the same is in effect on the date of the indenture and as amended or replaced from time to time, provided that no such amendment or replacement is more restrictive as to the matters enumerated above than the Credit Agreement and related documentation as in effect on the date of the indenture. Nothing contained in this "Dividend and Other Payment Restrictions Affecting Subsidiaries" covenant shall prevent us or any of our Subsidiaries from creating, incurring, assuming or suffering to exist any Permitted Liens or entering into agreements in connection therewith that impose restrictions on the transfer or disposition of the property or assets subject to such Permitted Liens. 45 50 Limitation on Business Activities The indenture provides that we will not, and we will not permit any of our Subsidiaries to, engage to any material extent in any business other than the ownership, operation and management of Nursing Facilities and Related Businesses. Merger, Consolidation or Sale of Assets The indenture provides that we may not consolidate or merge with or into (whether or not we are the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless: (1) we are the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all of our obligations under the notes and the indenture pursuant to a supplemental indenture in form reasonably satisfactory to the trustee; (3) immediately after such transaction no Default or Event of Default exists; and (4) we or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than our Consolidated Net Worth immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the Reference Period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant in the indenture described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." Prior to the consummation of the proposed transaction, we will deliver to the trustee, an Officers' Certificate covering clauses (1) through (4) above and an Opinion of Counsel covering clauses (1) and (2) above, and each stating that the proposed transaction and such supplemental indenture comply with the indenture. The trustee shall be entitled to conclusively rely upon such Officers' Certification and Opinion of Counsel. Transactions with Affiliates The indenture provides that neither we nor any of our Subsidiaries will sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person, and (2) we deliver to the trustee (A) with respect to an Affiliate Transaction involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that 46 51 such Affiliate Transaction complies with clause (1) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors, and (B) with respect to an Affiliate Transaction involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company or such Subsidiary of such Affiliate Transaction from a financial point of view issued by an investment banking firm of national standing; provided that (i) transactions or payments pursuant to any employment arrangements, director or officer indemnification agreements or employee or director benefit plans entered into by the Company or any of its Subsidiaries in the ordinary course of business of the Company or such Subsidiary, (ii) transactions between or among the Company and/or its Subsidiaries and (iii) Restricted Payments permitted by the provisions of the indenture described above under the caption "-- Restricted Payments," in each case, shall not be deemed to be Affiliate Transactions. Future Guarantors and Release of Guarantors The indenture provides that any of our existing or future subsidiaries will be a guarantor of the notes, on a senior unsecured basis, on substantially the same terms as the existing guarantors, subject to certain exceptions, including that no Receivables Subsidiary will be required to be guarantors. Upon the sale or disposition (whether by merger, stock purchase, asset sale or otherwise) of a guarantor (or all of its assets) to an entity which is not our Subsidiary, or upon the dissolution of any guarantors which sale, disposition or dissolution is otherwise in compliance with the indenture, such guarantor shall be deemed released from its obligations under its Guarantee of the notes; provided, however, that any such termination shall occur only to the extent that all obligations of such guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any of our Indebtedness shall also terminate upon such sale, disposition or dissolution. Reports The indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any notes are outstanding, we will furnish to the trustee, within 15 days after we file or would have been required to file, all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 1O-Q and 10-K if we were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by our certified independent accountants. In addition, whether or not required by the rules and regulations of the Commission, we will file a copy of all such information and reports with the Commission for public availability and make such information available to securities analysts and prospective investors upon request. EVENTS OF DEFAULT AND REMEDIES The indenture provides that each of the following constitutes an Event of Default: (1) default for 30 days in the payment, when due, of interest on the notes; (2) default in payment when due of the principal of or premium, if any, on the notes, at maturity or otherwise; (3) failure by the Company or any guarantor to comply with the provisions described under the caption " -- Repurchase at the Option of Holders -- Change of Control" or " -- Repurchase at the Option of Holders -- Asset Sales"; 47 52 (4) failure by the Company or any guarantor for 30 days after notice to comply with the provisions described under the caption "-- Certain Covenants -- Restricted Payments" or "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; (5) failure by the Company or any guarantor for 60 days after notice to comply with any of its agreements in the indenture or the notes; (6) any default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries (or the payment of which is guaranteed by the Company or any of its Significant Subsidiaries), whether such Indebtedness or guarantee exists on the date of the indenture or is thereafter created, which default (A) constitutes a Payment Default or (B) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or that has been so accelerated, aggregates in excess of $20.0 million; (7) failure by the Company or any of its Significant Subsidiaries to pay final judgments aggregating in excess of $20.0 million entered by a court or courts of competent jurisdiction against the Company or such Significant Subsidiaries, which judgments are not paid, discharged or stayed for a period of 60 days; (8) any Guarantee shall cease for any reason not permitted by the indenture to be in full force and effect or any guarantor, or any person acting on behalf of any guarantor, shall deny or disaffirm its obligations under its Guarantee; and (9) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries. A Default under clause (4) or (5) is not an Event of Default until the trustee notifies the Company in writing, or the holders of at least 25% in aggregate principal amount of the then outstanding notes notify the Company and the trustee in writing, of the Default and the Company does not cure the Default within 30 days, with respect to a Default under clause (4), or 60 days with respect to a Default under clause (5), after receipt of such notice. The written notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." If any Event of Default occurs and is continuing (other than an Event of Default with respect to (9) above), the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding notes will become due and payable without further action or notice. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The holders of a majority in aggregate principal amount of the notes then outstanding by notice to the trustee on behalf of the holders of all of the notes, may waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on the notes. We are required to deliver to the trustee annually a statement regarding compliance with the indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the trustee a statement specifying such Default or Event of Default. LEGAL DEFEASANCE AND COVENANT DEFEASANCE We may, at our option and at any time, elect to have all of our obligations and the obligations of our guarantors discharged with respect to the outstanding notes ("Legal Defeasance") except for: 48 53 (1) the rights of holders of outstanding notes to receive payments in respect of the principal of, premium, if any, and interest on such notes when such payments are due from the trust referred to below, (2) our obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust, (3) the rights, powers, trusts, duties and immunities of the trustee, and our obligations in connection therewith, and (4) the Legal Defeasance provisions of the indenture. In addition, we may, at our option and at any time, elect to have our obligations and the obligations of our guarantors released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (1) we must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash, U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on such outstanding notes on the Maturity Date; (2) in the case of Legal Defeasance, we shall have delivered to the trustee an opinion of counsel in the United States confirming that: (A) we have received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of such outstanding notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, we shall have delivered to the trustee an opinion of counsel in the United States confirming that the holders of such outstanding notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture) to which we or any of our Subsidiaries is a party or by which we or any of our Subsidiaries is bound (other than a breach, violation or default resulting from the borrowing of funds to be applied to such deposit); (6) we must have delivered to the trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; 49 54 (7) we must deliver to the trustee an Officers' Certificate stating that we did not make the deposit with the intent of preferring the holders of such notes over our other creditors with the intent of defeating, hindering, delaying or defrauding our creditors or others; and (8) we must deliver to the trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS OR STOCKHOLDERS None of our directors, officers, employees, incorporators or stockholders, as such, shall have any liability for any of our obligations under the notes, the indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver may not be effective to waive liabilities under the Federal securities laws and it is the view of the Commission that such a waiver is against public policy. TRANSFER AND EXCHANGE A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and we may require a holder to pay any taxes and fees required by law or permitted by the indenture. The registered holder of a note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the indenture or the notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for such notes), and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding notes (including consents obtained in connection with a tender offer or exchange offer for such notes). Without the consent of each holder affected, an amendment or waiver may not (with respect to any notes held by a non-consenting holder): (1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver, (2) reduce the principal of or change the fixed maturity of any note, (3) reduce the rate of or change the time for payment of interest on any note, (4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount thereof and a waiver of the Payment Default that resulted from such acceleration), (5) make any note payable in money other than that stated in the notes, (6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of or premium, if any, or interest on the notes, or (7) make any change in the foregoing amendment and waiver provisions. 50 55 Notwithstanding the foregoing, without the consent of any holder of notes, we, our guarantors and the trustee may amend or supplement the indenture or the notes: (1) to cure any ambiguity, defect or inconsistency, (2) to provide for uncertificated notes in addition to or in place of certificated notes, (3) to provide for additional guarantors of the notes or the release, in accordance with the indenture, of any guarantor, (4) to provide for the assumption of our or any guarantor's obligations to holders of notes in the case of a merger, consolidation or sale of assets, (5) to provide for additional guarantors of the notes, (6) to evidence the release of any guarantor in accordance with the provisions of the indenture, (7) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder, (8) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended, (9) to evidence and provide for the acceptance of the appointment of a successor trustee with respect to the Securities, or (10) in any other case, pursuant to the provisions of the indenture, where a supplemental indenture is required or permitted to be entered into without the consent of any holder of notes. CONCERNING THE TRUSTEE The indenture will contain certain limitations on the rights of the trustee, should the trustee become our creditor, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if the trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default shall occur (which shall not be cured), the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will not be under any obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. The Bank of New York, an affiliate of BNY Capital Markets, Inc., is the trustee, registrar and paying agent under the indenture. An affiliate of the trustee, BNY Capital Markets, Inc., was an initial purchaser of the old notes. BNY Capital Markets, Inc. is also a lender under our senior secured credit facility. If an event of default (or an event that would be an event of default if the requirements for giving us notice of default or our default having to exist for a specific period of time were disregarded) occurs, the trustee may be considered to have a conflicting interest with respect to the notes for purposes of the Trust Indenture Act. In that case, the trustee may be required to resign as trustee under the indenture and we would be required to appoint a successor trustee. GOVERNING LAW The indenture will provide that it and the notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. 51 56 DESCRIPTION OF CERTAIN INDEBTEDNESS The net proceeds of the old notes were used to refinance and permanently reduce our commitment under our old $375.0 million senior secured credit facility. New Senior Secured Credit Facility. Simultaneously with the offering of the old notes, we entered into a new $150.0 million senior secured credit facility of which $75.0 million will be available for letters of credit. Borrowings under our new senior secured credit facility will bear interest according to a pricing schedule based on our financial leverage and will bear an initial interest rate of adjusted LIBOR plus 2.875%, the Base Rate plus 1.875% or the adjusted CD rate, each as defined, plus 3.000% at our option. Such spreads may be adjusted quarterly based on certain financial ratio calculations. Our new senior secured credit facility is secured by certain of our real and personal property (but not our receivables), stock of certain of our subsidiaries and is guaranteed by substantially all of our present and future subsidiaries and imposes on us certain financial tests and restrictive covenants, and maintenance tests. Senior Notes. We have $180.0 million of 9% Senior Notes due February 15, 2006 (the "Senior Notes") which were sold through a public offering. The Senior Notes are unsecured obligations and guaranteed by the same subsidiaries that will guarantee these notes and impose on us certain restrictive covenants that are substantially similar to those to be contained in the notes offered hereby. The Senior Notes are redeemable at our option in whole or in part, at any time at the following redemption prices (expressed as percentages at the principal amount) if redeemed during the 12-month period commencing February 15 of the years indicated below, in each case, together with accrued and unpaid interest thereon to the redemption date:
YEAR PERCENTAGE - ---- ---------- 2001........................................................ 104.5% 2002........................................................ 103.0% 2003........................................................ 101.5% 2004 and thereafter......................................... 100.0%
Upon the occurrence of a change of control each holder of the Senior Notes will have the right to require us to repurchase all or any part of such holder's Senior Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon to the date of purchase. In certain circumstances, we may be required to offer to redeem the Senior Notes from excess proceeds from asset sales. We are not otherwise required to make any mandatory redemption or sinking fund payments with respect to the Senior Notes. 7% Note. We issued a $65.0 million 7% note to A.I. Credit Corp. of which $32.5 million is currently outstanding and is due in installments through January 2002. This Note is secured by a surety bond. Medium Term Notes. Our subsidiary, Beverly Funding Corporation, has outstanding $70,000,000 of Medium Term Notes due March 2005. The Medium Term Notes are collateralized by patient accounts receivable, which are sold, from time to time, by one of our subsidiaries to Beverly Funding Corporation. Under applicable accounting rules, Beverly Funding Corporation is not consolidated in our financial statements. At December 31, 2000, Beverly Funding Corporation had total assets of approximately $110,000,000. Beverly Funding Corporation is required to maintain receivables and certain other liquid assets based upon the amount of the then outstanding Medium Term Notes. We service and administer the receivables sold by us to Beverly Funding Corporation. The Medium Term Notes bear interest at LIBOR plus 0.70%. We are not otherwise required to make any mandatory redemption or sinking fund payments with respect to the Medium Term Notes. Other Indebtedness. Our subsidiaries have tax-exempt industrial development revenue bonds outstanding which were originally issued prior to 1986 primarily for the construction or acquisition of nursing facilities. In addition, our subsidiaries, have various mortgage financings. We also have other debt obligations with respect to the OIG Settlement and patient care liability claims. See Notes 6 and 7 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2000. 52 57 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of the material federal income tax considerations relevant to the exchange of old notes for new notes pursuant to the exchange offer. This discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations, Internal Revenue Service rulings and pronouncements, and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively in a manner that could adversely affect your notes. We have not and will not seek any rulings from the Internal Revenue Service with respect to the matters discussed below. We cannot assure you that the Internal Revenue Service will not take positions concerning tax consequences of the exchange offer which are different from those discussed below. This discussion does not consider the effect of any applicable foreign, state, local or other tax laws or estate or gift tax considerations. This discussion also does not address the federal income tax consequences to holders subject to special treatment under the federal income tax laws, such as dealers in securities or foreign currency, tax-exempt entities, banks, thrifts, insurance companies, persons that hold the notes as part of a straddle, hedge or conversion transaction, persons that have a functional currency other than the United States dollar, and investors in pass-through entities. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF EXCHANGING OLD NOTES FOR NEW NOTES PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. The exchange of old notes for new notes pursuant to the exchange offer will not constitute a taxable exchange for federal income tax purposes. You will have a tax basis in the new notes equal to your tax basis in the old notes exchanged therefor and your holding period for the new notes will include your holding period for the old notes exchanged therefor. Accordingly, the exchange should have no material federal income tax consequences to you. 53 58 PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account in connection with the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed that for a period ending on the earlier of (1) 180 days after the date of this prospectus or (2) the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities, we will make available and provide promptly upon reasonable request this prospectus, in a form meeting the requirements of the Securities Act, to any broker-dealer for use in connection with any such resale. We will receive no proceeds in connection with the exchange offer. Exchange notes received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. A resale may be made directly to purchasers or through brokers or dealers who may receive compensation in the form of commissions or concessions from the broker-dealer and/or the purchasers of new notes. Any broker-dealer that resells new notes that it received for its own account in the exchange offer and any broker or dealer that participates in a distribution of the new notes may be an underwriter within the meaning of the Securities Act, and any profit on the resale of exchange notes and any commissions or concessions received by these persons may be underwriting compensation under the Securities Act. The transmittal letter states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be considered to admit that it is an underwriter. We have agreed to pay all expenses incident to our performance of, or compliance with, the exchange and registration rights agreement and will indemnify the holders of Transfer Restricted Securities, including any broker-dealers, and certain parties related to such holders, against certain liabilities including liabilities under the Securities Act. LEGAL MATTERS The validity of the new notes will be passed upon for us by Latham & Watkins, Chicago, Illinois, and certain other matters will be passed on for us by Douglas J. Babb, Esq. our Executive Vice President -- Law and Government Relations and Secretary of the Company. EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements and schedule included in our Annual Report on Form 10-K for the year ended December 31, 2000, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. 54 59 GLOSSARY Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback or by merger or consolidation) other than in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "-- Repurchase at the Option of Holders -- Change of Control" and/or the provisions described above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions of the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales"), and (ii) the issuance or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $10.0 million or (b) for net proceeds in excess of $10.0 million. Notwithstanding the foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity Interests by a Subsidiary to the Company or to another Subsidiary, (c) a Restricted Payment that is permitted by the covenant described above under the caption "-- Restricted Payments" and (d) a Nursing Facility Swap will not be deemed to be an Asset Sale. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit with maturities of one year or less from the date of acquisition, bankers' acceptances (or, with respect to foreign banks, similar instruments) with maturities not exceeding one year and overnight bank deposits, in each case with any domestic commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $100.0 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, 55 60 (v) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within one year after the date of acquisition, and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in the foregoing clauses (i) through (v). "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or group (as such term is used in Sections l3(d)(3) and l4(d)(2) of the Exchange Act) other than to a Person or group who, prior to such transaction, held a majority of the voting power of the voting stock of the Company, (ii) the acquisition by any Person or group (as defined above) of a direct or indirect interest in more than 50% of the voting power of the voting stock of the Company, by way of merger or consolidation or otherwise, or (iii) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. The phrase "all or substantially all" of the assets of the Company will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" of the assets of the Company has occurred, in which case a holder's ability to obtain the benefit of a Change of Control Offer may be impaired. In addition, no assurances can be given that the Company will be able to acquire notes tendered upon the occurrence of a Change of Control. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes. "COMPARABLE TREASURY PRICE" means, with respect to any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, (i) as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York or published on the website of the Federal Reserve Bank of New York at http://www.ny.frb.org and designated "Composite 3:30 p.m. Quotations for the U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, the average of the Reference Treasury Dealer Quotations for such redemption date. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent such provision for taxes was included in computing such Consolidated Net Income, plus (ii) the Fixed Charges of such Person and its Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income, plus (iii) depreciation and amortization (including amortization of goodwill and other intangibles) of such Person and its Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, plus (iv) other non-cash items of such Person and its Subsidiaries for such period to the extent such non-cash items were deducted in computing such Consolidated Net Income, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, the depreciation and amortization of, and the other non-cash items of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis; provided that, (i) the Net Income, if positive, of any Person that is not a Subsidiary or that is accounted for by the equity method of 56 61 accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Subsidiary thereof, (ii) the Net Income, if positive, of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Redeemable Stock), less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made in accordance with GAAP as a result of the acquisition of such business) subsequent to the date of the indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, and excluding the cumulative effect of a change in accounting principles, all as determined in accordance with GAAP. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CREDIT AGREEMENT" means a credit agreement providing for revolving or term loans and other extensions of credit to the Company and its Subsidiaries. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXISTING COLLATERAL" means property or assets of the Company or its Subsidiaries (other than any Receivables Subsidiary) that are, or since the date of the original issuance of the 9% Senior Notes of the Company due 2006, subject to one or more Permitted Liens. "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Subsidiaries in existence on the date of the indenture until such amounts are repaid. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that such Person or any of its Subsidiaries incurs, assumes, guarantees, redeems or repays any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption or repayment of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable Reference Period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the Reference Period or subsequent to such Reference Period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the Reference Period and (ii) the Consolidated Cash Flow and Fixed Charges attributable to operations or businesses disposed of prior to the Calculation Date shall be excluded. 57 62 "FIXED CHARGES" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Subsidiaries that was capitalized during such period, and (iii) interest actually paid by such Person or any of its Subsidiaries under any guarantee of Indebtedness or other obligation of any other Person and (iv) the product of (a) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Subsidiary) on any series of preferred stock of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; provided, however, in the event that any cash dividend payment is deductible for federal, state and/or local tax purposes, the amount of the tax deduction relating to such cash dividend payment for such period shall be subtracted from the Fixed Charges for such Person for such period. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect from time to time. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) foreign exchange contracts or currency swap agreements and (iii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values. "INDEBTEDNESS" means, with respect to any Person, (i) any Redeemable Stock of such Person, (ii) any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (iii) all indebtedness of any other Person secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, (iv) to the extent not otherwise included, the guarantee by such Person of any indebtedness of any other Person. "INDEPENDENT INVESTMENT BANKER" means the Reference Treasury Dealer appointed by the trustee after consultation with the Company. "INVESTMENT" by any Person in any other Person means (without duplication) (a) the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other Person or any agreement to make any such acquisition; (b) the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable or deposits arising in the ordinary course of business); (c) other than guarantees of Indebtedness of the Company or any Subsidiary to the extent permitted by the covenant described under the caption "-- Certain Covenants -- 58 63 Incurrence of Indebtedness and Issuance of Preferred Stock," the entering into by such Person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other Person; provided, however, Investments shall not be deemed to include extensions of trade credit by such Person or any of its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of such Person or such Subsidiary, as the case may be. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset given to secure Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction with respect to any such lien, pledge, charge or security interest). "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, and before any reduction in respect of preferred stock dividends, excluding, however, the effect of any extraordinary or other material non-recurring gain or loss outside the ordinary course of business, together with any related provision for taxes on such extraordinary or other material non-recurring gain or loss. "NET PROCEEDS" means the aggregate cash or Cash Equivalent proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any other expenses incurred or to be incurred by the Company or a Subsidiary as a direct result of the sale of such assets (including, without limitation, severance, relocation, lease termination and other similar expenses), taxes actually paid or payable as a result thereof, amounts required to be applied to the repayment of Indebtedness (other than Subordinated Indebtedness) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-CASH CONSIDERATION" means any non-cash or non-Cash Equivalent consideration received by the Company or a Subsidiary of the Company in connection with an Asset Sale and any non-cash or non-Cash Equivalent consideration received by the Company or any of its Subsidiaries upon disposition thereof. "NON-QUALIFIED ASSET SALE" means an Asset Sale in which the Non-Cash Consideration received by the Company or its Subsidiaries exceeds 25% of the total consideration received in connection with such Asset Sale calculated in accordance with clause (x), but not clause (y), of the proviso to the first sentence under the caption "-- Repurchase at the Option of Holders -- Asset Sales." "NURSING FACILITY" means a nursing facility, hospital, outpatient clinic, assisted living center, hospice, long-term care facility or other facility that is used or useful in the provision of health care services. "NURSING FACILITY SWAP" means an exchange of assets by the Company or one or more Subsidiaries of the Company for one or more Nursing Facilities and/or one or more Related Businesses or for the Capital Stock of any Person owning one or more Nursing Facilities and/or one or more Related Businesses. "OBLIGATIONS" means any principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "PAYMENT DEFAULT" means any failure to pay any scheduled installment of principal on any Indebtedness within the grace period provided for such payment in the documentation governing such Indebtedness. "PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company or becomes a Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person merged into or consolidated with the Company or that becomes a Subsidiary of the Company; (iii) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; 59 64 (iv) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens (I) existing on the date of the indenture under which the notes are to be issued to the extent that such Liens secure Indebtedness outstanding on the date of the indenture, (II) secured Indebtedness under clause (i) of the second paragraph of "Incurrence of Indebtedness and Issuance of Preferred Stock" or (III) on property or assets that were subject to a Lien on the date of the indenture that secure indebtedness permitted by the indenture under which the notes are to be issued; (vi) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (vii) Liens to secure Permitted Refinancing Indebtedness incurred to refinance Indebtedness that was secured by a Lien permitted under the indenture and that was incurred in accordance with the provisions of the indenture; provided that such Liens do not extend to or cover any property or assets of the Company or any of its Subsidiaries other than assets or property securing the Indebtedness so refinanced or Substitute Mortgage Collateral therefor; (viii) Liens on Substitute Mortgage Collateral; (ix) Purchase Money Liens; (x) Liens on Medicare, Medicaid or other patient accounts receivable of the Company or its Subsidiaries and any other Liens granted by a Receivables Subsidiary, in each case in connection with a Receivables Financing; provided that the aggregate principal or redemption amount of Receivables Financing outstanding shall not exceed 50% of the net amount of the uncollected Medicare, Medicaid or other patient accounts receivable then owing to the Company or its Subsidiaries; (xi) Liens on real estate and related personal property with a fair market value not in excess of 50% of the fair market value of any Existing Collateral which has become free and clear of all Liens securing Indebtedness since the date of original issuance of the 9% Senior Notes of the Company due 2006; (xii) Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business; (xiii) easements, rights-of-way, zoning restrictions, reservations, encroachments and other similar encumbrances in respect of real property; (xiv) any interest or title of a lessor under any Capitalized Lease Obligation; (xv) Liens upon specific items of inventory or equipment and proceeds of the Company or any subsidiary securing its obligations in respect of bankers' acceptances issued or created for its account (whether or not under the Credit Agreement) to facilitate the purchase, shipment, or storage of such inventory and equipment; (xvi) Liens securing reimbursement obligations with respect to letters of credit (whether or not issued under the Credit Agreement) otherwise permitted under the indenture and issued in connection with the purchase of inventory or equipment by the Company or any Subsidiary in the ordinary course of business; (xvii) Liens to secure (or encumbering deposits securing) obligations arising from warranty or contractual service obligations of the Company or any Subsidiary, including rights of offset and set-off; (xviii) Liens securing Acquired Debt or acquisition Indebtedness otherwise permitted by the indenture; provided that (A) the Indebtedness secured shall not exceed the fair market value of the assets so acquired (such fair market value to be determined in good faith by the Board of Directors of the Company at the time of such acquisition) and (B) such Indebtedness shall be incurred, and the Lien securing such Indebtedness shall be created, within 12 months after such acquisition; (xix) Liens securing Hedging Obligations agreements relating to Indebtedness otherwise permitted under the indenture; (xx) Liens securing stay and appeal bonds or judgment Liens in connection with any judgment not giving rise to a Default under the indenture; and (xxi) other Liens on assets of the Company or any of its Subsidiaries securing Indebtedness that is permitted by the terms of the indenture to be outstanding having an aggregate principal amount at any one time outstanding not to exceed $5.0 million. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used solely to extend, refinance, renew, replace, defease or refund, other Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of any premiums paid and reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, 60 65 refinanced, renewed, replaced, defeased or refunded is Subordinated Indebtedness, such Permitted Refinancing Indebtedness has a final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of the notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) if the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is a Subsidiary that is not a guarantor, such Permitted Refinancing Indebtedness shall only be incurred by such Subsidiary. "PURCHASE MONEY INDEBTEDNESS" means any Indebtedness of a Person to any seller or other Person incurred to finance the acquisition or construction (including in the case of a Capital Lease Obligation, the lease) of any asset or property which is incurred within 180 days of such acquisition or completion of construction (or, if later, commencement of current operations) and is secured only by the assets so financed. "PURCHASE MONEY LIEN" means a Lien granted on an asset or property to secure Purchase Money Indebtedness permitted to be incurred under the indenture and incurred solely to finance the acquisition or construction of such asset or property; provided, however, that such Lien encumbers only such asset or property and is granted within 180 days of such acquisition or completion of construction (or, if later, commencement of current operations). "QUALIFIED EQUITY INTERESTS" shall mean all Equity Interests of the Company other than Redeemable Stock of the Company. "RECEIVABLES FINANCING" means the sale or other disposition of Medicare, Medicaid or other patient accounts receivable of the Company or any of its Subsidiaries to a Receivables Subsidiary followed by a financing transaction in connection with such sale or disposition of such accounts receivable. "RECEIVABLES SUBSIDIARY" means a Subsidiary of the Company exclusively engaged in Receivables Financing and activities reasonably related thereto, including Beverly Funding Corporation, a Delaware corporation. "REDEEMABLE STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the notes mature. "REFERENCE PERIOD" with regard to any Person means the four full fiscal quarters (or such lesser period during which such Person has been in existence) for which internal financial statements are available ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the notes or the indenture. "REFERENCE TREASURY DEALER" means JPMorgan, a division of Chase Securities Inc., and its successors; provided, however, that if JPMorgan shall cease to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefore another Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quote in writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date. "RELATED BUSINESS" means the business conducted by the Company and its Subsidiaries as of the date of the indenture and any and all health care service businesses that in the good faith judgment of the Board of Directors of the Company are materially related businesses. Without limiting the generality of the foregoing, Related Business shall include the operation of long-term and specialty health care services, skilled nursing care, subacute care, rehabilitation programs, pharmaceutical services, geriatric care and home health care. "RESTRICTED INVESTMENT" means, in one or a series of related transactions, any Investment, other than (i) Investments in Cash Equivalents, (ii) Investments in a Subsidiary, (iii) Investments in any Person that as a consequence of such Investment becomes a Subsidiary, (iv) Investments existing on the date of the 61 66 indenture, (v) accounts receivable, advances, loans, extensions of credit created or acquired in the ordinary course of business, (vi) Investments made as a result of the receipt of Non-Cash Consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Repurchase at the Option of the Holders -- Asset Sales," (vii) Investments made as the result of the guarantee by the Company or any of its Subsidiaries of Indebtedness of a Person or Persons other than the Company or any Subsidiary of the Company that is secured by Liens on assets sold or otherwise disposed of by the Company or such Subsidiary to such Person or Persons; provided, that such Indebtedness was in existence prior to the contemplation of such sale or other disposition and that the terms of such guarantee permit the Company or such Subsidiary to foreclose on the pledged or mortgaged assets if the Company or such Subsidiary are required to perform under such guarantee and (viii) Investments in any Related Business; provided, however, that a merger of another person with or into the Company or a Guarantor shall not be deemed to be a Restricted Investment so long as the surviving entity is the Company or a direct wholly owned Guarantor. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 or Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date of the indenture. "STOCKHOLDERS' EQUITY" means, with respect to any Person as of any date, the stockholders' equity of such Person determined in accordance with GAAP as of the date of the most recent available internal financial statements of such Person, and calculated on a pro forma basis to give effect to any acquisition or disposition by such person consummated or to be consummated since the date of such financial statements and on or prior to the date of such calculation. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a guarantor that is subordinated in right of payment to the notes or such Subsidiary's Guarantee of the notes, as applicable. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "SUBSTITUTE MORTGAGE COLLATERAL" means real estate and related personal property on which Liens are created in substitution for the release of Liens on other real estate and related personal property ("Initial Liens"); provided that (i) such Initial Liens were permitted by the terms of the indenture, (ii) the fair market value of the Substitute Mortgage Collateral (as conclusively evidenced by an Officers' Certificate delivered to the trustee within 60 days prior to the date of such substitution of collateral) is substantially equivalent to or less than the fair market value of the property subject to the released Initial Liens and (iii) the Indebtedness secured by the Liens on Substitute Mortgage Collateral is permitted by the terms of the indenture. "TREASURY RATE" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity, or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. 62 67 "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. 63 68 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") grants corporations the right to limit or eliminate the personal liability of their directors in certain circumstances in accordance with provisions therein set forth. Article XIII of the Certificate of Incorporation of Beverly Enterprises, Inc. contains a provision eliminating or limiting director liability to Beverly Enterprises, Inc. and its stockholders for monetary damages arising from acts or omissions in the director's capacity as a director. The provision does not, however, eliminate or limit the personal liability of a director (i) for any breach of such director's duty of loyalty to Beverly Enterprises, Inc. or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under the Delaware statutory provision making directors personally liable, under a negligence standard, for unlawful dividends or unlawful stock purchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit. This provision offers persons who serve on the board of directors of Beverly Enterprises, Inc. protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above). As a result of this provision, the ability of Beverly Enterprises, Inc. or a stockholder thereof to successfully prosecute an action against a director for a breach of his duty of care is limited. However, the provision does not affect the availability of equitable remedies such as an injunction or rescission based upon a director's breach of his duty of care. The SEC has taken the position that the provision will have no effect on claims arising under the Federal securities laws. Section 145 of the DGCL grants corporations the right to indemnify their directors, officers, employees and agents in accordance with the provisions therein set forth. Article XIII of the Certificate of Incorporation of Beverly Enterprises, Inc. and Article VI, Section 1 of the Bylaws of Beverly Enterprises, Inc. provide for mandatory indemnification rights, subject to limited exceptions, to any director, officer, employee, or agent of Beverly Enterprises, Inc. who, by reason of the fact that he or she is a director, officer, employee, or agent of Beverly Enterprises, Inc., is involved in a legal proceeding of any nature. Such indemnification rights include reimbursement for expenses incurred by such director, officer, employee, or agent in advance of the final disposition of such proceeding in accordance with the applicable provisions of the DGCL. II-1 69 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Indenture, dated as of April 25, 2001, among Beverly Enterprises, Inc., the subsidiary guarantors as named therein and The Bank of New York, as trustee 4.2 Form of old 9 5/8% Senior Note due 2009 (included in Exhibit 4.1) 4.3 Form of new 9 5/8% Senior Note due 2009 (included in Exhibit 4.1) 4.4 Exchange and Registration Rights Agreement, dated April 25, 2001, among Beverly Enterprises, Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. 5.1 Opinion of Latham & Watkins 5.2 Opinion of Douglas J. Babb, Esq. 10.1 Purchase Agreement, dated April 18, 2001, among Beverly Enterprises Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. 12.1 Statement re: Computation of Ratios 13.1 Annual Report on Form 10-K for the fiscal year ended December 31, 2000 13.2 Quarterly Report on Form 10-Q for the three-months ended March 31, 2001 23.1 Consent of Ernst & Young LLP 23.2 Consent of Latham & Watkins (included in Exhibit 5.1) 23.3 Consent of Douglas J. Babb, Esq. (included in Exhibit 5.2) 24.1 Power of Attorney of the Company (incorporated in the signature page on page S-2 of this Registration Statement) 24.2 Power of Attorney of the Guarantors 25.1 Statement of Eligibility of Trustee 99.1 Form of Transmittal Letter 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to DTC Participants 99.4 Form of Letter to Beneficial Holders 99.5 Form of Letter to Clients 99.6 Form of Guidelines for Certification 99.7 Exchange Agent Agreement dated June 14, 2001, among Beverly Enterprises, Inc. and The Bank of New York
ITEM 22. UNDERTAKINGS (a) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered II-2 70 (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (e) The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of each registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 71 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on date set forth below. BEVERLY ENTERPRISES, INC. /s/ Schuyler Hollingsworth, Jr. By: -------------------------------------- Schuyler Hollingsworth, Jr. Senior Vice President and Treasurer DATE: June 14, 2001 II-4 72 KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on June 14, 2001 in the capacities indicated.
SIGNATURE TITLE --------- ----- /s/ David R. Banks Chairman of the Board and Director - --------------------------------------------- David R. Banks /s/ William R. Floyd President, Chief Executive Officer and Director - --------------------------------------------- (Principal Executive Officer) William R. Floyd /s/ Pamela H. Daniels Senior Vice President and Controller (Principal - --------------------------------------------- Financial and Accounting Officer) Pamela H. Daniels /s/ Beryl F. Anthony, Jr. Director - --------------------------------------------- Beryl F. Anthony, Jr. /s/ Harris Diamond Director - --------------------------------------------- Harris Diamond /s/ James R. Greene Director - --------------------------------------------- James R. Greene /s/ Edith E. Holiday Director - --------------------------------------------- Edith E. Holiday /s/ James W. McLane Director - --------------------------------------------- James W. McLane /s/ Marilyn R. Seymann Director - --------------------------------------------- Marilyn R. Seymann
II-5 73 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. AGI-Camelot, Inc. Beverly -- Bella Vista Holding, Inc. Beverly -- Branson Holdings, Inc. Beverly -- Missouri Valley Holding, Inc. Beverly -- Rapid City Holding, Inc. Beverly Enterprises -- Arkansas, Inc. Beverly Enterprises -- Illinois, Inc. Beverly Enterprises -- Indiana, Inc. Beverly Enterprises -- Kansas, Inc. Beverly Enterprises -- Michigan, Inc. Beverly Enterprises -- Minnesota, Inc. Beverly Enterprises -- Missouri, Inc. Beverly Enterprises -- Nebraska, Inc. Beverly Enterprises -- Nevada, Inc. Beverly Enterprises -- New Hampshire, Inc. Beverly Enterprises -- New Mexico, Inc. Beverly Enterprises -- North Dakota, Inc. Beverly Enterprises -- Oklahoma, Inc. Beverly Enterprises -- Oregon, Inc. Beverly Enterprises -- Rhode Island, Inc. Beverly Enterprises -- Tennessee, Inc. Beverly Enterprises -- Texas, Inc. Beverly Enterprises -- Utah, Inc. Beverly Enterprises -- Vermont, Inc. Beverly Enterprises -- Washington, Inc. Beverly Enterprises -- Wisconsin, Inc. Beverly Enterprises -- Wyoming, Inc. Beverly Healthcare, LLC Beverly-Indianapolis, LLC Commercial Management, Inc. Nebraska City S-C-H, Inc. South Alabama Nursing Home, Inc. South Dakota -- Beverly Enterprises, Inc. Vantage Healthcare Corporation /s/ John W. Mackenzie By: -------------------------------------- Name: John W. MacKenzie Title: Attorney-in-fact of the above-referenced Co-Registrants II-6 74 Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Director and President - --------------------------------------------- (Principal Executive Officer) David R. Devereaux * Director and Vice President -- Finance - --------------------------------------------- (Principal Financial Officer) Kevin M. Roberts * Senior Vice President and Treasurer - --------------------------------------------- (Principal Accounting Officer) Schuyler Hollingsworth, Jr.
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. MacKenzie, Esq., Attorney-in-fact II-7 75 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. Beverly Assisted Living, Inc. Beverly -- Plant City Holdings, Inc. Beverly -- Tamarac Holdings, Inc. Beverly -- Tampa Holdings, Inc. Beverly Clinical, Inc. Beverly Enterprises -- Alabama, Inc. Beverly Enterprises -- Arizona, Inc. Beverly Enterprises -- Colorado, Inc. Beverly Enterprises -- Connecticut, Inc. Beverly Enterprises -- Delaware, Inc. Beverly Enterprises -- Distribution Services, Inc. Beverly Enterprises -- District of Columbia, Inc. Beverly Enterprises -- Florida, Inc. Beverly Enterprises -- Garden Terrace, Inc. Beverly Enterprises -- Georgia, Inc. Beverly Enterprises -- Hawaii, Inc. Beverly Enterprises -- Idaho, Inc. Beverly Enterprises -- Iowa, Inc. Beverly Enterprises -- Kentucky, Inc. Beverly Enterprises -- Louisiana, Inc. Beverly Enterprises -- Maine, Inc. Beverly Enterprises -- Maryland, Inc. Beverly Enterprises -- Massachusetts, Inc. Beverly Enterprises -- Mississippi, Inc. Beverly Enterprises -- Montana, Inc. Beverly Enterprises -- New Jersey, Inc. Beverly Enterprises -- North Carolina, Inc. Beverly Enterprises -- Ohio, Inc. Beverly Enterprises -- Pennsylvania, Inc. Beverly Enterprises -- South Carolina, Inc. Beverly Enterprises -- Virginia, Inc. Beverly Enterprises -- West Virginia, Inc. Beverly Healthcare Acquisition, Inc. Beverly Healthcare -- California, Inc. Beverly Holdings I, Inc. Beverly Manor Inc. of Hawaii Beverly Real Estate Holdings, Inc. Beverly Savana Cay Manor, Inc. Hallmark Convalescent Homes, Inc. Liberty Nursing Homes, Incorporated Medical Arts Health Facility of Lawrenceville, Inc. Moderncare of Lumberton, Inc. Nursing Home Operators, Inc. II-8 76 Petersen Health Care, Inc. By: /s/ John W. Mackenzie ------------------------------------ Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Director and President - ------------------------------------------------ (Principal Executive Officer) David R. Devereaux * Vice President -- Finance-Coastal and Director - ------------------------------------------------ (Principal Financial Officer) Jerry S. Roles * Senior Vice President and Treasurer - ------------------------------------------------ (Principal Accounting Officer) Schuyler Hollingsworth, Jr.
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. By: /s/ John W. Mackenzie ------------------------------------ John W. MacKenzie, Esq., Attorney-in-fact II-9 77 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. Arborland Management Company, Inc. Associated Physical Therapy Practitioners, Inc. Carrollton Physical Therapy Clinic, Inc. Greenville Rehabilitation Services, Inc. Home Health and Rehabilitation Services, Inc. Las Colinas Physical Therapy, Inc. Matrix Occupational Health, Inc. Matrix Rehabilitation -- Delaware, Inc. Matrix Rehabilitation -- Georgia, Inc. Matrix Rehabilitation -- Maryland, Inc. Matrix Rehabilitation -- Ohio, Inc. Matrix Rehabilitation -- South Carolina, Inc. Matrix Rehabilitation -- Texas, Inc. Matrix Rehabilitation -- Washington, Inc. Matrix Rehabilitation, Inc. Network For Physical Therapy, Inc. North Dallas Physical Therapy Associates, Inc. PT Net (Colorado), Inc. PT Net, Inc. Rehabilitation Associates of Lafayette, Inc. The Parks Physical Therapy And Work Hardening Center, Inc. Theraphysics Corp. Theraphysics of New York IPA, Inc. Theraphysics Partners of Colorado, Inc. Theraphysics Partners of Louisiana, Inc. Theraphysics Partners of Texas, Inc. Theraphysics Partners of Western Pennsylvania, Inc. /s/ John W. Mackenzie By: -------------------------------------- Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrants II-10 78 Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Chairman, President, Chief Executive Officer and - --------------------------------------------- Director (Principal Executive Officer) T. Jerald Moore * Senior Vice President and Treasurer (Principal - --------------------------------------------- Financial and Accounting Officer) Schuyler Hollingsworth, Jr.
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. MacKenzie, Esq. Attorney-in-fact II-11 79 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. Homecare Preferred Choice, Inc. Compassion and Personal Care Services, Inc. Community Care, Inc. Eastern Home Health Supply & Equipment Co., Inc. Hospice of Eastern Carolina, Inc. Hospice Preferred Choice, Inc. HTHC Holdings, Inc. Tar Heel Infusion Company, Inc. /s/ John W. Mackenzie By: -------------------------------------- Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer and Director - --------------------------------------------- (Principal Executive Officer) William A. Mathies * Senior Vice President and Treasurer (Principal - --------------------------------------------- Financial and Accounting Officer) Schuyler Hollingsworth, Jr. * Director - --------------------------------------------- Glen R. Cavallo
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. MacKenzie, Esq., Attorney-in-fact II-12 80 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrants listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. BEVERLY ENTERPRISES INTERNATIONAL LIMITED TMD DISPOSITION COMPANY By: /s/ John W. Mackenzie ------------------------------------ Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrants Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer and Director - --------------------------------------------- (Principal Executive Officer) David R. Banks * Senior Vice President and Controller - --------------------------------------------- (Principal Financial and Accounting Officer) Pamela H. Daniels * Director - --------------------------------------------- Bobby W. Stephens
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrants pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. MacKenzie, Esq., Attorney-in-fact II-13 81 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. SPECTRA HEALTHCARE ALLIANCE, INC. By: /s/ John W. Mackenzie ------------------------------------ Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Director and President - --------------------------------------------- (Principal Executive Officer) William A. Mathies * Senior Vice President and Treasurer - --------------------------------------------- (Principal Financial and Accounting Officer) Schuyler Hollingsworth, Jr. * Director - --------------------------------------------- T. Jerald Moore
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. Mackenzie, Esq., Attorney-in-fact II-14 82 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. BEVERLY HEALTH AND REHABILITATION SERVICES, INC. By: /s/ John W. Mackenzie ------------------------------------ Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Director & President - --------------------------------------------- (Principal Executive Officer) David R. Devereaux * Vice President -- Finance, Nursing Home Operations - --------------------------------------------- and Director John E. Williams (Principal Financial Officer) * Senior Vice President and Treasurer - --------------------------------------------- (Principal Accounting Officer) Schuyler Hollingsworth, Jr.
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ John W. Mackenzie ------------------------------------ John W. MacKenzie, Esq., Attorney-in-fact II-15 83 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. AEGIS THERAPIES, INC. By: /s/ John W. Mackenzie ------------------------------------ Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above-referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer and Director - --------------------------------------------- (Principal Executive Officer) William A. Mathies * Vice President -- Finance and Director - --------------------------------------------- (Principal Financial Officer) Mark A. Linam * Senior Vice President and Treasurer - --------------------------------------------- (Principal Accounting Officer) Schuyler Hollingsworth, Jr.
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. By: /s/ John W. Mackenzie ------------------------------------ John W. MacKenzie, Esq., Attorney-in-fact II-16 84 Pursuant to the requirements of the Securities Act of 1933, as amended, the Co-Registrant listed below have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Fort Smith, State of Arkansas, on June 14, 2001. BEVERLY INDEMNITY, LTD. /s/ John W. Mackenzie By: -------------------------------------- Name: John W. MacKenzie, Esq. Title: Attorney-in-fact of the above- referenced Co-Registrant Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on June 14, 2001.
SIGNATURE TITLE --------- ----- * Chairman, President, Chief Executive Officer, Chief - --------------------------------------------- Operating Officer and Director (Principal Executive William R. Floyd Officer) * Senior Vice President, Treasurer and Director - --------------------------------------------- (Principal Financial Officer) Schuyler Hollingsworth, Jr. * Senior Vice President and Controller (Principal - --------------------------------------------- Accounting Officer) Pamela H. Daniels * Director - --------------------------------------------- Robert E. Fancy
- --------------- * John W. MacKenzie, Esq., by signing his name hereto, does hereby sign this document on behalf of each of the above-named officers and/or directors of the Co-Registrant pursuant to powers of attorney duly executed by such persons. /s/ John W. Mackenzie By: -------------------------------------- John W. MacKenzie, Esq., Attorney-in-fact II-17 85 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Indenture, dated as of April 25, 2001, among Beverly Enterprises, Inc., the subsidiary guarantors as named therein and The Bank of New York, as trustee 4.2 Form of old 9 5/8% Senior Note due 2009 (included in Exhibit 4.1) 4.3 Form of new 9 5/8% Senior Note due 2009 (included in Exhibit 4.1) 4.4 Exchange and Registration Rights Agreement, dated April 25, 2001, among Beverly Enterprises, Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. 5.1 Opinion of Latham & Watkins 5.2 Opinion of Douglas J. Babb, Esq. 10.1 Purchase Agreement, dated April 18, 2001, among Beverly Enterprises Inc., the guarantors as named therein and JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. 12.1 Statement re: Computation of Ratios 13.1 Annual Report on Form 10-K for the fiscal year ended December 31, 2000 13.2 Quarterly Report on Form 10-Q for the three-months ended March 31, 2001 23.1 Consent of Ernst & Young LLP 23.2 Consent of Latham & Watkins (included in Exhibit 5.1) 23.3 Consent of Douglas J. Babb, Esq. (included in Exhibit 5.2) 24.1 Power of Attorney of the Company (incorporated in the signature page on page S-2 of this Registration Statement) 24.2 Power of Attorney of the Guarantors 25.1 Statement of Eligibility of Trustee 99.1 Form of Transmittal Letter 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to DTC Participants 99.4 Form of Letter to Beneficial Holders 99.5 Form of Letter to Clients 99.6 Form of Guidelines for Certification 99.7 Exchange Agent Agreement dated June 14, 2001, among Beverly Enterprises, Inc. and The Bank of New York
EX-4.1 2 c63210ex4-1.txt INDENTURE/ FORM OF OLD & NEW 9 5/8% SENIOR NOTE 1 EXHIBIT 4.1 - -------------------------------------------------------------------------------- BEVERLY ENTERPRISES, INC. ------------------------------ $200,000,000 9 5/8% SENIOR NOTES DUE 2009 ------------------------------ ------------------------------ INDENTURE DATED AS OF APRIL 25, 2001 ------------------------------ ------------------------------ THE BANK OF NEW YORK ------------------------------ AS TRUSTEE - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. Definitions.................................................1 SECTION 1.2. Other Definitions..........................................16 SECTION 1.3. Incorporation By Reference of TIA..........................17 SECTION 1.4. Rules of Construction......................................17 ARTICLE 2 THE SECURITIES; OFFER TO PURCHASE PROCEDURES SECTION 2.1. Form and Dating............................................18 SECTION 2.2. Execution and Authentication...............................18 SECTION 2.3. Registrar and Paying Agent.................................19 SECTION 2.4. Paying Agent to Hold Money in Trust........................20 SECTION 2.5. Holder Lists...............................................20 SECTION 2.6. Transfer and Exchange......................................20 SECTION 2.7. Replacement Securities.....................................34 SECTION 2.8. Outstanding Securities.....................................35 SECTION 2.9. Treasury Securities........................................35 SECTION 2.10. Temporary Securities.......................................35 SECTION 2.11. Cancellation...............................................36 SECTION 2.12. Defaulted Interest.........................................36 SECTION 2.13. Record Date................................................36 SECTION 2.14. CUSIP Number...............................................36 SECTION 2.15. Offer to Purchase by Application of Excess Proceeds........36 ARTICLE 3 REDEMPTION SECTION 3.1. Right of Redemption........................................39 SECTION 3.2. Notices to Trustee.........................................39 SECTION 3.3. Selection of Securities to be Redeemed.....................39 SECTION 3.4. Notice of Redemption.......................................40 SECTION 3.5. Effect of Notice of Redemption.............................41 SECTION 3.6. Deposit of Redemption Price................................41
-i- 3
Page ---- SECTION 3.7. Securities Redeemed in Part................................41 ARTICLE 4 COVENANTS SECTION 4.1. Payment of Securities......................................42 SECTION 4.2. Maintenance of Office or Agency............................42 SECTION 4.3. Reports....................................................43 SECTION 4.4. Compliance Certificate; Notice of Default..................43 SECTION 4.5. Taxes......................................................44 SECTION 4.6. Stay, Extension and Usury Laws.............................44 SECTION 4.7. Limitations on Restricted Payments.........................45 SECTION 4.8. Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries..................................46 SECTION 4.9. Limitations on Incurrence of Indebtedness and Issuance of Preferred Stock.........................................47 SECTION 4.10. Asset Sales................................................49 SECTION 4.11. Limitations on Transactions With Affiliates................50 SECTION 4.12. Limitations on Liens.......................................51 SECTION 4.13. Change of Control..........................................51 SECTION 4.14. Corporate Existence........................................53 SECTION 4.15. Line of Business...........................................53 ARTICLE 5 SUCCESSORS SECTION 5.1. Limitations on Mergers, Consolidations or Sales of Assets...............................................53 SECTION 5.2. Successor Corporation or Person Substituted................54 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. Events of Default..........................................54 SECTION 6.2. Acceleration...............................................56 SECTION 6.3. Other Remedies.............................................56 SECTION 6.4. Waiver of Past Defaults....................................57 SECTION 6.5. Control by Majority........................................57 SECTION 6.6. Limitation on Suits........................................57 SECTION 6.7. Rights of Holders to Receive Payment.......................58 SECTION 6.8. Collection Suit by Trustee.................................58
-ii- 4
Page ---- SECTION 6.9. Trustee May File Proofs of Claim...........................58 SECTION 6.10. Priorities.................................................58 SECTION 6.11. Undertaking for Costs......................................59 ARTICLE 7 TRUSTEE SECTION 7.1. Duties of Trustee..........................................59 SECTION 7.2. Rights of Trustee..........................................60 SECTION 7.3. Individual Rights of Trustee...............................62 SECTION 7.4. Trustee's Disclaimer.......................................62 SECTION 7.5. Notice of Defaults.........................................62 SECTION 7.6. Reports by Trustee to Holders..............................62 SECTION 7.7. Compensation and Indemnity.................................63 SECTION 7.8. Replacement of Trustee.....................................63 SECTION 7.9. Successor Trustee or Agent by Merger, Etc..................64 SECTION 7.10. Eligibility; Disqualification..............................65 SECTION 7.11. Preferential Collection of Claims Against Company..........65 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1. Defeasance and Discharge of This Indenture and the Securities..............................................65 SECTION 8.2. Legal Defeasance and Discharge.............................65 SECTION 8.3. Covenant Defeasance........................................66 SECTION 8.4. Conditions to Legal or Covenant Defeasance.................66 SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions................68 SECTION 8.6. Repayment to Company.......................................69 SECTION 8.7. Reinstatement..............................................69 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.1. Without Consent of Holders.................................69 SECTION 9.2. With Consent of Holders....................................70 SECTION 9.3. Compliance with TIA........................................72 SECTION 9.4. Revocation and Effect of Consents..........................72 SECTION 9.5. Notation on or Exchange of Securities......................72 SECTION 9.6. Trustee to Sign Amendments, Etc............................72
-iii- 5
Page ---- ARTICLE 10 GUARANTEE SECTION 10.1. Guarantee..................................................73 SECTION 10.2. Execution and Delivery of Guarantee........................75 SECTION 10.3. Future Subsidiary Guarantors...............................75 SECTION 10.4. Guarantor May Consolidate, Etc. on Certain Terms...........76 SECTION 10.5. Release of Guarantors......................................76 SECTION 10.6. Certain Bankruptcy Events..................................77 ARTICLE 11 MISCELLANEOUS SECTION 11.1. TIA Controls...............................................77 SECTION 11.2. Notices....................................................78 SECTION 11.3. Communication by Holders With Other Holders................79 SECTION 11.4. Certificate and Opinion as to Conditions Precedent.........79 SECTION 11.5. Statements Required in Certificate or Opinion..............79 SECTION 11.6. Rules by Trustee and Agents................................80 SECTION 11.7. Legal Holidays.............................................80 SECTION 11.8. No Personal Liability of Directors, Officers, Employees, Incorporator and Stockholders. ............80 SECTION 11.9. Duplicate Originals........................................80 SECTION 11.10. Governing Law..............................................80 SECTION 11.11. No Adverse Interpretation of Other Agreements..............80 SECTION 11.12. Successors.................................................80 SECTION 11.13. Severability...............................................81 SECTION 11.14. Counterpart Originals......................................81 SECTION 11.15. Table of Contents, Headings, Etc...........................81 EXHIBIT A Form of Security.........................................A-1 EXHIBIT B Form of Certificate of Transfer..........................B-1 EXHIBIT C Form of Certificate of Exchange..........................C-1 EXHIBIT D Form of Certificate of Acquiring Institutional Accredited Investor..................................D-1
-iv- 6 CROSS-REFERENCE TABLE*
TRUST INDENTURE INDENTURE ACT SECTION SECTION - --------------- --------- 310 (a)(1)............................................................... 7.10 (a)(2)............................................................... 7.10 (a)(3)............................................................... N.A. (a)(4)............................................................... N.A. (a)(5)............................................................... 7.10 (b).................................................................. 7.8; 7.10 (c).................................................................. N.A. 311 (a).................................................................. 7.11 (b).................................................................. 7.11 (c).................................................................. N.A. 312 (a).................................................................. 2.5 (b).................................................................. 11.3 (c).................................................................. 11.3 313 (a).................................................................. 7.6 (b)(1)............................................................... N.A. (b)(2)............................................................... 7.6 (c).................................................................. 7.6; 11.2 (d).................................................................. 7.6 314 (a).................................................................. 4.3; 11.2 (b).................................................................. N.A. (c)(1)............................................................... 11.4 (c)(2)............................................................... 11.4 (c)(3)............................................................... N.A. (d).................................................................. N.A. (e).................................................................. 11.5 (f).................................................................. N.A. 315 (a).................................................................. 7.1(ii) (b).................................................................. 7.5; 11.2 (c).................................................................. 7.1(i) (d).................................................................. 7.1(iii) (e).................................................................. 6.11 316 (a) (last sentence).................................................. 2.9 (a)(1)(A)............................................................ 6.5 (a)(1)B)............................................................. 6.4 (a)(2)............................................................... N.A. (b).................................................................. 6.7 (c).................................................................. 2.13; 9.4 317 (a)(1)............................................................... 6.8 (a)(2)............................................................... 6.9 (b).................................................................. 2.4 318 (a).................................................................. 11.1 (b).................................................................. N.A. (c).................................................................. 11.1
- ---------------------------- N.A. means not applicable. * THIS CROSS-REFERENCE TABLE IS NOT PART OF THE INDENTURE. 7 INDENTURE dated as of April 25, 2001, among Beverly Enterprises, Inc., a Delaware corporation (the "Company"), the corporations listed on the signature page hereto (the "Guarantors") and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the 9 5/8% Senior Notes due 2009 (the "Securities"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. Definitions. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar or Paying Agent. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Security, the rules and procedures of the Depositary that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback or by merger or consolidation) other than in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by Section 4.13 and/or Section 5.1 hereof and not by Section 4.10 hereof), and (ii) the issuance or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $10 million or (b) for net proceeds in excess of $10.0 million. Notwithstanding the foregoing: (a) a transfer of assets by the Company to a Subsidiary or by a Subsidiary to the Company or to another Subsidiary, (b) an issuance of Equity Interests by a Subsidiary to the 8 -2- Company or to another Subsidiary, (c) a Restricted Payment that is permitted by Section 4.7 hereof and (d) a Nursing Facility Swap shall not be deemed to be an Asset Sale. "Bankruptcy Law" means title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company or any authorized committee thereof. "Business Day" means any day other than a Legal Holiday. "Capital Lease" means, at the time any determination thereof is to be made, any lease of property, real or personal, in respect of which the present value of the minimum rental commitment would be capitalized on a balance sheet of the lessee in accordance with GAAP. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a Capital Lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "cash" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit with maturities of one year or less from the date of acquisition, bankers' acceptances (or, with respect to foreign banks, similar instruments) with maturities not exceeding one year and overnight bank deposits, in each case with any domestic commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $100.0 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within one year after the date of acquisition, and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in the foregoing clauses (i) through (v). "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of 9 -3- the assets of the Company and its Subsidiaries taken as a whole to any Person or group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than to a Person or group who, prior to such transaction, held a majority of the voting power of the voting stock of the Company, (ii) the acquisition by any Person or group, as defined above, of a direct or indirect interest in more than 50% of the voting power of the voting stock of the Company, by way of merger, consolidation or otherwise, or (iii) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Commission" means the Securities and Exchange Commission. "Company" means Beverly Enterprises, Inc., as obligor under the Securities, unless and until a successor replaces Beverly Enterprises, Inc., in accordance with Article 5 hereof and thereafter includes such successor. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Comparable Treasury Price" means, with respect to any Redemption Date, the average of the bid and asked prices of the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such Redemption Date, (i) as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York or published on the website of the Federal Reserve Bank of New York at http://www.ny.frb.org and designated "Composite 3:30 p.m. Quotations for the U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, the average of the Reference Treasury Dealer Quotations for such Redemption Date. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus (i) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent such provision for taxes was included in computing such Consolidated Net Income, plus (ii) the Fixed Charges of such Person and its Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income, plus (iii) depreciation and amortization (including amortization of goodwill and other intangibles) of such Person and its Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, plus (iv) other non-cash items of such Person and its Subsidiaries for such period to the extent such non-cash items were deducted in computing such Consolidated Net Income, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, the depreciation and amortization of, and the other non-cash items of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the 10 -4- date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis; provided that, (i) the Net Income, if positive, of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Subsidiary thereof, (ii) the Net Income, if positive, of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Redeemable Stock), less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made in accordance with GAAP as a result of the acquisition of such business), subsequent to the Issue Date, in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, and excluding the cumulative effect of a change in accounting principles, all as determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the Issue Date or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company). "Credit Agreement" means a credit agreement providing for revolving or term loans and other extensions of credit to the Company and its Subsidiaries. 11 -5- "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Security" means a certificated Security registered in the name of the Holder thereof and issued in accordance with Section 2.6, in the form of Exhibit A except that such Security shall not bear the Global Security Legend and shall not have a schedule of exchanges of interests applicable to a Global Security attached thereto. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.3 as the Depositary with respect to the Securities, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Exchange Securities" means the 9 5/8% Senior Notes due 2009 to be issued in exchange for the Securities pursuant to the Registration Rights Agreement. "Excluded Guarantee Subsidiary" shall have the meaning specified in Section 10.3. "Existing Collateral" means property or assets of the Company or its Subsidiaries (other than any Receivables Subsidiary) that are, or since the date of the original issuance of the 9% Senior Notes of the Company due 2006 have been, subject to one or more Permitted Liens. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries in existence on the Issue Date, until such amounts are repaid. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that such Person or any of its Subsidiaries incurs, assumes, guarantees, redeems or repays any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge 12 -6- Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption or repayment of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable Reference Period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the Reference Period or subsequent to such Reference Period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the Reference Period, and (ii) the Consolidated Cash Flow and Fixed Charges attributable to operations or businesses disposed of prior to the Calculation Date shall be excluded. "Fixed Charges" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Subsidiaries that was capitalized during such period, and (iii) interest actually paid by such Person or any of its Subsidiaries under any guarantee of Indebtedness or other obligation of any other Person and (iv) the product of (a) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Subsidiary) on any series of preferred stock of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; provided, however, in the event that any cash dividend payment is deductible for federal, state and/or local tax purposes, the amount of the tax deduction relating to such cash dividend payment for such period shall be subtracted from the Fixed Charges for such Person for such period. "Future Subsidiary Guarantor" shall have the meaning specified in Section 10.3. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect from time to time. "Global Securities" means, individually and collectively, each of the Restricted Global Securities and the Unrestricted Global Securities, in the form of Exhibit A, issued in accordance with Section 2.1, 2.6(b)(iv), 2.6(d)(ii) or 2.6(f). "Global Security Legend" means the legend set forth in Section 2.6(g)(ii) which is required to be placed on all Global Securities issued under this Indenture. 13 -7- "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means (i) the Subsidiaries designated as such on the signature pages hereof, and their successors and assigns and (ii) Future Subsidiary Guarantors that became Guarantors pursuant to the terms of this Indenture, but excluding any Receivables Subsidiary or their successors, any Persons whose guarantees have been released pursuant to the terms of this Indenture, and any Excluded Guarantee Subsidiary. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) foreign exchange contracts or currency swap agreements and (iii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values. "Holder" means a Person in whose name a Security is registered. "Indebtedness" means, with respect to any Person, (i) any Redeemable Stock of such Person, (ii) any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (iii) all indebtedness of any other Person secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person), and (iv) to the extent not otherwise included, the guarantee by such Person of any indebtedness of any other Person. "Indenture" means this indenture, as amended or supplemented from time to time. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Indirect Participant" means a Person who holds a beneficial interest in a Global Security through a Participant. "Initial Securities" means the $200.0 million in aggregate principal amount of 9 5/8% Senior Notes due 2009 of the Company issued on the Issue Date. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is not also a QIB. 14 -8- "Interest Payment Date" means the stated due date of an installment of interest on the Securities. "Investment" by any Person in any other Person means (without duplication) (a) the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other Person or any agreement to make any such acquisition; (b) the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable or deposits arising in the ordinary course of business); (c) other than guarantees of Indebtedness of the Company or any Subsidiary to the extent permitted by Section 4.9 hereof, the entering into by such Person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other Person; provided, however, Investments shall not be deemed to include extensions of trade credit by such Person or any of its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of such Person or such Subsidiary, as the case may be. "Issue Date" means April 25, 2001, the date on which the Securities are to be originally issued hereunder. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Securities for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset given to secure Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction with respect to any such lien, pledge, charge or security interest). "Maturity Date" means, when used with respect to any Security, the date specified on such Security as the fixed date on which the final installment of principal of such Security is due and payable (in the absence of any acceleration thereof pursuant to the provisions of the Indenture regarding acceleration of Indebtedness or any Change of Control Offer or Senior Asset Sale Offer). "Moody's" means Moody's Investors Services, Inc. and its successors. 15 -9- "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, and before any reduction in respect of preferred stock dividends, excluding, however, the effect of any extraordinary or other material non-recurring gain or loss outside the ordinary course of business, together with any related provision for taxes on such extraordinary or other material non-recurring gain or loss. "Net Proceeds" means the aggregate cash or Cash Equivalent proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any other expenses incurred or to be incurred by the Company or a Subsidiary as a direct result of the sale of such assets (including, without limitation, severance, relocation, lease termination and other similar expenses), taxes actually paid or payable as a result thereof, amounts required to be applied to the repayment of Indebtedness (other than Subordinated Indebtedness) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Cash Consideration" means any non-cash or non-Cash Equivalent consideration received by the Company or a Subsidiary of the Company in connection with an Asset Sale and any non-cash or non-Cash Equivalent consideration received by the Company or any of its Subsidiaries upon disposition thereof. "Non-Qualified Asset Sale" means an Asset Sale in which the Non-Cash Consideration received by the Company or its Subsidiaries exceeds 25% of the total consideration received in connection with such Asset Sale calculated in accordance with clause (x), but not clause (y), of the proviso to the first sentence in Section 4.10 hereof. "Nursing Facility" means a nursing facility, hospital, outpatient clinic, assisted living center, hospice, long-term care facility or other facility that is used or useful in the provision of healthcare services. "Nursing Facility Swap" means an exchange of assets by the Company or one or more Subsidiaries of the Company for one or more Nursing Facilities and/or one or more Related Businesses or for the Capital Stock of any Person owning one or more Nursing Facilities and/or one or more Related Businesses. "Obligations" means any principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officers" means the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary and any Vice President of the Company or any Subsidiary, as the case may be. "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the principal executive officer, principal financial officer or principal accounting officer of the Company or any Subsidiary, as the case may be. 16 -10- "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company, any Subsidiary or the Trustee. "Participant" means, with respect to the Depositary, a Person who has an account with the Depositary. "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Payment Default" means any failure to pay any scheduled installment of principal on any Indebtedness within the grace period provided for such payment in the documentation governing such Indebtedness. "Permitted Liens" means (i) Liens in favor of the Company; (ii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company or becomes a Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person merged into or consolidated with the Company or that becomes a Subsidiary of the Company; (iii) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (iv) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens (I) existing on the Issue Date to the extent that such Liens secure Indebtedness outstanding on the Issue Date, (II) securing Indebtedness under clause (a) of the second paragraph of Section 4.9 or (III) on property or assets that were subject to a Lien on the Issue Date that secure indebtedness permitted hereunder; (vi) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (vii) Liens to secure Permitted Refinancing Indebtedness incurred to refinance Indebtedness that was secured by a Lien permitted hereunder and that was incurred in accordance with the provisions hereof; provided that such Liens do not extend to or cover any property or assets of the Company or any of its Subsidiaries other than assets or property securing the Indebtedness so refinanced or Substitute Mortgage Collateral therefor; (viii) Liens on Substitute Mortgage Collateral; (ix) Purchase Money Liens; (x) Liens on Medicare, Medicaid or other patient accounts receivable of the Company or its Subsidiaries and any other Liens granted by a Receivables Subsidiary, in each case in connection with a Receivables Financing; provided that the aggregate principal or redemption amount of Receivables Financing outstanding shall not exceed 50% of the net amount of the uncollected Medicare, Medicaid or other patient accounts receivable then owing to the Company or its Subsidiaries; (xi) Liens on real estate and related personal property with a fair market value not in excess of 50% of the fair market value of any Existing Collateral which has become free and clear of all Liens securing Indebtedness since the date of original issuance of the 9% Senior Notes of the Company due 2006; (xii) Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business; (xiii) easements, rights-of-way, zoning restrictions, reservations, encroachments and other similar encumbrances in 17 -11- respect of real property; (xiv) any interest or title of a lessor under any Capital Lease Obligation; (xv) Liens upon specific items of inventory or equipment and proceeds of the Company or any Subsidiary securing its obligations in respect of bankers' acceptances issued or created for its account (whether or not under the Credit Agreement) to facilitate the purchase, shipment, or storage of such inventory and equipment; (xvi) Liens securing reimbursement obligations with respect to letters of credit (whether or not issued under the Credit Agreement) otherwise permitted hereunder and issued in connection with the purchase of inventory or equipment by the Company or any Subsidiary in the ordinary course of business; (xvii) Liens to secure (or encumbering deposits securing) obligations arising from warranty or contractual service obligations of the Company or any Subsidiary, including rights of offset and setoff; (xviii) Liens securing Acquired Debt or acquisition Indebtedness otherwise permitted hereunder; provided that (A) the Indebtedness secured shall not exceed the fair market value of the assets so acquired (such fair market value to be determined in good faith by the Board of Directors of the Company at the time of such acquisition) and (B) such Indebtedness shall be incurred, and the Lien securing such Indebtedness shall be created, within 12 months after such acquisition; (xix) Liens securing Hedging Obligations agreements relating to Indebtedness otherwise permitted under this Indenture; (xx) Liens securing stay and appeal bonds or judgment Liens in connection with any judgment not giving rise to a Default hereunder; and (xxi) other Liens on assets of the Company or any of its Subsidiaries securing Indebtedness that is permitted hereunder to be outstanding having an aggregate principal amount at any one time outstanding not to exceed $5.0 million. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used solely to extend, refinance, renew, replace, defease or refund, other Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of any premiums paid and reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is Subordinated Indebtedness, such Permitted Refinancing Indebtedness has a final maturity date of, and is subordinated in right of payment to, the Securities on terms at least as favorable to the Holders of Securities as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) if the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is a Subsidiary that is not a Guarantor, such Permitted Refinancing Indebtedness shall only be incurred by such Subsidiary. "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust or unincorporated organization (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). 18 -12- "Private Placement Legend" means the legend set forth in Section 2.6(g)(i) to be placed on all Securities issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Purchase Money Indebtedness" means any Indebtedness of a Person to any seller or other Person incurred to finance the acquisition or construction (including in the case of a Capital Lease Obligation, the lease) of any asset or property which is incurred within 180 days of such acquisition or completion of construction (or if later, commencement of current operations) and is secured only by the assets so financed. "Purchase Money Lien" means a Lien granted on an asset or property to secure Purchase Money Indebtedness permitted to be incurred under the Indenture and incurred solely to finance the acquisition or construction of such asset or property; provided, however, that such Lien encumbers only such asset or property and is granted within 180 days of such acquisition or completion of construction (or if later, commencement of current operations). "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Equity Interests" shall mean all Equity Interests of the Company other than Redeemable Stock of the Company. "Receivables Financing" means the sale or other disposition of Medicare, Medicaid or other patient accounts receivable of the Company or any of its Subsidiaries to a Receivables Subsidiary followed by a financing transaction in connection with such sale or disposition of such accounts receivable. "Receivables Subsidiary" means a Subsidiary of the Company exclusively engaged in Receivables Financing and activities reasonably related thereto, including Beverly Funding Corporation, a Delaware corporation. "Record Date" means a Record Date specified in the Securities whether or not such Record Date is a Business Day. "Redeemable Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Securities mature. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to Article 3 of this Indenture and Paragraph 5 in the form of Security. "Redemption Price," when used with respect to any Security to be redeemed, means the redemption price for such redemption pursuant to Paragraph 5 in the form of Security, which shall 19 -13- include, without duplication, in each case, accrued and unpaid interest to the Redemption Date (subject to the provisions of Section 3.5). "Reference Period," with regard to any Person means the four full fiscal quarters (or such lesser period during which such Person has been in existence) for which internal financial statements are available ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Securities or this Indenture. "Reference Treasury Dealer" means JPMorgan, a division of Chase Securities Inc., and its successors; provided, however, that if JPMorgan shall cease to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefore another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quote in writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date by and among the Company, the Guarantors and the Initial Purchasers. "Related Business" means the business conducted by the Company and its Subsidiaries as of the Issue Date and any and all health care service businesses that in the good faith judgment of the Board of Directors of the Company are materially related businesses. Without limiting the generality of the foregoing, Related Business shall include the operation of long-term and specialty health care services, skilled nursing care, subacute care, rehabilitation programs, pharmaceutical services, geriatric care and home health care. "Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Definitive Security" means a Definitive Security bearing the Private Placement Legend. "Restricted Global Security" means a Global Security bearing the Private Placement Legend. "Restricted Investment" means, in one or a series of related transactions, any Investment, other than (i) Investments in Cash Equivalents, (ii) Investments in a Subsidiary, (iii) Investments in any Person that as a consequence of such Investment becomes a Subsidiary, (iv) Investments existing on the 20 -14- Issue Date, (v) accounts receivable, advances, loans, extensions of credit created or acquired in the ordinary course of business, (vi) Investments made as a result of the receipt of Non-Cash Consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof, (vii) Investments made as the result of the guarantee by the Company or any of its Subsidiaries of Indebtedness of a Person or Persons other than the Company or any Subsidiary of the Company that is secured by Liens on assets sold or otherwise disposed of by the Company or such Subsidiary to such Person or Persons; provided that such Indebtedness was in existence prior to the contemplation of such sale or other disposition and that the terms of such guarantee permit the Company or such Subsidiary to foreclose on the pledged or mortgaged assets if the Company or such Subsidiary are required to perform under such guarantee, and (viii) Investments in any Related Business; provided, however, that a merger of another Person with or into the Company or a Guarantor shall not be deemed to be a Restricted Investment so long as the surviving entity is the Company or a direct wholly owned Guarantor. "Restricted Securities" means any Restricted Definitive Securities and any Restricted Global Security. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "S&P" means Standard & Poor's, a division of The McGraw Hill Companies, and its successors. "Securities" means, collectively, the Securities (including, without limitation, the Initial Securities) issued hereunder and the Exchange Securities, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Security Custodian" means the Trustee, as custodian with respect to the Securities in global form, or any successor entity thereto. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Stockholders' Equity" means, with respect to any Person as of any date, the stockholders' equity of such Person determined in accordance with GAAP as of the date of the most recent available internal financial statements of such Person, and calculated on a pro forma basis to give effect to any acquisition or disposition by such Person consummated or to be consummated since the date of such financial statements and on or prior to the date of such calculation. 21 -15- "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment to the Securities or such Subsidiary's Guarantee of the Securities, as applicable. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Substitute Mortgage Collateral" means real estate and related personal property on which Liens are created in substitution for the release of Liens on other real estate and related personal property ("Initial Liens"); provided, that (i) such Initial Liens were permitted hereunder, (ii) the fair market value of the Substitute Mortgage Collateral (as conclusively evidenced by an Officers' Certificate delivered to the Trustee within 60 days prior to the date of such substitution of collateral) is substantially equivalent to or less than the fair market value of the property subject to the released Initial Liens and (iii) the Indebtedness secured by the Liens on Substitute Mortgage Collateral is permitted hereunder. "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Section 9.3 hereof; provided, however, that, in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. "Transfer Restriction" means, with respect to the Company's Subsidiaries, any encumbrance or restriction on the ability of any Subsidiary (other than a Receivables Subsidiary) to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries, or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries. "Treasury Rate" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. 22 -16- "U.S. Government Obligations" means direct noncallable obligations of, or noncallable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. "Unrestricted Definitive Security" means one or more Definitive Securities that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Security" means a permanent global Security in the form of Exhibit A attached hereto that bears the Global Security Legend and that has the "Schedule of Exchanges of Interests in the Global Security" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Securities that do not bear the Private Placement Legend. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. SECTION 1.2. Other Definitions.
DEFINED IN TERM SECTION ---- ---------- "Affiliate Transaction" 4.11 "Change of Control Offer" 4.13 "Change of Control Payment" 4.13 "Change of Control Payment Date" 4.13 "Commencement Date" 2.15 "Covenant Defeasance" 8.3 "Event of Default" 6.1 "Excess Proceeds" 4.10 "Guarantee" 10.1 "incur" 4.9 "Legal Defeasance" 8.2 "Notice of Default" 6.1 "Offer Amount" 2.15 "Offer Period" 2.15 "Paying Agent" 2.3 "Purchase Date" 2.15 "Purchase Price" 4.10 "Registrar" 2.3 "Restricted Payments" 4.7 "Senior Asset Sale Offer" 4.10
23 -17- SECTION 1.3. Incorporation By Reference of TIA. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Indenture Securities" means the Securities; "Indenture Security Holder" means a Holder; "Indenture to be Qualified" means this Indenture; "Indenture Trustee" or "Institutional Trustee" means the Trustee; "Obligor" on the Securities means the Company, any Guarantor and any successor obligor upon the Securities. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by the Commission rule under the TIA have the meanings so assigned to them. SECTION 1.4. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; (6) "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture as a whole (as amended or supplemented from time to time) and not to any particular Article, Section or other subdivision; and 24 -18- (7) references to sections of or rules under the Securities Act or the Exchange Act shall be deemed to include substitute, replacement and successor sections or rules adopted by the Commission from time to time. ARTICLE 2 THE SECURITIES; OFFER TO PURCHASE PROCEDURES SECTION 2.1. Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements approved as to form by the Company and required by law, stock exchange rule, agreements to which the Company is subject or usage. The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Each Security shall be dated the date of its authentication. The Securities shall be issuable only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. Global Securities; Definitive Securities. Securities issued in global form shall be substantially in the form of Exhibit A (including the Global Securities Legend thereon). Notes issued in definitive form shall be substantially in the form of Exhibit A (but without the Global Security Legend thereon). Each Global Security shall represent such of the outstanding Securities as shall be specified therein and shall provide that it shall represent the aggregate principal amount of outstanding Securities from time to time endorsed thereon and that the aggregate principal amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Trustee or the Security Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.6. SECTION 2.2. Execution and Authentication. Two Officers of the Company shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee. The signature of the Trustee shall be conclusive evidence that the Security has been authenticated under this 25 -19- Indenture. The form of Trustee's certificate of authentication to be borne by the Securities shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a written order of the Company signed by two Officers of the Company, initially authenticate Securities for original issue up to the aggregate principal amount stated in paragraph 4 of the Securities. The aggregate principal amount of Securities outstanding at any time shall not exceed the amount set forth herein except as provided in Section 2.8 hereof. The Securities shall be issued only in fully registered form, without coupons and only in denominations of $1,000 and any integral multiple thereof. All Securities issued under this Indenture shall vote and consent together on all matters as one class and no series of Securities will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. The Company agrees to pay to each authenticating agent from time to time reasonable compensation under this Section 2.2. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. SECTION 2.3. Registrar and Paying Agent. The Company shall maintain (i) an office or agency where Securities may be presented for registration of transfer or for exchange (including any co-registrar, the "Registrar") and (ii) an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may, from time to time, appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee and the Trustee shall notify the Holders of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.7 hereof. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Securities. The Company initially appoints the Trustee as Registrar, Paying Agent, Securities Custodian and agent for service of notices and demands in connection with the Global Securities. 26 -20- SECTION 2.4. Paying Agent to Hold Money in Trust. Prior to 12:00 p.m. on the due date of principal of, premium, if any, and interest on any Securities, the Company shall deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, and interest becoming due. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Securities, and shall notify the Trustee of any Default by the Company in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money delivered to the Trustee. If the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. SECTION 2.5. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, including the aggregate principal amount of the Securities held by each thereof, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.6. Transfer and Exchange. (a) Transfer and Exchange of Global Securities. A Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Securities will be exchanged by the Company for Definitive Securities if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Securities (in whole but not in part) should be exchanged for Definitive Securities and delivers a written notice to such effect to the Trustee or (iii) an Event of Default has occurred and is continuing. Upon the occurrence of any of the events described in clause (i), (ii) or (iii) above, Definitive Securities shall be issued in such names as the Depositary shall instruct the Trustee. Global Securities also may be replaced or exchanged, in whole or in part, as provided in Sections 2.7 and 2.10. Every Security authenticated and delivered in lieu of, or in exchange for, a Global Security or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10, shall be authenticated and delivered in the form of, and shall be, a Global Security. A Global Security may 27 -21- not be exchanged for another Security other than as provided in this Section 2.6(a); however, beneficial interests in a Global Security may be transferred and exchanged as provided in Section 2.6(b),(c) or (f). (b) Transfer and Exchange of Beneficial Interests in the Global Securities. The transfer and exchange of beneficial interests in the Global Securities shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Securities shall be subject to restrictions on transfer set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Securities also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Security. Beneficial interests in any Restricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Security in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.6(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Securities. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.6(b)(i) above, the transferor of such beneficial interest must deliver to the Depositary either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase, or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Security shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.6(f), the requirements of this Section 2.6(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Securities. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Securities contained in this Indenture and the Securities or otherwise applicable 28 -22- under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Security(ies) pursuant to Section 2.6(h). (iii) Transfer of Beneficial Interests to Another Restricted Global Security. A beneficial interest in any Restricted Global Security may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Security if the transfer complies with the requirements of Section 2.6(b)(ii) above and the Registrar receives the following: (A) if such Security is being transferred to a QIB in accordance with Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (1) thereof; (B) if such Security is being transferred pursuant to an exemption from registration in accordance with Regulation S under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (2) thereof; or (C) if such Security is being transferred pursuant to an exemption from registration other than Rule 144A or Regulation S, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications, certificates and Opinion of Counsel in form reasonably acceptable to the Company and the Registrar required by item (3)(d) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Security for Beneficial Interests in the Unrestricted Global Security. A beneficial interest in any Restricted Global Security may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Security or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security if the exchange or transfer complies with the requirements of Section 2.6(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary's book-entry system that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 29 -23- (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit C, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company or the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of a written authentication order from the Company in accordance with Section 2.2, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Security cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Security. (c) Transfer or Exchange of Beneficial Interests for Definitive Securities. (i) Beneficial Interests in Restricted Global Securities to Restricted Definitive Securities. If any holder of a beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Security, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted 30 -24- Definitive Security, a certificate from such holder in the form of Exhibit C, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Regulation S under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraph (B), (C) or (D) above, a certificate to the effect set forth in Exhibit B, including the certifications, certificates and Opinion of Counsel in form reasonably acceptable to the Company and the Registrar required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.6(h), and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Security in the appropriate principal amount. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this Section 2.6(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this 31 -25- Section 2.6(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Securities to Unrestricted Definitive Securities. A holder of a beneficial interest in a Restricted Global Security may exchange such beneficial interest for an Unrestricted Definitive Security or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Definitive Security that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Security that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar and the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Securities to Unrestricted Definitive Securities. If any holder of a beneficial interest in an Unrestricted Global 32 -26- Security proposes to exchange such beneficial interest for a Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Security, then, upon satisfaction of the conditions set forth in Section 2.6(b)(ii), the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.6(h), and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Security in the appropriate principal amount. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Securities for Beneficial Interests. (i) Restricted Definitive Securities to Beneficial Interests in Restricted Global Securities. If any Holder of a Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security or to transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Security, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security, a certificate from such Holder in the form of Exhibit C, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (1) thereof; (C) if such Restricted Definitive Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Regulation S under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (2) thereof; (D) if such Restricted Definitive Security is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to 33 -27- the effect set forth in Exhibit B, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Security is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraph (B), (C) or (D) above, a certificate to the effect set forth in Exhibit B, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such Restricted Definitive Security is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Security is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Security, increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Security. (ii) Restricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of a Restricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: 34 -28- (1) if the Holder of such Definitive Securities proposes to exchange such Securities for a beneficial interest in the Unrestricted Global Security, a certificate from such Holder in the form of Exhibit C, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Security, a certificate from such Holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.6(d)(ii), the Trustee shall cancel the Definitive Securities and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security. (iii) Unrestricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of an Unrestricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Security and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Securities. If any such exchange or transfer from a Definitive Security to a beneficial interest is effected pursuant to subparagraph (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.2, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of Definitive Securities so transferred. (e) Transfer and Exchange of Definitive Securities for Definitive Securities. Upon request by a Holder of Definitive Securities and such Holder's compliance with the provisions of this Section 2.6(e), the Registrar shall register the transfer or exchange of Definitive Securities. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Securities duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.6(e). 35 -29- (i) Restricted Definitive Securities to Restricted Definitive Securities. Any Restricted Definitive Security may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Security if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (1) thereof; and (B) if the transfer will be made pursuant to Regulation S, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications in item (2) thereof; (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Securities to Unrestricted Definitive Securities. Any Restricted Definitive Security may be exchanged by the Holder thereof for an Unrestricted Definitive Security or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Security if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Securities proposes to exchange such Securities for an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit C, including the certifications in item (1)(d) thereof; or 36 -30- (2) if the Holder of such Restricted Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit B, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Securities to Unrestricted Definitive Securities. A Holder of Unrestricted Definitive Securities may transfer such Securities to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Securities pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.2, the Trustee shall authenticate (i) one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Securities tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Securities in an aggregate principal amount equal to the principal amount of the Restricted Definitive Securities accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Securities, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Securities to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Securities so accepted Definitive Securities in the appropriate principal amounts. (g) Legends. The following legends shall appear on the face of all Global Securities and Definitive Securities issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Security and each Definitive Security (and all Securities issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: 37 -31- "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON THE BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELEGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 OF SECURITIES, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS 38 -32- LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." (B) Notwithstanding the foregoing, any Global Security or Definitive Security issued pursuant to subparagraph (b)(iv), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.6 (and all Securities issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Security Legend. Each Global Security shall bear a legend in substantially the following form: "THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) Cancellation and/or Adjustment of Global Securities. At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or canceled in whole and not in part, each such Global Security shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount at maturity of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. 39 -33- (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Securities and Definitive Securities upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Security or to a Holder of a Definitive Security for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.2, 2.10, 3.6, 3.9, 4.10, 4.15 and 9.5). (iii) The Registrar shall not be required (A) to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 3.3 and ending at the close of business on such day, or (B) to register the transfer of or exchange any Security selected for redemption in whole or in part pursuant to Article 3, except the unredeemed portion of any Security being redeemed in part. (iv) All Global Securities and Definitive Securities issued upon any registration of transfer or exchange of Global Securities or Definitive Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Securities or Definitive Securities surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 3.3 and ending at the close of business on such day, or (B) to register the transfer of or to exchange any Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (vi) Prior to due presentment for the registration of a transfer of any Security, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Securities and Definitive Securities in accordance with the provisions of Section 2.2. 40 -34- (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.6 to effect a registration of transfer or exchange may be submitted by facsimile. When Securities are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met; provided, however, that any Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or by his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate Securities at the Registrar's request. Neither the Company nor the Registrar shall be required to (i) issue, register the transfer of, or exchange Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption under Section 3.3 hereof and ending at the close of business on the day of selection, (ii) register the transfer of, or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part, or (iii) register the transfer or exchange of a Security between the record date and the next succeeding Interest Payment Date. No service charge shall be made to any Holder for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10 or 9.5 hereof, which shall be paid by the Company). Prior to due presentment for registration of a transfer of any Security, the Trustee, any Agent, the Company and any agent of the foregoing may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of, premium, if any, and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue (provided, that defaulted interest shall be paid as set forth in Section 2.12 hereof), and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. SECTION 2.7. Replacement Securities. If any mutilated Security is surrendered to the Trustee or the Company, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Security, the Company shall, upon written request of the Holder thereof, issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Security if the Trustee's requirements for replacements of Securities are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss 41 -35- which any of them may suffer if a Security is replaced. Each of the Company and the Trustee may charge for its expenses in replacing a Security. Every replacement Security is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionally with all other Securities duly issued hereunder. SECTION 2.8. Outstanding Securities. The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it (or its agent), those delivered to it for cancellation those reductions in the interest of a Global Security effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.7 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser (as such term is defined in Section 8-302 of the Uniform Commercial Code as in effect in the State of New York). If the principal amount of any Security is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. Subject to Section 2.9 hereof, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. SECTION 2.9. Treasury Securities. In determining whether the Holders of the required principal amount of Securities then outstanding have concurred in any demand, direction, waiver or consent, including any relating to any amendment, Securities owned by the Company or any Affiliate of the Company shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such demand, direction, waiver or consent, only Securities that a Responsible Officer actually knows to be so owned shall be so considered. Notwithstanding the foregoing, Securities that are to be acquired by the Company or an Affiliate of the Company pursuant to an exchange offer, tender offer or other agreement shall not be deemed to be owned by the Company or an Affiliate of the Company until legal title to such Securities passes to the Company or such Affiliate, as the case may be. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee, upon receipt of the written order of the Company pursuant to Section 2.2, shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company and the Trustee consider appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the 42 -36- Company pursuant to Section 2.2, shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, Holders of temporary Securities shall be entitled to all of the rights, benefits and privileges of this Indenture. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee (or its agent) for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee (or its agent) shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of all canceled Securities in accordance with its customary procedures. The Company may not issue new Securities to replace Securities that it has paid or that have been delivered to the Trustee (or its agent) for cancellation. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the related payment date, in each case at the rate provided in the Securities and in Section 4.1 hereof. The Company shall, with the consent of the Trustee, fix or cause to be fixed each such special record date and payment date. At least 15 days before the special record date, the Company (or, upon written request of the Company, the Trustee, in the name of and at the expense of the Company) shall mail to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. Record Date. The record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA Section 316(c). SECTION 2.14. CUSIP Number. The Company in issuing the Securities may use a "CUSIP" number, and if it does so, the Trustee shall use the CUSIP number in notices to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities and that reliance may be placed only on the other identification numbers printed on the Securities. The Company shall promptly notify the Trustee of any change in the CUSIP number. SECTION 2.15. Offer to Purchase by Application of Excess Proceeds. In the event that the Company shall commence a Senior Asset Sale Offer pursuant to Section 4.10 hereof, it shall follow the procedures specified below. 43 -37- No later than 10 days following the date on which the aggregate amount of Excess Proceeds exceeds $25.0 million, the Company shall notify the Trustee of such Senior Asset Sale Offer and provide the Trustee with an Officers' Certificate setting forth, in addition to the information to be included therein pursuant to Section 4.10 hereof, the calculations used in determining the amount of Net Proceeds to be applied to the purchase of Securities. The Company shall commence or cause to be commenced such Senior Asset Sale Offer on a date no later than 20 days after such notice (the "Commencement Date"). The Senior Asset Sale Offer shall remain open for at least 20 Business Days after the Commencement Date relating to such Senior Asset Sale Offer and shall remain open for no more than such 20 Business Days, except to the extent required by applicable law (as so extended, the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount (the "Offer Amount") of Securities required to be purchased in such Senior Asset Sale Offer pursuant to Section 4.10 hereof or, if less than the Offer Amount has been tendered, all Securities tendered in response to the Senior Asset Sale Offer, in each case for an amount in cash equal to the Purchase Price. If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued interest shall be paid to the Person in whose name a Security is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Securities pursuant to the Senior Asset Sale Offer. On the Commencement Date of any Senior Asset Sale Offer, the Company shall send or shall cause to be sent by first class mail, a notice to each of the Holders at their last registered address, with a copy to the Trustee and the Paying Agent, offering to repurchase the Securities held by such Holder pursuant to the procedure specified in such notice. Such notice, which shall govern the terms of the Senior Asset Sale Offer, shall contain all instructions and materials necessary to enable the Holders to tender Securities pursuant to the Senior Asset Sale Offer and shall state: (1) that the Senior Asset Sale Offer is being made pursuant to this Section 2.15 and Section 4.10 hereof and the length of time the Senior Asset Sale Offer shall remain open; (2) the Offer Amount, the Purchase Price and the Purchase Date; (3) that any Security not tendered or accepted for payment shall continue to accrue interest; (4) that, unless the Company defaults in the payment of the Purchase Price, any Security accepted for payment pursuant to the Senior Asset Sale Offer shall cease to accrue interest after the Purchase Date; (5) that Holders electing to have a Security purchased pursuant to any Senior Asset Sale Offer shall be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in 44 -38- the notice prior to the close of business on the Business Day next preceding the Purchase Date; (6) that Holders shall be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the Business Day next preceding the termination of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that, if the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Trustee shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased); (8) that Holders whose Securities were purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such Asset Sale and any other information that would be material to a decision as to whether to tender a Security pursuant to the Senior Asset Sale Offer. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis to the extent necessary, an aggregate principal amount equal to the Offer Amount of Securities and other Indebtedness ranking on a parity with the Securities whose provisions require the Company to make an offer to purchase or redeem such Indebtedness with proceeds from any asset sales tendered pursuant to the Senior Asset Sale Offer, or if less than the Offer Amount has been tendered, all Securities and other Indebtedness or portions thereof so tendered, (ii) deposit with the Paying Agent an amount equal to the Purchase Price in respect of all Securities and other Indebtedness or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Securities and other Indebtedness so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities and other Indebtedness or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Securities so tendered payment in an amount equal to the Purchase Price for such Securities and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) a new Security to such Holder equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that each such new Security shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Senior Asset Sale Offer on or as soon as practicable after the Purchase Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are 45 -39- applicable in connection with the purchase of Securities and other Indebtedness as a result of the Senior Asset Sale Offer. ARTICLE 3 REDEMPTION SECTION 3.1. Right of Redemption. Redemption of Securities, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article 3. The Company may redeem the Securities in whole or at any time or in part from time to time at the Redemption Prices specified in the form of Security attached as Exhibit A set forth therein under the caption "Optional Redemption," in each case (subject to the right of Holders of record on a Record Date to receive interest due on an Interest Payment Date that is on or prior to such Redemption Date, and subject to the provisions set forth in Section 3.5 hereof) including accrued and unpaid interest to the Redemption Date. SECTION 3.2. Notices to Trustee. If the Company elects to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Securities to be redeemed and whether it wants the Trustee to give notice of redemption to the Holders. If the Company elects to reduce the principal amount of Securities to be redeemed pursuant to Paragraph 5 of the Securities by crediting against any such redemption Securities it has not previously delivered to the Trustee for cancellation, it shall so notify the Trustee of the amount of the reduction and deliver such Securities with such notice. The Company shall give each notice to the Trustee provided for in this Section 3.2 at least 45 days before the Redemption Date (unless a shorter notice period shall be satisfactory to the Trustee). Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.3. Selection of Securities to be Redeemed. If less than all of the Securities are to be redeemed pursuant to Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a pro rata basis, by lot, by a method that complies with the requirements of any exchange on which the Securities are listed or by such other method as the Trustee shall determine to be fair and appropriate. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be 46 -40- redeemed. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.4. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail, postage prepaid, to the Trustee and each Holder whose Securities are to be redeemed to such Holder's last address as then shown on the registry books of the Registrar. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price, including the amount of accrued and unpaid interest to be paid upon such redemption; (3) the name, address and telephone number of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent at the address specified in such notice to collect the Redemption Price; (5) that, unless the Company defaults in its obligation to deposit cash or U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in an amount to fund the Redemption Price with the Paying Agent in accordance with Section 3.6 hereof or such redemption payment is otherwise prohibited, interest on Securities called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price, including accrued and unpaid interest to the Redemption Date, upon surrender to the Paying Agent of the Securities called for redemption and to be redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount equal to the unredeemed portion thereof, of such Security to be redeemed and that, on or after the Redemption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued upon cancellation of the original Security; (7) if less than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of such Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; 47 -41- (8) the CUSIP number of the Securities to be redeemed; and (9) that the notice is being sent pursuant to this Section 3.4 and pursuant to the optional redemption provisions of Paragraph 5 of the Securities. SECTION 3.5. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.4, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price, including accrued and unpaid interest to the Redemption Date. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price, including interest, if any, accrued and unpaid to the Redemption Date; provided that if the Redemption Date is after a regular Record Date and on or prior to the Interest Payment Date to which such Record Date relates, the accrued interest shall be payable to the Holder of the redeemed Securities registered on the relevant Record Date; and provided, further that if a Redemption Date is a non-Business Day, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. SECTION 3.6. Deposit of Redemption Price. On or prior to the Redemption Date, the Company shall deposit with the Trustee or the Paying Agent (other than the Company or an Affiliate of the Company) cash or U.S. Government Obligations sufficient to pay the Redemption Price of, including accrued and unpaid interest on, all Securities to be redeemed on such Redemption Date (other than Securities or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation). The Trustee or the Paying Agent shall promptly return to the Company any cash or U.S. Government Obligations so deposited which is not required for that purpose upon the written request of the Company. If the Company complies with the preceding paragraph and the other provisions of this Article 3 and payment of the Securities called for redemption is not otherwise prohibited, interest on the Securities to be redeemed will cease to accrue on the applicable Redemption Date, whether or not such Securities are presented for payment. Notwithstanding anything herein to the contrary, if any Security surrendered for redemption in the manner provided in the Securities shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall continue to accrue and be paid from the Redemption Date until such payment is made on the unpaid principal, and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the rate and in the manner provided in Section 4.1 hereof and the Security. SECTION 3.7. Securities Redeemed in Part. Upon surrender of a Security that is to be redeemed in part, the Company shall issue and the Trustee shall authenticate and deliver to the Holder, at the expense of the Company, a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. 48 -42- ARTICLE 4 COVENANTS SECTION 4.1. Payment of Securities. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Securities on the dates and in the manner provided in this Indenture and the Securities. Principal, premium, if any, and interest shall be considered paid on the date due if the Trustee or the Paying Agent, if other than the Company or a Subsidiary of the Company, holds as of 10:00 a.m. New York City Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Trustee or such Paying Agent shall return to the Company, no later than three days following the date of payment, any money that exceeds such amount of principal, premium, if any, and interest to be paid on the Securities. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the interest rate then applicable to the Securities to the extent lawful. In addition, it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.2. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates The Bank of New York, Corporate Trust Department, 101 Barclay Street, 21st Floor West, New York, New York 10286 as one such office or agency of the Company in accordance with Section 2.3 hereof. 49 -43- SECTION 4.3. Reports. (a) Whether or not the Company is required by the rules and regulations of the Commission or subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, for so long as any of the Securities are outstanding, the Company shall deliver to the Trustee, within 15 days after it files or would have been required to file such with the Commission, annual and quarterly financial statements equivalent to financial statements that would be required to be contained in a report filed with the Commission on Forms 10-Q and 10-K, if the Company were required by the rules and regulations of the Commission or subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by the Company's certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a "Management's Discussion and Analysis of Financial Condition and Results of Operations" which would be so required. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and will make such information available to securities analysts and prospective investors upon request. All obligors on the Securities shall comply with the provisions of TIA Section 314(a). (b) The Trustee, at the Company's expense, shall promptly mail copies of all such annual reports, information, documents and other reports provided to the Trustee pursuant to Section 4.3(a) hereof to the Holders at their addresses appearing in the register of Securities maintained by the Registrar. The Company shall provide the Trustee with a sufficient number of copies of all reports and other documents and information that the Trustee may be required to deliver to the Holders under this Section 4.3. (c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on Officers' Certificates). SECTION 4.4. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate complying with Section 314(a)(4) of the TIA and stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether each has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge each entity has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action each is taking or proposes to take with respect thereto, all without regard to periods of grace or notice requirements, and that to the best of his or her knowledge no 50 -44- event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Trustee should the relevant fiscal year end on any date other than the current fiscal year end date. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.3 above shall be accompanied by a written statement of the Company's certified independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention which would lead them to believe that the Company or any Subsidiary of the Company has violated any provisions of Article 4 or of Article 5 of this Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon any Officer becoming actually aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. The Trustee shall not be deemed to have knowledge of any Default or any Event of Default unless one of its Responsible Officers receives written notice thereof from the Company or any of the Holders. SECTION 4.5. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except (i) as contested in good faith by appropriate proceedings and with respect to which appropriate reserves have been taken in accordance with GAAP or (ii) where the failure to effect such payment is not adverse in any material respect to the Holders. SECTION 4.6. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. 51 -45- SECTION 4.7. Limitations on Restricted Payments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Equity Interests of the Company or any of its Subsidiaries (other than (x) dividends or distributions payable in Qualified Equity Interests of the Company, (y) dividends or distributions payable to the Company or any Subsidiary of the Company, and (z) dividends or distributions by any Subsidiary of the Company payable to all holders of a class of Equity Interests of such Subsidiary on a pro rata basis); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any of its Subsidiaries; (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Indebtedness, except at the original final maturity date thereof; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment (the amount of any such Restricted Payment, if other than cash or Cash Equivalents, shall be the fair market value (as conclusively evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee within 60 days prior to the date of such Restricted Payment) of the asset(s) proposed to be transferred by the Company or such Subsidiary, as the case may be, pursuant to such Restricted Payment): (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the Reference Period immediately preceding the date of such Restricted Payment, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof; and (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Subsidiaries after December 31, 1995 (excluding Restricted Payments permitted by clauses (ii), (iii), (iv) and (v) of the next succeeding paragraph), is less than the sum (without duplication) of (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after December 31, 1995 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (2) 100% of the aggregate net cash proceeds received by the Company from the issue or sale (other than to a Subsidiary of the Company) since December 31, 1995 of Qualified Equity Interests of the Company or of debt securities of the Company or any of its Subsidiaries that have been converted into or exchanged for such Qualified Equity Interests of the Company, plus(3) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (net of taxes and the cost of disposition, if any) or (B) the initial amount of such Restricted Investment, plus (4) $20 million. The foregoing provisions shall not prohibit the following Restricted Payments: 52 -46- (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have otherwise complied with the provisions hereof; (ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Subsidiary in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of Qualified Equity Interests of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c)(2) of the preceding paragraph; (iii) the defeasance, redemption or repurchase of Subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or in exchange for or out of the net cash proceeds from the substantially concurrent sale (other than to a Subsidiary of the Company) of Qualified Equity Interests of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c)(2) of the preceding paragraph; and (iv) any purchase or defeasance of Subordinated Indebtedness to the extent required upon a change of control or asset sale (as defined therein) by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued, but only if the Company (1) in the case of a Change of Control, has complied with its obligations under the provisions described under Section 4.13 of this Indenture or (2) in the case of an Asset Sale, has applied the Net Proceeds from such Asset Sale in accordance with the provisions under Sections 2.15 and 4.10 of this Indenture; provided, however, in the case of each of clauses (ii), (iii) and (iv) of this paragraph, no Default or Event of Default shall have occurred and be continuing at the time of such Restricted Payment or would occur as a consequence thereof. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this covenant were computed. SECTION 4.8. Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual Transfer Restriction (other than a consensual Transfer Restriction with respect to any Receivables Subsidiary), except for such Transfer Restrictions existing under or by reason of: 53 -47- (a) Existing Indebtedness as in effect on the Issue Date, (b) this Indenture, (c) applicable law, (d) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition or in violation of Section 4.9 hereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that the Consolidated Cash Flow of such Person shall not be taken into account in determining whether such acquisition was permitted by the terms hereof except to the extent that such Consolidated Cash Flow would be permitted to be dividended to the Company without the prior consent or approval of any third party, (e) customary non-assignment provisions in leases entered into in the ordinary course of business, (f) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the ability of any of the Company's Subsidiaries to transfer the property so acquired to the Company or any of its Subsidiaries, (g) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, or (h) the Credit Agreement and related documentation as the same is in effect on the Issue Date and as amended or replaced from time to time, provided that no such amendment or replacement is more restrictive as to Transfer Restrictions than the Credit Agreement and related documentation as in effect on the Issue Date. Nothing contained in this Section 4.8 shall prevent the Company or any Subsidiary of the Company from creating, incurring, assuming or suffering to exist any Permitted Liens or entering into agreements in connection therewith that impose restrictions on the transfer or disposition of the property or assets subject to such Permitted Liens. SECTION 4.9. Limitations on Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") after the Issue Date any Indebtedness (including Acquired Debt) and the Company will not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company and its Subsidiaries may incur Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for the Reference Period immediately preceding the 54 -48- date on which such additional Indebtedness is incurred would have been at least 2.5 to 1, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred at the beginning of such Reference Period. Indebtedness consisting of reimbursement obligations in respect of a letter of credit shall be deemed to be incurred when the letter of credit is first issued. The foregoing provision shall not apply to: (a) the incurrence by the Company or any of its Subsidiaries of Indebtedness pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential reimbursement obligation of the Company or any Subsidiary with respect thereto) not to exceed an amount equal to $175.0 million; (b) the incurrence by the Company and the Guarantors of Indebtedness represented by the Securities; (c) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted by this Indenture to be incurred (including, without limitation, Existing Indebtedness); (d) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Subsidiaries; provided that in the case of such Indebtedness of the Company, such obligations shall be unsecured; (e) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by the terms hereof to be outstanding or any receivable or liability the payment of which is determined by reference to a foreign currency; provided that the notional principal amount of any such Hedging Obligation does not exceed the principal amount of the Indebtedness or the amount of such receivable or liability to which such Hedging Obligation relates; (f) the incurrence by the Company or any of its Subsidiaries of Indebtedness represented by performance bonds, warranty or contractual service obligations, standby letters of credit or appeal bonds, in each case to the extent incurred in the ordinary course of business of the Company or such Subsidiary; (g) the incurrence by Receivables Subsidiaries of Indebtedness not to exceed $100.0 million in the aggregate at any time outstanding; provided that (x) the Company has received customary legal or accounting opinions (or advice from a nationally recognized rating agency) that such Receivables Subsidiary is "bankruptcy remote" or otherwise would not be consolidated with the Company in a bankruptcy proceeding and that the sale of receivables to such Receivables Subsidiary qualify as a "true sale" and (y) such Indebtedness is otherwise non-recourse to the assets of the Company and its Subsidiaries other than a Receivables Subsidiary; and 55 -49- (h) the incurrence by the Company or any of its Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount at any time outstanding not to exceed $100.0 million. For purposes of determining any particular amount of Indebtedness under this covenant, guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness permitted by the second paragraph of this covenant, the Company shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the categories of permitted Indebtedness described above and (ii) the outstanding principal amount on any date of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness on such date. SECTION 4.10. Asset Sales. The Company shall not, and shall not permit any of its Subsidiaries to, consummate an Asset Sale, unless (i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (as conclusively determined by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Subsidiary is in the form of cash or Cash Equivalents; provided that for purposes of this provision, (x) the amount of (A) any liabilities (as shown on the most recent balance sheet of the Company or such Subsidiary or in the notes thereto) of the Company or such Subsidiary (other than liabilities that are by their terms subordinated to the Securities or the Guarantees) that are assumed by the transferee of any such assets and (B) any securities or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into cash or Cash Equivalents (or as to which the Company or such Subsidiary has received at or prior to the consummation of the Asset Sale a commitment (which may be subject to customary conditions) from a nationally recognized investment, merchant or commercial bank to convert into cash or Cash Equivalents within 90 days of the consummation of such Asset Sale and which are thereafter actually converted into cash or Cash Equivalents within such 90-day period) shall be deemed to be cash or Cash Equivalents (but shall not be deemed to be Net Proceeds for purposes of the following provisions until reduced to cash or Cash Equivalents) and (y) the fair market value of any Non-Cash Consideration received by the Company or a Subsidiary in any Non-Qualified Asset Sale shall be deemed to be cash to the extent that the aggregate fair market value (as conclusively determined by resolution of the Board of Directors set forth in any Officers' Certificate delivered to the Trustee) of all Non-Cash Consideration (measured at the time received and without giving effect to any subsequent changes in value) received by the Company or any of its Subsidiaries since the Issue Date in all Non-Qualified Asset Sales does not exceed 6% of the Company's Stockholders' Equity as of the date of such consummation. Notwithstanding the foregoing, to the extent the Company or any of its Subsidiaries receives Non-Cash Consideration as proceeds of an Asset Sale, such Non-Cash Consideration shall be deemed to be Net Proceeds for purposes of (and shall be applied in accordance with) the following 56 -50- provisions when the Company or such Subsidiary receives cash or Cash Equivalents from a sale, repayment, exchange, redemption or retirement of or extraordinary dividend or return of capital on such Non-Cash Consideration. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Subsidiary may apply such Net Proceeds (i) to purchase one or more Nursing Facilities or Related Businesses and/or a controlling interest in the Capital Stock of a Person owning one or more Nursing Facilities and/or one or more Related Businesses, (ii) to make a capital expenditure or to acquire other tangible assets, in each case, that are used or useful in any business in which the Company is permitted to be engaged pursuant to Section 4.15 hereof or (iii) to permanently reduce Indebtedness (other than Subordinated Indebtedness) of the Company or its Subsidiaries. Pending the final application of any such Net Proceeds, the Company or such Subsidiary may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any manner that is not prohibited by the terms hereof. Any Net Proceeds from Asset Sales that are not so invested or applied shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25 million, the Company shall make an offer to all Holders of Securities and holders of any other Indebtedness of the Company ranking on a parity with the Securities from time to time outstanding with similar provisions requiring the Company to make an offer to purchase or to redeem such Indebtedness with proceeds from any Asset Sales, pro rata in proportion to the respective principal amounts of the Securities and such other Indebtedness then outstanding (a "Senior Asset Sale Offer") to purchase the maximum principal amount of Securities and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Purchase Price"), in accordance with the procedures set forth in Section 2.15 hereof. To the extent that the aggregate amount of Securities and such other Indebtedness tendered pursuant to a Senior Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes not prohibited at the time by the provisions of this Indenture. If the aggregate principal amount of Securities and such other Indebtedness surrendered by holders thereof exceeds the amount of Excess Proceeds, the Securities and such other Indebtedness shall be purchased on a pro rata basis. Upon completion of a Senior Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. SECTION 4.11. Limitations on Transactions With Affiliates. The Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of their properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction") unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction involving aggregate 57 -51- consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction was approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness of such Affiliate Transaction to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing; provided that (x) transactions or payments pursuant to any employment arrangements, director or officer indemnification agreements or employee or director benefit plans entered into by the Company or any of its Subsidiaries in the ordinary course of business of the Company or such Subsidiary, (y) transactions between or among the Company and/or its Subsidiaries and (z) Restricted Payments permitted under Section 4.7 hereof, in each case, shall not be deemed to be Affiliate Transactions. SECTION 4.12. Limitations on Liens. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom unless all payments due hereunder and under the Securities are secured on an equal and ratable basis with the Obligations so secured until such time as such Obligations are no longer secured by a Lien. SECTION 4.13. Change of Control. Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Securities pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to the date of purchase (the "Change of Control Payment") on a date that is not more than 90 days after the occurrence of such Change of Control (the "Change of Control Payment Date"). Within 45 days following any Change of Control, the Company shall mail or at the Company's request, the Trustee will mail, a notice of a Change of Control to each Holder (at its last registered address with a copy to the Trustee and the Paying Agent) offering to repurchase the Securities held by such Holder pursuant to the procedures specified in such notice. The Change of Control Offer shall remain open from the time of mailing until at least the close of business on the third Business Day preceding the Change of Control Payment Date. The notice, which shall govern the terms of the Change of Control Offer, shall contain all instructions and materials necessary to enable the Holders to tender Securities pursuant to the Change of Control Offer and shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.13 and that all Securities tendered will be accepted for payment; (2) the Change of Control Payment and the Change of Control Payment Date, which date shall be no earlier than 30 days from the date such notice is mailed; (3) that any Security not tendered will continue to accrue interest in accordance with the terms of this Indenture; 58 -52- (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Securities accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to any Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the Business Day next preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the third Business Day next preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase, and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that Holders whose Securities are being purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; and (8) the circumstances and relevant facts regarding such Change of Control and any other information that would be material to a decision as to whether to tender a Security pursuant to the Change of Control Offer. On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment all Securities or portions thereof properly tendered and not withdrawn pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Securities or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Securities so tendered the Change of Control Payment for such Securities, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that each such new Security shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities as a result of a Change of Control. 59 -53- SECTION 4.14. Corporate Existence. Subject to Section 4.13 and Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of each Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. SECTION 4.15. Line of Business. The Company shall not, and shall not permit any of its Subsidiaries to, engage to any material extent in any business other than the ownership, operation and management of Nursing Facilities and Related Businesses. ARTICLE 5 SUCCESSORS SECTION 5.1. Limitations on Mergers, Consolidations or Sales of Assets. The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless: (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the Obligations of the Company under this Indenture and the Securities pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and 60 -54- (iv) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the Reference Period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof. The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers' Certificate covering clauses (i) through (iv) above and an Opinion of Counsel covering clauses (i) and (ii) above, and each stating that the proposed transaction and such supplemental indenture comply with this Indenture. The Trustee shall be entitled to conclusively rely upon such Officers' Certificate and Opinion of Counsel. SECTION 5.2. Successor Corporation or Person Substituted. Upon any consolidation or merger or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1 hereof, the successor corporation or Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation or Person and not to the Company), and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation or Person had been named as the Company, herein. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. Events of Default. Each of the following constitutes an "Event of Default": (i) default for 30 days in the payment when due of interest on the Securities; (ii) default in payment when due of the principal of, or premium, if any, on the Securities, at maturity or otherwise; 61 -55- (iii) failure by the Company or any Guarantor to comply with the provisions of Section 4.10 or 4.13 hereof; (iv) failure by the Company or any Guarantor for 30 days after notice to comply with the provisions of Section 4.7 or 4.9 hereof; (v) failure by the Company or any Guarantor for 60 days after notice to comply with any of its agreements in this Indenture or the Securities; (vi) any default that occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries (or the payment of which is guaranteed by the Company or any of its Significant Subsidiaries), whether such Indebtedness or guarantee exists on the date hereof or is created after the date hereof, which default (a) constitutes a Payment Default or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or that has been so accelerated, aggregates in excess of $20.0 million; (vii) failure by the Company or any of its Significant Subsidiaries to pay a final judgment or judgments aggregating in excess of $20.0 million entered by a court or courts of competent jurisdiction against the Company or such Significant Subsidiaries, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (viii) any Guarantee shall cease, for any reason not permitted by this Indenture, to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee; (ix) the Company or any Significant Subsidiary thereof pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or 62 -56- (e) admits in writing its inability generally to pay its debts as the same become due; and (x) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any Significant Subsidiary thereof in an in- voluntary case in which it is the debtor, (b) appoints a Custodian of the Company or any Significant Subsidiary thereof or for all or substantially all of the property of the Company or any Significant Subsidiary thereof, or (c) orders the liquidation of the Company or any Significant Subsidiary thereof, and the order or decree remains unstayed and in effect for 60 consecutive days. A Default under clause (iv) or (v) is not an Event of Default until the Trustee notifies the Company in writing, or the Holders of at least 25% in aggregate principal amount of the then outstanding Securities notify the Company and the Trustee in writing, of the Default and the Company does not cure the Default within 30 days, with respect to a Default under clause (iv), or 60 days, with respect to a Default under clause (v), after receipt of such notice. The written notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." SECTION 6.2. Acceleration. If any Event of Default occurs (other than an Event of Default with respect to the Company specified in clause (ix) or (x) of Section 6.1 hereof) and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the then outstanding Securities by written notice to the Company and the Trustee, may declare the unpaid principal of, premium, if any, and accrued and unpaid interest on all the Securities to be due and payable immediately. Upon such declaration the principal, premium, if any, and interest shall be due and payable immediately. If an Event of Default specified in clause (ix) or (x) of Section 6.1 hereof occurs with respect to the Company such an amount shall ipso facto become and be immediately due and payable without further action or notice on the part of the Trustee or any Holder. SECTION 6.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or 63 -57- constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.4. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Securities then outstanding by written notice to the Trustee may, on behalf of the Holders of all of the Securities, waive any existing Default or Event of Default and its consequences under this Indenture except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.5. Control by Majority. Holders of the Securities may not enforce this Indenture or the Securities except as provided in this Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper which is not inconsistent with any such direction. SECTION 6.6. Limitation on Suits. A Holder may pursue a remedy with respect to this Indenture or the Securities only if: (i) the Holder gives to the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (v) during such 60-day period the Holders of a majority in principal amount of the then outstanding Securities do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. 64 -58- SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified in Section 6.1(i) or (ii) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company or any other obligor for the whole amount of principal, premium, if any, and interest remaining unpaid on the Securities and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover amounts due the Trustee under Section 7.7 hereof, including the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.9. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of any and all distributions, dividends, money, securities and other properties which the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: 65 -59- First: to the Trustee, its agents and attorneys for amounts due under Section 7.7, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10 upon five Business Days prior notice to the Company. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Securities. ARTICLE 7 TRUSTEE SECTION 7.1. Duties of Trustee. (i) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (ii) Except during the continuance of an Event of Default known to the Trustee: (a) the duties of the Trustee shall be determined solely by the express provisions of this Indenture or the TIA and the Trustee need perform only those duties that are specifically set forth in this Indenture or the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and 66 -60- (b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (iii) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (a) this paragraph does not limit the effect of paragraph (ii) of this Section; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof. (iv) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (i), (ii), and (iii) of this Section. (v) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives security and indemnity satisfactory to it against any loss, liability or expense. (vi) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Absent written instruction from the Company, the Trustee shall not be required to invest any such money. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2. Rights of Trustee. (i) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. 67 -61- (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture. A permissive right granted to the Trustee hereunder shall not be deemed an obligation to act. (v) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (vi) The Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Securities unless either (1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by the Company, any Guarantor or any other obligor on the Securities or by any Holder of the Securities. (vii) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (viii) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and (ix) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to the Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superceded. 68 -62- SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, nor shall it be accountable for the Company's use of the proceeds from the Securities or any money paid to the Company or upon the Company's direction under any provision of this Indenture, nor shall it be responsible for the use or application of any money received by any Paying Agent other than the Trustee, nor shall it be responsible for any statement or recital herein or any statement in the Securities or any other document in connection with the sale of the Securities or pursuant to this Indenture other than its certificate of authentication. SECTION 7.5. Notice of Defaults. The Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after such Default or Event of Default occurs. Except in the case of a Default or Event of Default in payment on any Security, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. SECTION 7.6. Reports by Trustee to Holders. Within 60 days after each December 31 beginning with the December 31 following the Issue Date, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders shall be mailed to the Company and filed with the Commission and each stock exchange on which the Securities are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange or of any delisting thereof. 69 -63- SECTION 7.7. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services rendered by it hereunder as the parties shall agree from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities, damages, claims or expenses including taxes (other than taxes based on the income of the Trustee) incurred by it arising out of or in connection with the acceptance of its duties and the administration of the trusts under this Indenture, except as set forth below. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. In addition, the Trustee will not be under any obligation to exercise any of its rights or powers under this Indenture at the request of any Holder of Securities, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. The obligations of the Company under this Section 7.7 shall survive the satisfaction and discharge of this Indenture. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities. Such Lien shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(ix) or (x) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. 70 -64- The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a Custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee or Agent by Merger, Etc. If the Trustee or any Agent consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee or Agent. 71 -65- SECTION 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee power, shall be subject to supervision or examination by federal or state authority and shall have a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1. Defeasance and Discharge of This Indenture and the Securities. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, with respect to the Securities, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Securities upon compliance with the conditions set forth below in this Article 8. SECTION 8.2. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.2, the Company and the Guarantors shall be deemed to have been discharged from their respective obligations with respect to all outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the other Sections of this Indenture referred to in clauses (i) and (ii) of this Section 8.2, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities to receive solely from the trust fund described in Section 8.4 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Securities when such payments are due, (ii) the 72 -66- Company's obligations with respect to such Securities under Sections 2.4, 2.6, 2.7, 2.10 and 4.2 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, the Trustee's rights under Section 7.7 hereof, and the Company's obligations in connection therewith and (iv) this Article 8. Upon Legal Defeasance as provided herein, the Guarantee of each Guarantor shall be fully released and discharged and the Trustee shall promptly execute and deliver to the Company any documents reasonably requested by the Company to evidence or effect the foregoing. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof with respect to the Securities. SECTION 8.3. Covenant Defeasance. Upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3, the Company and the Guarantors shall be released from their respective obligations under the covenants contained in Sections 2.15, 4.3, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and Article 5 hereof with respect to the outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of a reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Sections 6.1(iii) and 6.1(iv) hereof, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition upon the Company's exercise under Section 8.1 hereof of the option applicable to this Section 8.3, Sections 6.1(v) through 6.1(viii) hereof shall not constitute Events of Default. SECTION 8.4. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.2 or Section 8.3 hereof to the outstanding Securities: (i) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 who shall agree to comply with the provisions of this Article 8 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (a) cash in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in an amount, or (c) a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally 73 -67- recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Paying Agent (or other qualifying trustee) to pay and discharge the principal of, premium, if any, and interest on such outstanding Securities on the Maturity Date or on the applicable Redemption Date, as the case may be, of such principal or installment of principal, premium, if any, or interest on the Securities, and the Holders of the Securities must have a valid, perfected, exclusive security interest in such trust; provided that the Paying Agent shall have been irrevocably instructed to apply such cash and the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. The Paying Agent shall promptly advise the Trustee in writing of any cash or Securities deposited pursuant to this Section 8.4. (ii) In the case of an election under Section 8.2 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred. (iii) In the case of an election under Section 8.3 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that the Holders of the outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred. (iv) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or, insofar as Section 6.1(ix) or 6.1(x) hereof is concerned, at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period, but in the case of Covenant Defeasance, the covenants which are defeased under Section 8.3 hereof will cease to be in effect unless an Event of Default under Section 6.1(ix) or Section 6.1(x) hereof occurs during such period). 74 -68- (v) Such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound (other than a breach, violation or default resulting from the borrowing of funds to be applied to such deposit). (vi) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (vii) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 8.2 or 8.3 hereof was not made by the Company with the intent of preferring the Holders of the Securities over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others. (viii) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent relating to either the Legal Defeasance under Section 8.2 hereof or the Covenant Defeasance under Section 8.3 hereof (as the case may be) have been complied with as contemplated by this Section 8.4. SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.6 hereof, all cash and U.S. Government Obligations (including the proceeds thereof) deposited with the Paying Agent (or other qualifying trustee, collectively for purposes of this Section 8.5, the "Paying Agent") pursuant to Section 8.4 hereof in respect of the outstanding Securities shall be held in trust and applied by the Paying Agent, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Article 8 to the contrary notwithstanding, the Trustee or the Paying Agent, as applicable, shall deliver or pay to the Company from time to time upon the Company's request any cash or U.S. Government Obligations held by it as provided in Section 8.4 hereof which, in the opinion of a 75 -69- nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.4(i) hereof), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.6. Repayment to Company. Any cash and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.7. Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or U.S. Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Security to receive such payment from the cash and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.1. Without Consent of Holders. Notwithstanding Section 9.2 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Securities without the consent of any Holder: 76 -70- (i) to cure any ambiguity, defect or inconsistency; (ii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iii) to provide for the assumption of the Company's obligations to the Holders of the Securities in the case of a merger, consolidation or sale of assets pursuant to Article 5 hereof; (iv) to provide for the assumption of any Guarantor's obligations to the Holders of the Securities in the case of a merger, consolidation or sale of assets pursuant to Section 10.4 hereof; (v) to provide for additional Guarantors of the Securities; (vi) to evidence the release of any Guarantor in accordance with Article 10 hereof; (vii) to make any change that would provide any additional rights or benefits to the Holders of the Securities or that does not adversely affect the legal rights hereunder of any such Holder; (viii) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (ix) in any other case where a supplemental indenture is required or permitted to be entered into pursuant to the provisions of Article 10 hereof without the consent of any Holder; or (x) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture which affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2. With Consent of Holders. Except as otherwise provided herein, this Indenture or the Securities may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for such Securities), and any existing default or compliance with any provision of this Indenture or the Se- 77 -71- curities may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Securities (including consents obtained in connection with a tender offer or exchange offer for such Securities). Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company or any Guarantor with any provision of this Indenture or the Securities. Without the consent of each Holder affected, however, an amendment or waiver may not (with respect to any Security held by a non-consenting Holder): (i) reduce the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal of or change the fixed maturity of any Security; (iii) reduce the rate of or change the time for payment of interest on any Security; (iv) waive a Default or Event of Default in the payment of principal of, or premium, if any, or interest, on the Securities (except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount thereof and a waiver of the Payment Default that resulted from such acceleration); (v) make any Security payable in money other than that stated in the Securities; (vi) make any change in Section 6.4 or 6.7 hereof; or (vii) make any change in this sentence of this Section 9.2. 78 -72- SECTION 9.3. Compliance with TIA. Every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment waiver, or supplement becomes effective in accordance with its terms and thereafter binds every Holder. The Company may, but shall not be obligated to, fix a record date for determining which Holders must consent to such amendment, supplement or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 2.5 hereof or (ii) such other date as the Company shall designate. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment or waiver or revoke any consent previously given, whether or not such persons continue to be Holders after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless such amendment, supplement or waiver makes a change described in any of clauses (i) through (vii) of Section 9.2, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same indebtedness as the consenting Holder's Security. SECTION 9.5. Notation on or Exchange of Securities. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Security thereafter authenticated. The Company in exchange for all Securities may issue and the Trustee shall authenticate new Securities that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6. Trustee to Sign Amendments, Etc. The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplemental indenture does not adversely affect the rights, duties, liabili- 79 -73- ties or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive and, subject to Section 7.1, shall be fully protected in relying upon, in addition to the documents required by Section 11.4, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it shall be valid and binding upon the Company in accordance with its terms. Neither the Company nor any Guarantor may sign such amendment or supplemental indenture until its Board of Directors approves it. ARTICLE 10 GUARANTEE SECTION 10.1. Guarantee. In consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the Guarantors hereby irrevocably and unconditionally guarantees (the "Guarantee"), jointly and severally, on a senior basis, to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company under this Indenture or the Securities, that, in accordance with the terms of this Indenture and the Securities: (i) the principal and premium (if any) of and interest on the Securities will be paid in full when due, whether at the Maturity Date or Interest Payment Date, by acceleration, call for redemption or otherwise; (ii) the purchase price for all Securities properly and timely tendered for acceptance in response to a Change of Control Offer or a Senior Asset Sale Offer will be timely, or otherwise in accordance with the provisions of this Indenture, paid in full; (iii) all other payment obligations of the Company to the Holders or the Trustee under this Indenture or the Securities will be promptly paid in full; and (iv) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at the Maturity Date, as so extended, by acceleration, call for redemption, upon a Change of Control Offer, upon a Senior Asset Sale Offer or otherwise. Failing payment when due of any amount so Guaranteed for whatever reason, each Guarantor shall be jointly and severally obligated to pay the same before failure so to pay becomes an Event of Default. If the Company or a Guarantor defaults in the payment of the principal of, premium, if any, or interest on, the Securities when and as the same shall become due, whether upon maturity, acceleration, call for redemption, upon a Change of Control Offer, Asset Sale Offer or otherwise, without the necessity of action by the Trustee or any Holder, each Guarantor shall be required, jointly and severally, to promptly make such payment in full. Each Guarantor hereby agrees that its obligations with regard to this Guarantee shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the 80 -74- same, any delays in obtaining or realizing upon or failures to obtain or realize upon collateral, the recovery of any judgment against the Company, any action to enforce the same or any other circumstances that might otherwise constitute a legal or equitable discharge or defense of a Guarantor (except as provided in Sections 10.4 and 10.5 hereof). Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company or right to require the prior disposition of the assets of the Company to meet its obligations, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged (except to the extent released pursuant to Sections 10.4 or 10.5 hereof) except by complete performance of the obligations contained in the Securities and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian, trustee, or similar official acting in relation to either the Company or such Guarantor, any amount paid by either the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect (except to the extent released pursuant to Sections 10.4 or 10.5 hereof). Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Article 6, those obligations (whether or not due and payable) will forthwith become due and payable by each of the Guarantors for the purpose of this Guarantee. Each Guarantor and by its acceptance of a Security issued hereunder each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor set forth in the first paragraph of this Section 10.1 not constitute a fraudulent transfer or conveyance for purpose of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under its Guarantee set forth in the first paragraph of this Section 10.1 shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to the following paragraph of this Section 10.1, result in the obligations of such Guarantor under such Guarantee not constituting such a fraudulent transfer or conveyance. Each Guarantor that makes any payment or distribution under the first paragraph of this Section 10.1 shall be entitled to a contribution from each other Guarantor equal to its Pro Rata Portion of such payment or distribution. For purposes of the foregoing, the "Pro Rata Portion" of any Guarantor means the percentage of the net assets of all Guarantors held by such Guarantor, determined in accordance with GAAP. 81 -75- It is the intention of each Guarantor and the Company that the obligations of each Guarantor hereunder shall be joint and several and in, but not in excess of, the maximum amount permitted by applicable law. Accordingly, if the obligations in respect of the Guarantee would be annulled, avoided or subordinated to the creditors of any Guarantor by a court of competent jurisdiction in a proceeding actually pending before such court as a result of a determination both that such Guarantee was made without fair consideration and, immediately after giving effect thereto, such Guarantor was insolvent or unable to pay its debts as they mature or left with an unreasonably small capital, then the obligations of such Guarantor under such Guarantee shall be reduced by such court if and to the extent such reduction would result in the avoidance of such annulment, avoidance or subordination; provided, however, that any reduction pursuant to this paragraph shall be made in the smallest amount as is strictly necessary to reach such result. For purposes of this paragraph, "fair consideration," "insolvency," "unable to pay its debts as they mature," "unreasonably small capital," and the effective times of reductions, if any, required by this paragraph shall be determined in accordance with applicable law. SECTION 10.2. Execution and Delivery of Guarantee. Each Guarantor shall, by virtue of such Guarantor's execution and delivery of this Indenture or such Guarantor's execution and delivery of an indenture supplement pursuant to Section 10.3 hereof, be deemed to have signed on each Security issued hereunder the notation of guarantee set forth on the form of the Securities attached hereto as Exhibit A to the same extent as if the signature of such Guarantor appeared on such Security. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the guarantee set forth in Section 10.1 on behalf of each Guarantor. The notation of a guaranty set forth on any Security shall be null and void and of no further effect with respect to the guaranty of any Guarantor which, pursuant to Section 10.4 or Section 10.5, is released from such Guarantee. SECTION 10.3. Future Subsidiary Guarantors. Upon (i) the acquisition by the Company or Guarantor of the Capital Stock of any Person, if, as a result of such acquisition, such Person becomes a Subsidiary of the Company or any Guarantor or (ii) the last day of any fiscal quarter during which any Subsidiary of the Company that is not a Guarantor as of such date and has not previously been released as a Guarantor pursuant to Section 10.4 or Section 10.5 of this Indenture becomes a Subsidiary, such Subsidiary (hereinafter any such Subsidiary, except any Excluded Guarantee Subsidiary (as defined below), being called a "Future Subsidiary Guarantor") shall unconditionally guarantee the obligations of the Company with respect to payment and performance of the Securities and the other obligations of the Company under this Indenture to the same extent that such obligations are guaranteed by the other Guarantors pursuant to Section 10.1 hereof; and, within 60 days of the date of such occurrence, such Future Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental indenture, which shall be in a form satisfactory to the Trustee, making such Future Subsidiary Guarantor a party to this Indenture; provided, however, that the foregoing provisions shall not apply to (A) any Subsidiary referenced in clause (i) or clause (ii) above that is prohibited by law or by the terms of any agreement from making the guarantee set forth in Section 10.1 82 -76- hereof (an "Excluded Guarantee Subsidiary") (provided that such Subsidiary will become a Future Subsidiary Guarantor as of the date such prohibition is removed or lapses), or (B) a Subsidiary which would have been released from its guarantee, by virtue of events set forth in Section 10.5 hereof, had such Subsidiary been a Guarantor at the time such events occurred, (C) a Subsidiary of any Person which has been released as a Guarantor pursuant to Section 10.5 hereof, or (D) any Receivables Subsidiary. SECTION 10.4. Guarantor May Consolidate, Etc. on Certain Terms. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company or any other Guarantor. Upon any such consolidation or merger, the Guarantees (as set forth in Section 10.1 hereof) of the Guarantor which is not the survivor of the merger or consolidation, and of any Subsidiary of such Guarantor that is also a Guarantor, shall be released and shall no longer have any force or effect. Nothing contained in this Indenture shall prevent any sale or conveyance of assets of any Guarantor (whether or not constituting all or substantially all of the assets of such Guarantor) to any Person, provided that the Company shall comply with the provisions of Sections 2.15 and 4.10 hereof, and provided further that, in the event that all or substantially all of the assets of a Guarantor are sold or conveyed, the Guarantees of such Guarantor (as set forth in Section 10.1 hereof) shall be released and shall no longer have any force or effect. Except as provided in the first paragraph of Section 10.4 or Section 10.5 hereof, each Guarantor shall not, directly or indirectly, consolidate with or merge with or into another Person, unless (i) either (a) the Guarantor is the continuing entity or (b) the resulting or surviving entity is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the obligations of the Guarantor in connection with the Securities and this Indenture; (ii) no Default or Event of Default would occur as a consequence of (after giving effect, on a pro forma basis, to) such transaction; and (iii) the Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation or merger and if a supplemental indenture is required, such supplemental indenture comply with this Indenture and that all conditions precedent herein relating to such transaction have been satisfied. Upon any consolidation or merger of the Guarantor in accordance with Section 10.4 hereof, the successor corporation formed by such consolidation or into which the Guarantor is merged shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor under this Indenture with the same effect as if such successor corporation had been named herein as the Guarantor, and when a successor corporation duly assumes all of the obligations of the Guarantor pursuant hereto and pursuant to the Securities, the Guarantor shall be released from such obligations. SECTION 10.5. Release of Guarantors. Without any further notice or action being required by any Person, any Guarantor, and each Subsidiary of such Guarantor that is also a Guarantor, shall be fully and conditionally released and discharged from all obligations under its Guarantee and this Indenture upon the sale or disposition 83 -77- (whether by merger, stock purchase, asset sale or otherwise) of a Guarantor (or all of its assets) to an entity which is not a Subsidiary of the Company, or upon the dissolution of any Guarantor, which sale, disposition or dissolution is otherwise in compliance with this Indenture, such Guarantor shall be deemed released from its obligations under its Guarantee of the Securities; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or dissolution. The releases and discharges set forth in the first paragraph of this Section 10.5 shall be effective on the date of consummation thereof. At the written request of the Company, the Trustee shall promptly execute and deliver appropriate instruments in forms reasonably acceptable to the Company evidencing and further implementing any releases and discharges pursuant to the foregoing provisions. If the Company desires the instruments evidencing or implementing any releases or discharges to be executed prior to the effectiveness of such releases and discharges as set forth above, such instruments may be made conditional upon the occurrence of the events necessary to cause the effectiveness of such releases and discharges, as specified in the first sentence of this Section 10.5. Notwithstanding the foregoing provisions of this Article 10, (i) any Guarantor whose Guarantee would otherwise be released pursuant to the provisions of this Section 10.5 may elect, by written notice to the Trustee, to maintain such Guarantee in effect notwithstanding the event or events that otherwise would cause the release of such Guarantee (which election to maintain such Guarantee in effect may be conditional or for a limited period of time), and (ii) any Subsidiary of the Company which is not a Guarantor may elect, by written notice to the Trustee, to become a Guarantor (which election may be conditional or for a limited period of time). SECTION 10.6. Certain Bankruptcy Events. Each Guarantor hereby covenants and agrees, to the fullest extent that it may do so under applicable law, that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company, such Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees not to take the benefit of any such stay of execution, whether under the Bankruptcy Law or otherwise. ARTICLE 11 MISCELLANEOUS SECTION 11.1. TIA Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. 84 -78- SECTION 11.2. Notices. Any notice or communication to the Company or any Guarantor or the Trustee is duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, addressed as follows: If to the Company or to any Guarantor: Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 Telecopier No.: (501) 201-4801 Attention: Secretary With, in the case of notices delivered in connection with Section 6.1 hereof, a copy to: Latham & Watkins 633 West Fifth Street Suite 4000 Los Angeles, California 90071 Telecopier No.: (213) 891-8763 Attention: Gary Olson If to the Trustee: The Bank of New York Corporate Trust Department 101 Barclay Street, 21st Floor West New York, New York 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration The Company or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Unless otherwise set forth above, any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing 85 -79- next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 11.3. Communication by Holders With Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.4. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 11.5 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 11.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 11.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and 86 -80- (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been satisfied; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 11.6. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 11.7. Legal Holidays. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 11.8. No Personal Liability of Directors, Officers, Employees, Incorporator and Stockholders. No director, officer, employee, incorporator or stockholder of the Company or of any Guarantor, as such, shall have any liability for any obligations of the Company or of any Guarantor under the Securities, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities. SECTION 11.9. Duplicate Originals. The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture. SECTION 11.10. Governing Law. The internal law of the State of New York, shall govern and be used to construe this Indenture and the Securities, without regard to the conflict of laws provisions thereof. SECTION 11.11. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.12. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. 87 -81- SECTION 11.13. Severability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 11.14. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 11.15. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signature Pages Follow] 88 S-1 Executed this 25th day of April, 2001. BEVERLY ENTERPRISES, INC. By: /s/ Schuyler Hollingsworth, Jr. ------------------------------------------ Name: Schuyler Hollingsworth, Jr. Title: Senior Vice President and Treasurer THE BANK OF NEW YORK, as Trustee By: /s/ Robert A. Massimillo ------------------------------------------ Name: Robert A. Massimillo Title: Assistant Vice President GUARANTORS LISTED ON SCHEDULE I HERETO By: /s/ John W. MacKenzie ------------------------------------------ Name: John W. MacKenzie Title: Vice President and Secretary of each Guarantor 89 SCHEDULE I GUARANTORS
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.) 71-0811574 Delaware AGI-Camelot, Inc. 43-1253376 Missouri Arborland Management Company, Inc. 58-2340689 South Carolina Associated Physical Therapy Practitioners, Inc. 23-2638708 Pennsylvania Beverly Assisted Living, Inc. 71-0777901 Delaware Beverly - Bella Vista Holding, Inc. 71-0797481 Delaware Beverly - Branson Holdings, Inc. 71-0817008 Delaware Beverly-Indianapolis, LLC 71-0824184 Indiana Beverly - Missouri Valley Holding, Inc. 71-0797485 Delaware Beverly - Plant City Holdings, Inc. 71-0817010 Delaware Beverly - Rapid City Holding, Inc. 71-0797483 Delaware Beverly - Tamarac Holdings, Inc. 71-0817009 Delaware Beverly - Tampa Holdings, Inc. 71-0817007 Delaware Beverly Clinical, Inc. 71-0796035 Delaware Beverly Enterprises International Limited 95-3982125 California Beverly Enterprises - Alabama, Inc. 95-3742145 California Beverly Enterprises - Arizona, Inc. 95-3750871 California Beverly Enterprises - Arkansas, Inc. 95-3751272 California Beverly Enterprises - California, Inc. 95-2499218 California
90 -2-
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- Beverly Enterprises - Colorado, Inc. 95-3750882 California Beverly Enterprises - Connecticut, Inc. 95-3849642 California Beverly Enterprises - Delaware, Inc. 95-3849628 California Beverly Enterprises - Distribution Services, Inc. 95-4081567 California Beverly Enterprises - District of Columbia, Inc. 95-3750889 California Beverly Enterprises - Florida, Inc. 95-3742251 California Beverly Enterprises - Garden Terrace, Inc. 95-3849648 California Beverly Enterprises - Georgia, Inc. 95-3750880 California Beverly Enterprises - Hawaii, Inc. 95-3750890 California Beverly Enterprises - Idaho, Inc. 95-3750886 California Beverly Enterprises - Illinois, Inc. 95-3750883 California Beverly Enterprises - Indiana, Inc. 95-3744258 California Beverly Enterprises - Iowa, Inc. 95-3751271 California Beverly Enterprises - Kansas, Inc. 95-3751269 California Beverly Enterprises - Kentucky, Inc. 95-3750894 California Beverly Enterprises - Louisiana, Inc. 95-3849633 California Beverly Enterprises - Maine, Inc. 95-3849627 California Beverly Enterprises - Maryland, Inc. 95-3750892 California Beverly Enterprises - Massachusetts, Inc. 95-3750893 California Beverly Enterprises - Michigan, Inc. 95-3898661 California Beverly Enterprises - Minnesota, Inc. 95-3742698 California
91 -3-
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- Beverly Enterprises - Mississippi, Inc. 95-3742144 California Beverly Enterprises - Missouri, Inc. 95-3750895 California Beverly Enterprises - Montana, Inc. 95-3849636 California Beverly Enterprises - Nebraska, Inc. 95-3750873 California Beverly Enterprises - Nevada, Inc. 95-3750896 California Beverly Enterprises - New Hampshire, Inc. 95-3849630 California Beverly Enterprises - New Jersey, Inc. 95-3750884 California Beverly Enterprises - New Mexico, Inc. 95-3750869 California Beverly Enterprises - North Carolina, Inc. 95-3742257 California Beverly Enterprises - North Dakota, Inc. 95-3751270 California Beverly Enterprises - Ohio, Inc. 95-3750867 California Beverly Enterprises - Oklahoma, Inc. 95-3849624 California Beverly Enterprises - Oregon, Inc. 95-3750881 California Beverly Enterprises - Pennsylvania, Inc. 95-3750870 California Beverly Enterprises - Rhode Island, Inc. 95-3849621 California Beverly Enterprises - South Carolina, Inc. 95-3750866 California Beverly Enterprises - Tennessee, Inc. 95-3742261 California Beverly Enterprises - Texas, Inc. 95-3744256 California Beverly Enterprises - Utah, Inc. 95-3751089 California Beverly Enterprises - Vermont, Inc. 95-3750885 California Beverly Enterprises - Virginia, Inc. 95-3742694 California
92 -4-
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- Beverly Enterprises - Washington, Inc. 95-3750868 California Beverly Enterprises - West Virginia, Inc. 95-3750888 California Beverly Enterprises - Wisconsin, Inc. 95-3742696 California Beverly Enterprises - Wyoming, Inc. 95-3849638 California Beverly Health and Rehabilitation Services, Inc. 95-2301514 California Beverly Healthcare, LLC 71-0817438 Indiana Beverly Healthcare Acquisition, Inc. 71-0812407 Delaware Beverly Healthcare - California, Inc. 95-3750879 California Beverly Holdings I, Inc. 71-0768985 Delaware Beverly Indemnity, Ltd. 71-0712927 Vermont Beverly Manor Inc. of Hawaii 99-0144750 California Beverly Real Estate Holdings, Inc. 71-0768984 Delaware Beverly Savana Cay Manor, Inc. 95-4217381 California Carrollton Physical Therapy Clinic, Inc. 75-2102832 Texas Commercial Management, Inc. 42-0891358 Iowa Community Care, Inc. 56-1487367 North Carolina Compassion and Personal Care Services, Inc. 56-1904822 North Carolina Eastern Home Health Supply & Equipment Co., Inc. 56-1581980 North Carolina Greenville Rehabilitation Services, Inc. 75-2059145 Texas Hallmark Convalescent Homes, Inc. 41-1413478 Michigan HomeCare Preferred Choice, Inc. 62-1702864 Delaware
93 -5-
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- Home Health and Rehabilitation Services, Inc. 75-2012280 Texas Hospice of Eastern Carolina, Inc. 56-1951841 North Carolina Hospice Preferred Choice, Inc. 71-0761314 Delaware HTHC Holdings, Inc. 71-0807323 Delaware Las Colinas Physical Therapy Center, Inc. 75-2402177 Texas Liberty Nursing Homes, Incorporated 54-0784334 Virginia MATRIX Occupational Health, Inc. 58-2380955 Delaware MATRIX Rehabilitation, Inc. 71-0783147 Delaware MATRIX Rehabilitation - Delaware, Inc. 71-0842504 Delaware MATRIX Rehabilitation - Georgia, Inc. 58-2554073 Delaware MATRIX Rehabilitation - Maryland, Inc. 71-0842503 Delaware MATRIX Rehabilitation - Ohio, Inc. 71-0842505 Delaware MATRIX Rehabilitation - South Carolina, Inc. 73-1575603 Delaware MATRIX Rehabilitation - Texas, Inc. 73-1589542 Delaware MATRIX Rehabilitation - Washington, Inc. 58-2554074 Delaware Medical Arts Health Facility of Lawrenceville, Inc. 58-1329700 Georgia Moderncare of Lumberton, Inc. 56-1217025 North Carolina Nebraska City S-C-H, Inc. 41-1413481 Nebraska Network for Physical Therapy, Inc. 74-2453469 Texas North Dallas Physical Therapy Associates, Inc. 75-2075331 Texas Nursing Home Operators, Inc. 34-0949279 Ohio
94 -6-
Employer State of Corporation ID Number Incorporation - ----------- --------- ------------- Petersen Health Care, Inc. 59-2043392 Florida PT NET, Inc. 62-1575533 Tennessee PT Net (Colorado), Inc. 84-1277912 Colorado Rehabilitation Associates of Lafayette, Inc. 72-1118473 Louisiana South Alabama Nursing Home, Inc. 95-3809397 Alabama South Dakota - Beverly Enterprises, Inc. 95-3750887 California Spectra Healthcare Alliance, Inc. 71-0759298 Delaware Tar Heel Infusion Company, Inc. 56-1767308 North Carolina The Parks Physical Therapy and Work Hardening Center, Inc. 75-2452926 Texas Theraphysics Corp. 13-3643705 Delaware Theraphysics of New York IPA, Inc. 71-0817011 New York Theraphysics Partners of Colorado, Inc. 51-0372115 Delaware Theraphysics Partners of Texas, Inc. 62-1659976 Delaware Theraphysics Partners of Western Pennsylvania, Inc. 23-2901884 Delaware TMD Disposition Company 59-3151568 Florida Vantage Healthcare Corporation 35-1572998 Delaware
95 EXHIBIT A THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON THE BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELEGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 OF SECURITIES, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY A-1 96 FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. A-2 97 (FACE OF SECURITY) 9 5/8% SENIOR NOTE DUE 2009 CUSIP: No. 001 $200,000,000 BEVERLY ENTERPRISES, INC. promises to pay to CEDE & CO. or its registered assigns, the principal sum of TWO HUNDRED MILLION Dollars on April 15, 2009. Interest Payment Dates: April 15 and October 15, commencing October 15, 2001 Record Dates: April 1 and October 1 (whether or not a Business Day). BEVERLY ENTERPRISES, INC. By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: Dated: April 25, 2001 Trustee's Certificate of Authentication: This is one of the Securities referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By: --------------------------------- Authorized Signatory A-3 98 (BACK OF SECURITY) 9 5/8% SENIOR NOTE DUE 2009 Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. INTEREST. Beverly Enterprises, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate and in the manner specified below. The Company shall pay interest in cash on the principal amount of this Security at the rate per annum of 9 5/8% until maturity. The Company shall pay interest semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001, to Holders of record on the immediately preceding April 1 and October 1 respectively, or if any such date of payment is not a Business Day on the next succeeding Business Day (each an "Interest Payment Date"). Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Securities. To the extent lawful, the Company shall pay interest on overdue principal at the rate of 1% per annum in excess of the interest rate then applicable to the Securities; it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. 2. METHOD OF PAYMENT. The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the record date next preceding the Interest Payment Date, even if such Securities are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Holder hereof must surrender this Security to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Principal, premium, if any, and interest shall be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest may be made by check mailed to the Holder's registered address. Notwithstanding the foregoing, all payments with respect to Securities, the Holders of which have given wire transfer instructions to the Paying Agent on or before the relevant record date, shall be made by wire transfer of immediately available funds to the accounts specified by such Holders. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company and any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Securities under an Indenture, dated as of April 25, 2001 (the "Indenture"), by and among the Company, the Guarantors named therein and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the A-4 99 Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Securities are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Securities. The Securities are unsecured senior obligations of the Company. The Indenture permits the Company to issue an unlimited aggregate principal amount. 5. OPTIONAL REDEMPTION. The Securities may be redeemed, at the option of the Company, in whole at any time or in part from time to time, on at least 30 days but not more than 60 days' prior notice mailed to the registered address of each Holder of Securities to be so redeemed, at a redemption price equal to the greater of (i) 100% of their principal amount plus accrued but unpaid interest to the Redemption Date or (ii)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the Redemption Date to the Maturity Date (except for currently accrued but unpaid interest) discounted to the Redemption Date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at the Treasury Rate, plus 50 basis points, plus (b) accrued but unpaid interest to the date of redemption. Any such redemption will comply with Article 3 of the Indenture. 6. MANDATORY REDEMPTION. Subject to the Company's obligation to make an offer to repurchase Securities under certain circumstances pursuant to Sections 2.15, 4.10 and 4.13 of the Indenture (as described in paragraph 7 below), the Company shall have no mandatory redemption or sinking fund obligations with respect to the Securities. 7. REPURCHASE AT OPTION OF HOLDER. (i) If there is a Change of Control, the Company shall offer to repurchase on the Change of Control Payment Date all or any part outstanding Securities at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon to the Change of Control Payment Date. Holders that are subject to an offer to purchase shall receive a Change of Control Offer from the Company prior to any related Change of Control Payment Date and may elect to have such Securities purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (ii) If the Company or a Subsidiary consummates an Asset Sale, within 365 days after the receipt of any Net Proceeds from such Asset Sale, the Company or such Subsidiary may apply such Net Proceeds (a) to purchase one or more Nursing Facilities or Related Businesses and/or a controlling interest in the Capital Stock of a Person owning one or more Nursing Facilities and/or one or more Related Businesses, (b) to make a capital expenditure or to acquire other tangible assets, in each case, that are used or useful in any business in which the Company is permitted to be engaged pursuant to Section 4.15 of the Indenture, or (c) to permanently reduce Indebtedness (other than Subordinated Indebtedness) of the Company or its Subsidiaries. Pending the final application of any such Net Proceeds, the Company or such Subsidiary may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from any Asset Sale that are not so invested or applied shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Company shall make an offer to all A-5 100 Holders of Securities and holders of any other Indebtedness of the Company ranking on a parity with the Securities from time to time outstanding with similar provisions requiring the Company to make an offer to purchase or to redeem such Indebtedness with the proceeds from any Asset Sales, pro rata in proportion to the respective principal amounts of the Securities and such other Indebtedness then outstanding (a "Senior Asset Sale Offer") to purchase the maximum principal amount of Securities and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the terms of the Indenture. To the extent that the aggregate amount of Securities and such other Indebtedness tendered pursuant to a Senior Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes not prohibited at the time under the Indenture. If the aggregate principal amount of Securities and such other Indebtedness surrendered by holders pursuant to a Senior Asset Sale Offer exceeds the amount of Excess Proceeds, the Securities and such other Indebtedness shall be purchased on a pro rata basis. Holders that are the subject of an offer to purchase shall receive a Senior Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Securities purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered form without coupons, and in denominations of $1,000 and integral multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Neither the Company nor the Registrar shall be required to register the transfer of or exchange Securities for a period of 15 days before a selection of Securities to be redeemed (except the unredeemed portion of any Security being redeemed in part) or during the period between a record date and the next succeeding Interest Payment Date. 9. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Security, the Trustee, any Agent and the Company may deem and treat the Person in whose name this Security is registered as its absolute owner for the purpose of receiving payment of principal of, premium, if any, and interest on this Security and for all other purposes whatsoever, whether or not this Security is overdue (provided that defaulted interest shall be paid as set forth in Section 2.12 of the Indenture), and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. The registered Holder of a Security shall be treated as its owner for all purposes. 10. AMENDMENT, SUPPLEMENT AND WAIVERS. Except as provided in the next two succeeding paragraphs, the Indenture or the Securities may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for Securities) and any existing default or compliance with any provision of the Indenture or the Securities may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Securities (including consents obtained in connection with a tender offer or exchange offer for Securities). A-6 101 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Security held by a non-consenting Holder of Securities): (i) reduce the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Security, (iii) reduce the rate of or change the time for payment of interest on any Security, (iv) waive a Default or Event of Default in the payment of principal of, or premium, if any, or interest on the Securities (except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount thereof and a waiver of the Payment Default that resulted from such acceleration), (v) make any Security payable in money other than that stated in the Securities, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Securities to receive payments of principal of, or premium, if any, or interest on the Securities, or (vii) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Securities, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Securities to cure any ambiguity, defect or inconsistency, to provide for uncertificated Securities in addition to or in place of certificated Securities, to provide for additional Guarantors of the Securities or the release, in accordance with the Indenture, of any Guarantor, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Securities in the case of a merger, consolidation or sale of assets, to make any change that would provide any additional rights or benefits to the Holders of the Securities or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Securities and Exchange Commission (the "Commission") in order to effect or maintain the qualification of the Indenture under the TIA, to evidence and provide for the acceptance of the appointment of a successor Trustee with respect to the Securities, or in any other case, pursuant to the provisions of the Indenture, where a supplemental indenture is required or permitted to be entered into without the consent of any Holder of Securities. 11. DEFAULTS AND REMEDIES. Events of Default under the Indenture include: (i) a default for 30 days in the payment when due of interest on the Securities; (ii) a default in payment when due of the principal of, or premium, if any, on the Securities, at maturity or otherwise; (iii) a failure by the Company or any Guarantor to comply with the provisions described under Section 4.10 or 4.13 of the Indenture; (iv) a failure by the Company or any Guarantor for 30 days after notice to comply with the provisions of Section 4.7 or 4.9 of the Indenture; (v) a failure by the Company or any Guarantor for 60 days after notice to comply with any of its agreements in the Indenture or the Securities; (vi) any default that occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries (or the payment of which is guaranteed by the Company or any of its Significant Subsidiaries) whether such Indebtedness or guarantee exists on the date of the Indenture, or is created after the date of the Indenture, which default (a) constitutes a Payment Default or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or that has been so accelerated, aggregates in excess of $20.0 million; (vii) failure by the Company or any of its Significant Subsidiaries to pay a final judgment or judgments aggregating in excess of $20.0 million entered by a court or courts of competent jurisdiction against the A-7 102 Company or any of its Significant Subsidiaries which such final judgment or judgments are not paid, discharged or stayed for a period of 60 days; (viii) any Guarantee shall cease, for any reason not permitted by the Indenture, to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee; and (ix) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Securities by written notice to the Company and the Trustee, may declare all the Securities to be due and payable immediately (plus, in the case of an Event of Default that is the result of willful actions (or in actions) by or on behalf of the Company intended to avoid prohibitions on redemptions of the Securities contained in the Indenture or the Securities, an amount of premium applicable pursuant to the Indenture). Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding Securities shall become due and payable without further action or notice. Holders of the Securities may not enforce the Indenture or the Securities except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Securities notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in such Holders' interest. The Holders of not less than a majority in aggregate principal amount of the Securities then outstanding by written notice to the Trustee may, on behalf of the Holders of all of the Securities, waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Securities. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 12. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to incur additional Indebtedness and issue preferred stock, pay dividends or make other distributions, repurchase Equity Interests or Subordinated Indebtedness, create certain Liens, enter into certain transactions with Affiliates, sell assets of the Company or its Subsidiaries, issue or sell Equity Interests of the Company's Subsidiaries and enter into certain mergers and consolidations. 13. NOTATION OF GUARANTEE. As set forth more fully in the Indenture, the Persons constituting Guarantors from time to time, in accordance with the provisions of the Indenture, unconditionally and jointly and severally Guarantee, on a senior basis, in accordance with Section 10.1 of the Indenture, to each Holder of Securities and to the Trustee and its successors and assigns, that, in accordance with the terms of the Indenture and the Securities (i) the principal of, premium, if any, and interest on the A-8 103 Security will be paid in full when due, whether at the Maturity Date or Interest Payment Date, by acceleration, call for redemption or otherwise; (ii) the purchase price for all Securities properly and timely tendered for acceptance in response to a Change of Control Offer or a Senior Asset Sale Offer will be timely, or otherwise in accordance with the provisions of the Indenture, paid in full; (iii) all other payment obligations of the Company to the Holders or the Trustee under the Indenture or this Security will be promptly paid in full, all in accordance with the terms of the Indenture and this Security; and (iv) in the case of any extension of time of payment or renewal of this Security or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of such extension or renewal, whether at the Maturity Date, as so extended, by acceleration, call for redemption, upon a Change of Control Offer, upon a Senior Asset Sale Offer or otherwise. Such Guarantees shall cease to apply, and shall be null and void, with respect to any Guarantor who, pursuant to Article 10 of the Indenture, is released from its Guarantees, or whose Guarantees otherwise cease to be applicable pursuant to the terms of the Indenture. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 15. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND STOCKHOLDERS. No director, officer, employee, incorporator, stockholder or other Affiliate of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or other Affiliate under the Securities, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 16. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. A-9 104 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 Attention: Secretary A-10 105 SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS EVIDENCED BY THIS SECURITY The initial principal amount of indebtedness evidenced by this Security shall be $198,890,000. The following decreases/increases in the principal amount of indebtedness evidenced by this Security have been made:
Total Principal Decrease in Increase in Amount of Indebt- Principal Amount Principal Amount of edness Evidenced Notation Made Date of of Indebtedness Indebtedness Following Such by or on Behalf of Decrease/Increase Evidenced Evidenced Decrease/Increase Trustee - ----------------- ---------------- ------------------- ----------------- ------------------
A-11 106 ASSIGNMENT FORM To assign this Security, fill in the form below: For value received (I) or (we) hereby sell, assign and transfer this Security to - -------------------------------------------------------------------------------- (Insert assignee's Soc. Sec. or Tax I.D. No.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Print or type assignee's name, address and zip code) and do hereby irrevocably constitute and appoint ______________________________ Attorney to transfer this Security on the books of the Company with full power of substitution in the premises. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date: ------------------ Your Signature: ---------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guarantee* - --------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-12 107 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have all or any part of this Security purchased by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, check the appropriate box: [ ] Section 4.10 [ ] Section 4.13 (Asset Sale) (Change of Control) If you want to have only part of the Security purchased by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the amount you elect to have purchased: $ -------------------- Date: -------------------- Your Signature: ---------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guarantee* - ------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-13 108 EXHIBIT B [FORM OF CERTIFICATE OF TRANSFER] Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 The Banks of New York 101 Barclay Street, 21st Floor West New York, NY 10286 Attention: Corporate Trust Department Re: 9 5/8% Senior Notes due 2009 ---------------------------- Reference is hereby made to the Indenture, dated as of April 25, 2001 (the "Indenture"), between Beverly Enterprises, Inc., as issuer (the "Company"), certain subsidiaries of the Company, as guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________ (the "Transferor") owns and proposes to transfer the Security[ies] or interest in such Security[ies] specified in Annex A hereto, in the principal amount of $___________ in such Security[ies] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE IS A QIB IN ACCORDANCE WITH RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Security is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Security for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Global Security and/or the Definitive Security and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Regulation S under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf B-1 109 knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Global Security and/or the Definitive Security and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Securities and Restricted Definitive Securities and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Regulation S, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Security or Restricted Definitive Securities and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Securities at the time of transfer of less than $500,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Global Security and/or the Definitive Securities and in the Indenture and the Securities Act. B-2 110 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE SECURITY. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, on Restricted Definitive Securities and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144 or Regulation S and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities or Restricted Definitive Securities and in the Indenture. B-3 111 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------------- [Insert Name of Transferor] By: -------------------------------- Name: Title: Dated: , ------------- ---- B-4 112 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the Global Security (CUSIP 087851AN1; ISIN US087851AN18), or (b) [ ] a Restricted Definitive Security. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the Global Security (CUSIP 087851AN1; ISIN US087851AN18); or (b) [ ] a Restricted Definitive Security; or (c) [ ] an Unrestricted Definitive Security, in accordance with the terms of the Indenture. B-5 113 EXHIBIT C [FORM OF CERTIFICATE OF EXCHANGE] Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 The Bank of New York 101 Barclay Street, 21st Floor West New York, NY 10286 Attention: Corporate Trust Department Re: 9 5/8% Senior Notes due 2009 ---------------------------- CUSIP: ______________ Reference is hereby made to the Indenture, dated as of April 25, 2001 (the "Indenture"), between Beverly Enterprises, Inc., as issuer (the "Company"), certain subsidiaries of the Company, as guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________ (the "Owner") owns and proposes to exchange the Security[ies] or interest in such Security[ies] specified herein, in the principal amount of $____________ in such Security[ies] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY: (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a beneficial interest in an Unrestricted Global Security in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Securities and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for an Unrestricted Definitive Security, the Owner hereby certi- C-1 114 fies (i) the Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for a beneficial interest in an Unrestricted Global Security, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Unrestricted Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a Restricted Definitive Security with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Security is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Security issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Security and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's Restricted Definitive Security for a beneficial interest in the Global Security with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, and in C-2 115 compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Security and in the Indenture and the Securities Act. C-3 116 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. -------------------------------- [Insert Name of Owner] By: --------------------------------- Name: Title: Dated: , ------------ ----- C-4 117 EXHIBIT D [FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR] Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 The Bank of New York 101 Barclay Street, 21st Floor West New York, NY 10286 Attention: Corporate Trust Department Re: 9 5/8% Senior Notes due 2009 Reference is hereby made to the Indenture, dated as of April 25, 2001 (the "Indenture"), between Beverly Enterprises, Inc., as issuer (the "Company"), certain subsidiaries of the Company, as guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Security, or (b) [ ] a Definitive Security, we confirm that: 1. We understand that any subsequent transfer of the Securities or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Securities or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Securities, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) pursuant to the provisions of Rule 144(k) under D-1 118 the Securities Act or (E) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Security or beneficial interest in a Global Security from us in a transaction meeting the requirements of clauses (A) through (D) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Securities or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Securities or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Securities or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. --------------------------------------- [Insert Name of Accredited Investor] Dated: , By: ---------------- ----- ------------------------------- Name: Title: D-2 EX-4.4 3 c63210ex4-4.txt EXCHANGE AND REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.4 BEVERLY ENTERPRISES, INC. $200,000,000 9 5/8% Senior Notes due 2009 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT April 25, 2001 JPMORGAN, a division of CHASE SECURITIES INC. BANC OF AMERICA SECURITIES LLC BNY CAPITAL MARKETS, INC. BMO NESBITT BURNS CORP. c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Beverly Enterprises, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. (together, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated April 18, 2001 (the "Purchase Agreement"), $200,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2009 (the "Securities") to be jointly and severally guaranteed (the "Guarantees") by the subsidiaries of the Company listed on Schedule 1 and signatories hereto (collectively, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: 2 -2- 1. Registered Exchange Offer. Unless the Registered Exchange Offer (as defined herein) shall not be permitted by applicable federal law, the Company shall (i) prepare and, not later than 60 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Securities and the Guarantees (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the Securities and the Guarantees, a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Exchange Securities") that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 120 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 150 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above). As soon as practicable after the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" 3 -3- section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer. If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, by notice to the Company within 30 days of the Registered Exchange Offer, no later than 30 days after the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Private Exchange Securities") that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: 4 -4- (a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (b) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. 5 -5- Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 150 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Guarantors shall use their reasonable best efforts to file as promptly as practicable (but in no event more than 20 business days after so required or requested pursuant to this Section 2) with the Commission (the "Shelf Filing Date"), and thereafter shall use their commercially reasonable efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible 6 -6- for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) In the absence of the events described in clauses (i) through (vi) of the first paragraph of this Section 2, the Company and the Guarantors shall not be permitted to discharge its obligations hereunder by means of the filing of a Shelf Registration Statement. 3. Additional Interest. The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date or the Shelf Registration Statement is not filed with the Commission on or before the Shelf Filing Date, (ii) the Exchange Offer Registration Statement is not declared effective within 120 days after the Issue Date or the Shelf Registration Statement is not declared effective within 90 days of the Shelf Filing Date, (iii) the Registered Exchange Offer is not consummated on or prior to 150 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 90 days after the Shelf Filing Date but shall thereafter cease to be effective (at any time that the Company and the Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a 7 -7- "Registration Default"), the Company and the Guarantors will be jointly and severally obligated to pay additional interest to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be, which rate will be increased by an additional $ 0.05 per week per $1,000 principal amount of Transfer Restricted Securities for each 90 day period that any additional interest described in this Section 3 continues to accrue; provided that the rate for additional interest will not exceed $0.15 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued additional interest will be paid to each Holder in the same manner as interest payments on the Transfer Restricted Securities on semi-annual payment dates that correspond to interest payment dates for the Transfer Restricted Securities. Additional interest only accrues during a Registration Default. Following the cure of all Registration Defaults, the accrual of additional interest will cease. As used herein, the term "Transfer Restricted Securities" means each Security or Private Exchange Security, until the earliest to occur of: (i) the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) the date on which such Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), neither the Company nor the Guarantors shall be required to pay additional interest to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (a) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the additional interest due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the additional interest then due. The additional interest due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay additional interest shall be deemed to accrue from and including the date of the applicable Registration Default. 8 -8- (b) The parties hereto agree that the additional interest provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose within five business days after the delivery of such document to such Initial Purchaser; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; 9 -9- (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus in- 10 -10- cluded in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company and the Guarantors consent to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company and the Guarantors will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company and the Guarantors will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing at least two business days prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company and the Guarantors are required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee 11 -11- with the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act covering a twelve month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v) (a "Suspension Notice"), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by 12 -12- the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No 5. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders for the reason- 13 -13- able fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). 14 -14- (a) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (b) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After 15 -15- notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment or if the indemnifying party has not paid the expenses and fees for which it is liable 20 days after notice by the indemnified party of request for reimbursement. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement or admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), 16 -16- then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by such Holder with respect to the Securities, Exchange Securities or Private Exchange Securities, on the other, bear to the total gross proceeds from the sale of Securities, Exchange Securities or Private Exchange Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Holders' Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 17 -17- 8. Rules 144 and 144A. So long as any Transfer Restricted Securities remain outstanding, the Company shall use its reasonable best efforts to file the reports required to be filed by it under Rule 144A(d)(4) under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities, the Company and the Guarantors shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous; Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders 18 -18- of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. (a) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to JPMorgan, a division of Chase Securities Inc., Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp.; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; (3) if to the Company, initially at the address of the Company set forth in the Purchase Agreement; and (4) if to the Guarantors, initially at the address of the Guarantors set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (b) Successors and Assigns. This Agreement shall be binding upon the Company, the Guarantors and their respective successors and assigns. (c) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (d) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 19 -19- (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (g) Remedies. In the event of a breach by the Company or any of the Guarantors or by any Holder of any of their respective obligations under this Agreement, each Holder or the Company or any Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any Guarantor of their obligations under Sections 1 or 2 hereof for which additional interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, each Guarantor and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (h) No Inconsistent Agreements. Each of the Company and each Guarantor represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (i) No Piggyback on Registrations. Neither the Company nor the Guarantors nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (j) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, 20 -20- provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. [Signature Pages Follow] 21 -21- Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchasers. Very truly yours, BEVERLY ENTERPRISES, INC. By: /s/ Schuyler Hollingsworth, Jr. ------------------------------------- Name: Schuyler Hollingsworth, Jr. Title: Senior Vice President and Treasurer GUARANTORS listed on Schedule 1 attached hereto By: /s/ John W. MacKenzie ------------------------------------- Name: John W. MacKenzie Title: Vice President and Secretary of each of the Guarantors Accepted: CHASE SECURITIES INC. BANC OF AMERICA SECURITIES LLC BNY CAPITAL MARKETS, INC. BMO NESBITT BURNS CORP. By: CHASE SECURITIES INC., as Representative of the Initial Purchasers listed on Schedule 3 of the Purchase Agreement By: /s/ Christopher Boege ------------------------------------- Name: Christopher Boege Title: Vice President 22 SCHEDULE 1 GUARANTORS
Employer State of Corporation ID Number Incorporation AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.) 71-0811574 Delaware AGI-Camelot, Inc. 43-1253376 Missouri Arborland Management Company, Inc. 58-2340689 South Carolina Associated Physical Therapy Practitioners, Inc. 23-2638708 Pennsylvania Beverly Assisted Living, Inc. 71-0777901 Delaware Beverly - Bella Vista Holding, Inc. 71-0797481 Delaware Beverly - Branson Holdings, Inc. 71-0817008 Delaware Beverly-Indianapolis, LLC 71-0824184 Indiana Beverly - Missouri Valley Holding, Inc. 71-0797485 Delaware Beverly - Plant City Holdings, Inc. 71-0817010 Delaware Beverly - Rapid City Holding, Inc. 71-0797483 Delaware Beverly - Tamarac Holdings, Inc. 71-0817009 Delaware Beverly - Tampa Holdings, Inc. 71-0817007 Delaware Beverly Clinical, Inc. 71-0796035 Delaware Beverly Enterprises International Limited 95-3982125 California Beverly Enterprises - Alabama, Inc. 95-3742145 California Beverly Enterprises - Arizona, Inc. 95-3750871 California
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Employer State of Corporation ID Number Incorporation Beverly Enterprises - Arkansas, Inc. 95-3751272 California Beverly Enterprises - California, Inc. 95-2499218 California Beverly Enterprises - Colorado, Inc. 95-3750882 California Beverly Enterprises - Connecticut, Inc. 95-3849642 California Beverly Enterprises - Delaware, Inc. 95-3849628 California Beverly Enterprises - Distribution Services, Inc. 95-4081567 California Beverly Enterprises - District of Columbia, Inc. 95-3750889 California Beverly Enterprises - Florida, Inc. 95-3742251 California Beverly Enterprises - Garden Terrace, Inc. 95-3849648 California Beverly Enterprises - Georgia, Inc. 95-3750880 California Beverly Enterprises - Hawaii, Inc. 95-3750890 California Beverly Enterprises - Idaho, Inc. 95-3750886 California Beverly Enterprises - Illinois, Inc. 95-3750883 California Beverly Enterprises - Indiana, Inc. 95-3744258 California Beverly Enterprises - Iowa, Inc. 95-3751271 California Beverly Enterprises - Kansas, Inc. 95-3751269 California Beverly Enterprises - Kentucky, Inc. 95-3750894 California Beverly Enterprises - Louisiana, Inc. 95-3849633 California Beverly Enterprises - Maine, Inc. 95-3849627 California Beverly Enterprises - Maryland, Inc. 95-3750892 California
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Employer State of Corporation ID Number Incorporation Beverly Enterprises - Massachusetts, Inc. 95-3750893 California Beverly Enterprises - Michigan, Inc. 95-3898661 California Beverly Enterprises - Minnesota, Inc. 95-3742698 California Beverly Enterprises - Mississippi, Inc. 95-3742144 California Beverly Enterprises - Missouri, Inc. 95-3750895 California Beverly Enterprises - Montana, Inc. 95-3849636 California Beverly Enterprises - Nebraska, Inc. 95-3750873 California Beverly Enterprises - Nevada, Inc. 95-3750896 California Beverly Enterprises - New Hampshire, Inc. 95-3849630 California Beverly Enterprises - New Jersey, Inc. 95-3750884 California Beverly Enterprises - New Mexico, Inc. 95-3750869 California Beverly Enterprises - North Carolina, Inc. 95-3742257 California Beverly Enterprises - North Dakota, Inc. 95-3751270 California Beverly Enterprises - Ohio, Inc. 95-3750867 California Beverly Enterprises - Oklahoma, Inc. 95-3849624 California Beverly Enterprises - Oregon, Inc. 95-3750881 California Beverly Enterprises - Pennsylvania, Inc. 95-3750870 California Beverly Enterprises - Rhode Island, Inc. 95-3849621 California Beverly Enterprises - South Carolina, Inc. 95-3750866 California Beverly Enterprises - Tennessee, Inc. 95-3742261 California
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Employer State of Corporation ID Number Incorporation Beverly Enterprises - Texas, Inc. 95-3744256 California Beverly Enterprises - Utah, Inc. 95-3751089 California Beverly Enterprises - Vermont, Inc. 95-3750885 California Beverly Enterprises - Virginia, Inc. 95-3742694 California Beverly Enterprises - Washington, Inc. 95-3750868 California Beverly Enterprises - West Virginia, Inc. 95-3750888 California Beverly Enterprises - Wisconsin, Inc. 95-3742696 California Beverly Enterprises - Wyoming, Inc. 95-3849638 California Beverly Health and Rehabilitation Services, Inc. 95-2301514 California Beverly Healthcare, LLC 71-0817438 Indiana Beverly Healthcare Acquisition, Inc. 71-0812407 Delaware Beverly Healthcare - California, Inc. 95-3750879 California Beverly Holdings I, Inc. 71-0768985 Delaware Beverly Indemnity, Ltd. 71-0712927 Vermont Beverly Manor Inc. of Hawaii 99-0144750 California Beverly Real Estate Holdings, Inc. 71-0768984 Delaware Beverly Savana Cay Manor, Inc. 95-4217381 California Carrollton Physical Therapy Clinic, Inc. 75-2102832 Texas Commercial Management, Inc. 42-0891358 Iowa Community Care, Inc. 56-1487367 North Carolina
26 -5-
Employer State of Corporation ID Number Incorporation Compassion and Personal Care Services, Inc. 56-1904822 North Carolina Eastern Home Health Supply & Equipment Co., Inc. 56-1581980 North Carolina Greenville Rehabilitation Services, Inc. 75-2059145 Texas Hallmark Convalescent Homes, Inc. 41-1413478 Michigan HomeCare Preferred Choice, Inc. 62-1702864 Delaware Home Health and Rehabilitation Services, Inc. 75-2012280 Texas Hospice of Eastern Carolina, Inc. 56-1951841 North Carolina Hospice Preferred Choice, Inc. 71-0761314 Delaware HTHC Holdings, Inc. 71-0807323 Delaware Las Colinas Physical Therapy Center, Inc. 75-2402177 Texas Liberty Nursing Homes, Incorporated 54-0784334 Virginia MATRIX Occupational Health, Inc. 58-2380955 Delaware MATRIX Rehabilitation, Inc. 71-0783147 Delaware MATRIX Rehabilitation - Delaware, Inc. 71-0842504 Delaware MATRIX Rehabilitation - Georgia, Inc. 58-2554073 Delaware MATRIX Rehabilitation - Maryland, Inc. 71-0842503 Delaware MATRIX Rehabilitation - Ohio, Inc. 71-0842505 Delaware MATRIX Rehabilitation - South Carolina, Inc. 73-1575603 Delaware MATRIX Rehabilitation - Texas, Inc. 73-1589542 Delaware MATRIX Rehabilitation - Washington, Inc. 58-2554074 Delaware
27 -6-
Employer State of Corporation ID Number Incorporation Medical Arts Health Facility of Lawrenceville, Inc. 58-1329700 Georgia Moderncare of Lumberton, Inc. 56-1217025 North Carolina Nebraska City S-C-H, Inc. 41-1413481 Nebraska Network for Physical Therapy, Inc. 74-2453469 Texas North Dallas Physical Therapy Associates, Inc. 75-2075331 Texas Nursing Home Operators, Inc. 34-0949279 Ohio Petersen Health Care, Inc. 59-2043392 Florida PT NET, Inc. 62-1575533 Tennessee PT Net (Colorado), Inc. 84-1277912 Colorado Rehabilitation Associates of Lafayette, Inc. 72-1118473 Louisiana South Alabama Nursing Home, Inc. 95-3809397 Alabama South Dakota - Beverly Enterprises, Inc. 95-3750887 California Spectra Healthcare Alliance, Inc. 71-0759298 Delaware Tar Heel Infusion Company, Inc. 56-1767308 North Carolina The Parks Physical Therapy and Work Hardening Center, Inc. 75-2452926 Texas Theraphysics Corp. 13-3643705 Delaware Theraphysics of New York IPA, Inc. 71-0817011 New York Theraphysics Partners of Colorado, Inc. 51-0372115 Delaware Theraphysics Partners of Texas, Inc. 62-1659976 Delaware Theraphysics Partners of Western Pennsylvania, Inc. 23-2901884 Delaware
28 -7-
Employer State of Corporation ID Number Incorporation TMD Disposition Company 59-3151568 Florida Vantage Healthcare Corporation 35-1572998 Delaware
29 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". 30 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution". 31 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until ______, 2009, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 32 ANNEX D - CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-5.1 4 c63210ex5-1.txt OPINION/CONSENT OF LATHAM & WATKINS 1 EXHIBIT 5.1 [LATHAM & WATKINS LETTERHEAD] June 20, 2001 Beverly Enterprises, Inc. 1000 Beverly Way Fort Smith, Arkansas 72919 Re: Registration Statement for $200,000,000 Aggregate Principal Amount of Senior Notes and Related Guarantees Ladies and Gentlemen: In connection with the registration of $200,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2009 (the "Exchange Notes") by Beverly Enterprises, Inc., a Delaware corporation (the "Company"), and the related guarantees of the Exchange Notes pursuant to the Indenture (as defined below) (the "Guarantees") by the guarantors listed on Schedule 1 attached hereto (the "Guarantors"), under the Securities Act of 1933, as amended, on Form S-4 to be filed with the Securities and Exchange Commission on June 20, 2001 (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Exchange Notes and the Guarantees will be issued pursuant to an indenture dated as of April 25, 2001 (the "Indenture"), among the Company, the Guarantors and The Bank of New York, as trustee (the "Trustee"). The Exchange Notes will be issued in exchange for the Company's outstanding 9 5/8% Senior Notes due 2009 (the "Private Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Transmittal Letter filed as an exhibit thereto (the "Exchange Offer"). In our capacity as your special counsel in connection with the Exchange Offer, we are familiar with the proceedings taken by the Company in connection with the authorization of the Exchange Notes. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies. 2 LATHAM & WATKINS Beverly Enterprises, Inc. June 20, 2001 Page 2 We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York and the General Corporation Law of the State of Delaware, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state. Various issues concerning the Guarantees are addressed in the opinion of Douglas J. Babb of even date herewith, which has separately been provided to you, and we express no opinion with respect to those matters. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, the Exchange Notes to be exchanged for the Private Notes pursuant to the Exchange Offer have been duly authorized by the Company and, when the Exchange Notes have been duly executed, issued, authenticated and delivered in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Notes will be legally valid and binding obligations of the Company, enforceable in accordance with their terms. Assuming the power of, and the due authorization, execution and delivery of the Indenture by the respective Guarantor, when the Exchange Notes have been duly executed, issued, authenticated and delivered in accordance with the terms of the Exchange Offer and the Indenture, each Guarantee set forth in the Indenture will be the legally valid and binding obligation of the respective Guarantor, enforceable in accordance with its terms. The opinion rendered in the foregoing paragraph relating to the enforceability of the Exchange Notes and the Guarantees under the Indenture are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; and (iii) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 4.6 of the Indenture. To the extent that the obligations of the Company under the Exchange Notes and of the Company and the Guarantors under the Indenture may be dependent upon such matters, we have assumed for purposes of this opinion that (i) the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under the Indenture; (c) is duly qualified to engage in the activities contemplated by the Indenture; and (d) has duly authorized, executed and delivered the Indenture; (ii) the Indenture constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as Trustee under the Indenture, with all applicable laws and regulations. 3 LATHAM & WATKINS Beverly Enterprises, Inc. June 20, 2001 Page 3 We have not been requested to express and, with your knowledge and consent, do not render any opinion with respect to the applicability to the obligations of the Company under the Exchange Notes and the Indenture or of the Guarantors under the Indenture of Section 548 of the Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor & Creditor Law) relating to fraudulent transfers and obligations. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters." Very truly yours, /s/ Latham & Watkins 4 Beverly Enterprises, Inc. June 20, 2001 Page 4 SCHEDULE 1 GUARANTORS AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.) AGI-Camelot, Inc. Arborland Management Company, Inc. Associated Physical Therapy Practitioners, Inc. Beverly Assisted Living, Inc. Beverly - Bella Vista Holding, Inc. Beverly - Branson Holdings, Inc. Beverly - Indianapolis, LLC Beverly - Missouri Valley Holding, Inc. Beverly - Plant City Holdings, Inc. Beverly - Rapid City Holding, Inc. Beverly - Tamarack Holdings, Inc. Beverly - Tampa Holdings, Inc. Beverly Clinical, Inc. Beverly Enterprises International Limited Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - Arkansas, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Delaware, Inc. Beverly Enterprises - Distribution Services, Inc. Beverly Enterprises - District of Columbia, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Iowa, Inc. Beverly Enterprises - Kansas, Inc. 5 LATHAM & WATKINS Beverly Enterprises, Inc. June 20, 2001 Page 5 Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Maine, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - Minnesota, Inc. Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Montana, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - Nevada, Inc. Beverly Enterprises - New Hampshire, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - New Mexico, Inc. Beverly Enterprises - North Carolina, Inc. Beverly Enterprises - North Dakota, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Oklahoma, Inc. Beverly Enterprises - Oregon, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - Rhode Island, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Vermont, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Enterprises - Wisconsin, Inc. Beverly Enterprises - Wyoming, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Healthcare, LLC Beverly Healthcare Acquisition, Inc. Beverly Healthcare - California, Inc. Beverly Holdings I, Inc. Beverly Indemnity, Ltd. 6 LATHAM & WATKINS Beverly Enterprises, Inc. June 20, 2001 Page 6 Beverly Manor Inc. of Hawaii Beverly Real Estate Holdings, Inc. Beverly Savana Cay Manor, Inc. Carrollton Physical Therapy Clinic, Inc. Commercial Management, Inc. Community Care, Inc. Compassion and Personal Care Services, Inc. Eastern Home Health Supply & Equipment Co., Inc. Greenville Rehabilitation Services, Inc. Hallmark Convalescent Homes, Inc. HomeCare Preferred Choice, Inc. Home Health and Rehabilitation Services, Inc. Hospice of Eastern Carolina, Inc. Hospice Preferred Choice, Inc. HTHC Holdings, Inc. Las Colinas Physical Therapy Center, Inc. Liberty Nursing Homes, Incorporated MATRIX Occupational Health, Inc. MATRIX Rehabilitation, Inc. MATRIX Rehabilitation - Delaware, Inc. MATRIX Rehabilitation - Georgia, Inc. MATRIX Rehabilitation - Maryland, Inc. MATRIX Rehabilitation - Ohio, Inc. MATRIX Rehabilitation - South Carolina, Inc. MATRIX Rehabilitation - Texas, Inc. MATRIX Rehabilitation - Washington, Inc. Medical Arts Health Facility of Lawrenceville, Inc. Moderncare of Lumberton, Inc. Nebraska City S-C-H, Inc. Network for Physical Therapy, Inc. North Dallas Physical Therapy Associates, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. PT NET, Inc. PT Net (Colorado), Inc. Rehabilitation Associates of Lafayette, Inc. South Alabama Nursing Home, Inc. South Dakota - Beverly Enterprises, Inc. 7 LATHAM & WATKINS Beverly Enterprises, Inc. June 20, 2001 Page 7 Spectra Healthcare Alliance, Inc. Tar Heel Infusion Company, Inc. The Parks Physical Therapy and Work Hardening Center, Inc. Theraphysics Corp. Theraphysics of New York IPA, Inc. Theraphysics Partners of Colorado, Inc. Theraphysics Partners of Louisiana Theraphysics Partners of Texas, Inc. Theraphysics Partners of Western Pennsylvania, Inc. TMD Disposition Company Vantage Healthcare Corporation EX-5.2 5 c63210ex5-2.txt OPINION/CONSENT OF DOUGLAS J. BABB, ESQ. 1 EXHIBIT 5.2 BEVERLY ENTERPRISES INC. 1000 Beverly Way Fort Smith, Arkansas 72919 June 20, 2001 Beverly Enterprises, Inc. 1000 Beverly Way Fort Smith, Arkansas 72919 Re: Registration Statement for $200,000,000 Aggregate Principal Amount of Senior Notes and Related Guarantees Ladies and Gentlemen: In connection with the registration of $200,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2009 (the "Exchange Notes") by Beverly Enterprises, Inc., a Delaware corporation (the "Company"), and the related guarantees of the Exchange Notes pursuant to the Indenture (as defined below) (the "Guarantees") by the guarantors listed on Schedule 1 attached hereto (the "Guarantors"), under the Securities Act of 1933, as amended, on Form S-4 to be filed with the Securities and Exchange Commission on June 20, 2001 (the "Registration Statement"), you have requested my opinion with respect to the matters set forth below. The Exchange Notes and the Guarantees will be issued pursuant to an indenture dated as of April 25, 2001 (the "Indenture"), among the Company, the Guarantors and The Bank of New York, as trustee (the "Trustee"). The Exchange Notes will be issued in exchange for the Company's outstanding 9 5/8% Senior Notes due 2009 (the "Private Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Transmittal Letter filed as an exhibit thereto (the "Exchange Offer"). In my capacity as Executive Vice President - Law and Government Relations and Secretary of the Company, I am familiar with the proceedings taken by the Company and the Guarantors in connection with the authorization of the Exchange Notes and the Guarantees, respectively. In addition, I, or lawyers in the Company's legal department working under my supervision, have made such legal and factual examinations and inquiries, including an 2 examination of originals or copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments, as I have deemed necessary or appropriate for purposes of this opinion. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as copies. Various issues concerning the Exchange Notes and the enforceability of the Guarantees as set forth in the Indenture are addressed in the opinion of Latham & Watkins of even date herewith, which has separately been provided to you, and I express no opinion with respect to those matters. Subject to the foregoing and the other matters set forth herein, it is my opinion that, as of the date hereof, each Guarantor has the power to execute the Indenture, and the Indenture has been duly authorized, executed, authenticated and delivered by each respective Guarantor. I have not been requested to express and, with your knowledge and consent, do not render any opinion with respect to the applicability to the obligations of the Guarantors under the Indenture (including the Guarantees set forth therein) of Section 548 of the Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor & Creditor Law) relating to fraudulent transfers and obligations. [Remainder of Page Intentionally Left Blank] 3 I consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to my name contained under the heading "Legal Matters." Very truly yours, /s/ Douglas J. Babb Douglas J. Babb Executive Vice President - Law and Government Relations and Secretary 4 SCHEDULE 1 GUARANTORS AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.) AGI-Camelot, Inc. Arborland Management Company, Inc. Associated Physical Therapy Practitioners, Inc. Beverly Assisted Living, Inc. Beverly - Bella Vista Holding, Inc. Beverly - Branson Holdings, Inc. Beverly - Indianapolis, LLC Beverly - Missouri Valley Holding, Inc. Beverly - Plant City Holdings, Inc. Beverly - Rapid City Holding, Inc. Beverly - Tamarack Holdings, Inc. Beverly - Tampa Holdings, Inc. Beverly Clinical, Inc. Beverly Enterprises International Limited Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - Arkansas, Inc. Beverly Enterprises - California, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Delaware, Inc. Beverly Enterprises - Distribution Services, Inc. Beverly Enterprises - District of Columbia, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Iowa, Inc. Beverly Enterprises - Kansas, Inc. 5 Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Maine, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - Minnesota, Inc. Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Montana, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - Nevada, Inc. Beverly Enterprises - New Hampshire, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - New Mexico, Inc. Beverly Enterprises - North Carolina, Inc. Beverly Enterprises - North Dakota, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Oklahoma, Inc. Beverly Enterprises - Oregon, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - Rhode Island, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Vermont, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Enterprises - Wisconsin, Inc. Beverly Enterprises - Wyoming, Inc. Beverly Health and Rehabilitation Services, Inc. Beverly Healthcare, LLC Beverly Healthcare Acquisition, Inc. Beverly Healthcare - California, Inc. Beverly Holdings I, Inc. Beverly Indemnity, Ltd. Beverly Manor Inc. of Hawaii 6 Beverly Real Estate Holdings, Inc. Beverly Savana Cay Manor, Inc. Carrollton Physical Therapy Clinic, Inc. Commercial Management, Inc. Community Care, Inc. Compassion and Personal Care Services, Inc. Eastern Home Health Supply & Equipment Co., Inc. Greenville Rehabilitation Services, Inc. Hallmark Convalescent Homes, Inc. HomeCare Preferred Choice, Inc. Home Health and Rehabilitation Services, Inc. Hospice of Eastern Carolina, Inc. Hospice Preferred Choice, Inc. HTHC Holdings, Inc. Las Colinas Physical Therapy Center, Inc. Liberty Nursing Homes, Incorporated MATRIX Occupational Health, Inc. MATRIX Rehabilitation, Inc. MATRIX Rehabilitation - Delaware, Inc. MATRIX Rehabilitation - Georgia, Inc. MATRIX Rehabilitation - Maryland, Inc. MATRIX Rehabilitation - Ohio, Inc. MATRIX Rehabilitation - South Carolina, Inc. MATRIX Rehabilitation - Texas, Inc. MATRIX Rehabilitation - Washington, Inc. Medical Arts Health Facility of Lawrenceville, Inc. Moderncare of Lumberton, Inc. Nebraska City S-C-H, Inc. Network for Physical Therapy, Inc. North Dallas Physical Therapy Associates, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. PT NET, Inc. PT Net (Colorado), Inc. Rehabilitation Associates of Lafayette, Inc. South Alabama Nursing Home, Inc. South Dakota - Beverly Enterprises, Inc. Spectra Healthcare Alliance, Inc. Tar Heel Infusion Company, Inc. 7 The Parks Physical Therapy and Work Hardening Center, Inc. Theraphysics Corp. Theraphysics of New York IPA, Inc. Theraphysics Partners of Colorado, Inc. Theraphysics Partners of Louisiana Theraphysics Partners of Texas, Inc. Theraphysics Partners of Western Pennsylvania, Inc. TMD Disposition Company Vantage Healthcare Corporation EX-10.1 6 c63210ex10-1.txt PURCHASE AGREEMENT, DATED 4/18/2001 1 EXHIBIT 10.1 BEVERLY ENTERPRISES, INC. $200,000,000 9 5/8% SENIOR NOTES DUE 2009 PURCHASE AGREEMENT April 18, 2001 JPMORGAN, a division of CHASE SECURITIES INC. BANC OF AMERICA SECURITIES LLC BNY CAPITAL MARKETS, INC. BMO NESBITT BURNS CORP. c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, Now York 10017 Ladies and Gentlemen: Beverly Enterprises, Inc., a Delaware corporation (the "Company"), proposes to issue, and sell $200,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2009 (the "Securities"). The Securities will be issued pursuant to an indenture to be dated as of April 25, 2001 (the "Indenture") between the Company, each of the subsidiaries of the Company listed on Schedule 1 hereto (each a "Guarantor" and together, the "Guarantors") and The Bank of New York, as trustee (the "Trustee"). The Securities will be guaranteed (the "Guarantees" and each a "Guarantee") jointly and severally by each of the Guarantors. The Company hereby confirms its agreement with JPMorgan, a division of Chase Securities, Inc. ("JPMorgan"), Banc of America Securities LLC, BNY Capital Markets, Inc. and BMO Nesbitt Burns Corp. (together the "Initial Purchasers") concerning the purchase of the Securities from the Company by the several Initial Purchasers. The Securities will be offered and sold to the Initial Purchasers without being, registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Company has prepared a preliminary offering memorandum dated April 6, 2001 (the "Preliminary Offering Memorandum") and will prepare an offering memorandum dated the date hereof (the "Offering Memorandum") setting forth information concerning the Company and the Securities. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the 2 -2- Company to the Initial Purchasers pursuant to the terms of this Agreement. Any reference herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. This Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement", pursuant to which the Company will agree to file with the Securities and Exchange Commission (the "Commission") a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior notes of the Company and guarantees of each of the Guarantors (the "Exchange Securities") which are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and the Guarantees and under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 1. Representations, Warranties and Agreements of the Company and each of the Guarantors. Company and the Guarantors jointly and severally represent and warrant to, and agree with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the Company and each of the Guarantors make no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company or the Guarantors by or on behalf of any Initial Purchaser specifically for use therein as specified in Section 16 hereof (the "Initial Purchasers' Information"). (b) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all of the information that, if 3 -3- requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (c) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) The Company and each of its subsidiaries have been duly incorporated or formed, as the case may be, and are validly existing corporations or limited liability companies, as the case may be, in good standing under the laws of their respective jurisdictions of incorporation or formation, as the case may be, are duly qualified to do business and are in good standing as foreign corporations or foreign limited liability companies, as the case may be, in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, reasonably be expected to result in a material adverse effect on the condition (financial or otherwise), results of operations or business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (e) The Company has a capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable. All the outstanding shares of capital stock or membership interests, as the case may be, of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and nonassessable and are owned directly or indirectly by the Company, and except as noted on Schedule 3, are owned free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. (f) The Company and each of the Guarantors has full right and authority to execute and deliver this Agreement, the Indenture (including the Guarantees set forth therein), the Registration Rights Agreement and the Securities (in the case of the Company only) (collectively, the "Transaction Documents") and to perform their respective 4 -4- obligations hereunder and thereunder and, as of the Closing Date, all corporate or limited liability company action required to be taken by the Company and the Guarantors for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby will have been duly and validly taken. (g) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors, except as rights to indemnification and contribution may be limited by public policy considerations or applicable law, and, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (h) The Registration Rights Agreement has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors, enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (i) The Indenture has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (j) The Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture (assuming the Indenture is the valid and legally binding obligation of the Trustee and due 5 -5- authentication of the Securities by the Trustee) and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company, as issuer, and each of the Guarantors, as guarantors, entitled to the benefits of the Indenture and enforceable against the Company, as issuer, and each of the Guarantors, as guarantors in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) Each of the guarantors that, as of the date of the Guarantees, is a guarantor of the $180,000,000 of 9% Senior Notes due 2006 issued by Beverly Enterprises, Inc. is also a Guarantor of the Securities. Schedule 1 attached hereto sets forth all the subsidiaries of the Company that are Guarantors of the Securities. The Guarantees have been duly authorized by each of the Guarantors and, when the Securities have been duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein (assuming due authorization, execution and delivery of the Indenture by the Trustee and due authentication of the Securities by the Trustee), will constitute valid and legally binding obligations of each of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general equitable principles (whether considered in a proceeding in equity or at law). (l) The Exchange Securities have been duly authorized by the Company and the related guarantees have been duly authorized by each of the Guarantors and, when duly executed, authenticated, issued and delivered as provided in the Indenture and the Registration Rights Agreement (assuming the Indenture is the valid and legally binding obligation of the Trustee) will constitute a valid and legally binding obligation of the Company, as issuer, and each of the Guarantors, as guarantors, enforceable against the Company, as issuer, and each of the Guarantors, as guarantors, in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (m) Each of the Indenture and the Registration Rights Agreement conforms in all material respects to the description thereof contained in the Offering Memorandum. 6 -6- (n) The execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which it is a party, the issuance, authentication sale and delivery of the Securities and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions as contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws (or any other comparable organizational documents) of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule, or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities, the issuance of the Guarantees and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications which shall have been obtained or made prior to the Closing Date or as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement. (o) Ernst & Young LLP are independent certified public accountants with respect to the Company and its subsidiaries (i) as required by the Securities Act and the rules and regulations of the Commission thereunder and (ii) within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Offering Memorandum comply as to form in all material respects with the requirements applicable to a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results 7 -7- of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Offering Memorandum Summary--Summary Consolidated Financial Data", "Capitalization of the Company", "Selected Historical Consolidated Financial Data", and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The as adjusted financial information contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the adjustments specified therein). The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (p) Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect, and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (q) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or the issuance of the Guarantees, or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Securities or the issuance of the Guarantees or the use of the Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or the issuance of the Guarantees in any manner or draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and the Offering Memorandum. 8 -8- (r) Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws (or other comparable organizational documents), (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (s) The Company and each of its subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same could not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. (t) The Company and each of its subsidiaries have filed all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due and owing thereon, other than those being contested in good faith and for which adequate reserves have been provided. No tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect, except those deficiencies for which adequate reserves have been established. (u) Neither the Company nor any of its subsidiaries is an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder. (v) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are 9 -9- executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (w) The Company and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, as are consistent with industry practice to protect the Company and its subsidiaries and their respective businesses. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other similar expenditures are required or necessary to be made in order to continue such insurance. (x) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) presently employed by them in connection with the respective businesses now operated by them; and the use of such rights in connection with their respective businesses will not conflict in any material respect with, and the Company and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others, except such conflicts which, singularly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (y) The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid, rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or could not reasonably be expected to have a Material Adverse Effect, except with respect to secured debt described in the Offering Memorandum. (z) Except for those that could not reasonably be expected to have a Material Adverse Effect, no labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened. 10 -10- (aa) Except to the extent such events could not reasonably be expected to have a Material Adverse Effect: (i) no "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder "ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries; (ii) each such employee benefit plan is in compliance with applicable law, including ERISA and the Code; (iii) the Company and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability; and (iv) each such pension plan that is intended to be qualified under Section 401 (a) of the Code is so qualified and nothing has occurred whether by action or by failure to act, which could cause the loss of such qualification. (bb) Except as described in the Offering Memorandum, there has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit give rise to any liability, except for any violation or liability that could not reasonably be expected to have, singularly or in the aggregate with all such violation and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has any knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (cc) On and immediately after the Closing Date, the Company and its subsidiaries, on a consolidated basis, (after giving effect to the issuance of the Securities and to the other transactions related thereto as described in the Offering Memorandum) 11 -11- will be Solvent. As used in this paragraph, the term "Solvent" means, with respect to a particular date that on such date the present fair market value (or present fair saleable value) of the assets of the Company and its consolidated subsidiaries are not less than the total amount required to pay the probable liabilities of the Company and its consolidated subsidiaries on their total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, the Company and its consolidated subsidiaries are able to realize upon their assets and pay their debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, assuming the sale of the Securities as contemplated by this Agreement and the Offering Memorandum, the Company and its consolidated subsidiaries are not incurring debts or liabilities beyond their ability to pay as such debts and liabilities mature and the Company and its consolidated subsidiaries are not engaged in any business or transaction, and are not about to engage in any business or transaction, for which their property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Company and its consolidated subsidiaries are engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (dd) Except as described in the Offering Memorandum, there are no outstanding subscriptions, rights, warrants, calls or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity or other ownership interest in the Company or any of its subsidiaries. (ee) Neither the Company nor any of its subsidiaries or agents has taken, and none of them will take, any action that might cause this Agreement or the issuance and sale of the Securities or the issuance of the Guarantees to violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. (ff) Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. (gg) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (hh) Exclusive of the Initial Purchasers (as to which we make no representation or warranty), none of the Company, any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term 12 -12- is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (ii) Exclusive of the Initial Purchasers (as to which we make no representation or warranty), neither the Company nor any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (jj) Exclusive of the Initial Purchasers (as to which we make no representation or warranty), none of the Company or any of its affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (kk) Neither the Company nor any of its affiliates has taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (ll) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. (mm) Since the date as of which information is given in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), except as otherwise stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company, whether or not arising in the ordinary course of business, (ii) none of the Company or any of its subsidiaries has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) none of the Company or any of its subsidiaries has entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by the Company or any of its subsidiaries on any class of its capital stock, or any redemption in respect thereof. 2. Purchase and Resale of the Securities. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and 13 -13- conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 2 hereto at a purchase price equal to 97.5% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon its receipt of payment for all of the Securities to be purchased as provided herein. (b) The Initial Purchasers have advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents, warrants to and agrees with the Company that (i) it is purchasing the Securities pursuant to an exemption from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D"), and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of their initial offering, only (A) within the United States to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and (B) outside the United States to persons other than U.S. persons in reliance on Regulation S under the Securities Act ("Regulation S"). (c) In connection with the offer and sale of Securities in reliance on Regulation S, each Initial Purchaser, severally and not jointly, represents, warrants and agrees that: (i) such Initial Purchaser is a Qualified Institutional Buyer, with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Securities. (ii) the Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. (iii) such Initial Purchaser has offered and sold the Securities, and will offer and sell the Securities, (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering of the Securities and the 14 -14- Closing Date, only in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. (iv) none of such Initial Purchasers or any of their respective affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S) with respect to the Securities or the Guarantees, and all such persons have complied and will comply with the offering restrictions requirement of Regulation S. (v) at or prior to the confirmation of sale of any Securities sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration, that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities and the date of original issuance of the Securities, except in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S." (vi) it has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. Terms used in this Section 2(c) have the meanings given to them by Regulation S. (d) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that (i) it has not offered or sold and prior to the date six months after the Closing Date will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Public Offers of Securities Regulations 1995 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind 15 -15- described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on. (e) Each Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser of any of the Securities purchased by such Initial Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale where required by applicable law). In addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 5(d), (e) and (g), counsel for the Company and for the Initial Purchaser, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (f) The Company acknowledges and agrees that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to an Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Cahill Gordon & Reindel, New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on April 25, 2001, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time of payment and delivery being referred to herein as the "Closing Date"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Securities. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in global form, registered in such names and in such denominations as JPMorgan on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Securities available for inspection by JPMorgan on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 16 -16- 4. Further Agreements of the Company and each of Guarantors. Each of the Company and each of the Guarantors agrees with each of the several Initial Purchasers: (a) during the period referred to in Section 4(d): (i) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) to advise the Initial Purchasers promptly of any order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and (iii) to use its reasonable best efforts to prevent the issuance of any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time it is delivered to a purchaser not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; 17 -17- (e) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); (f) for so long as the Securities are outstanding, upon the request of an Initial Purchaser, to furnish to the Initial Purchasers copies of any annual reports, quarterly reports and current reports filed by the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; (g) to promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdiction as the Initial Purchasers may reasonably request; provided that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations or limited liability companies in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; (h) to assist the Initial Purchasers in arranging for the Securities to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through The Depository Trust Company ("DTC"); (i) not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; (j) except following the effectiveness of the Exchange Offer Registration, Statement or the Shelf Registration Statement, as the case may be, not to, and to cause 18 -18- its affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (k) except any notes issued under the new senior secured credit facility and any new industrial revenue bonds issued to refinance existing industrial revenue bonds, for a period of 90 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities) without the prior written consent of the Initial Purchasers; (l) during the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act; (m) in connection with the offering of the Securities, until JPMorgan on behalf of the Initial Purchasers shall have notified the Company of the completion of the resale of the Securities, not to, and to cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Securities, or attempt to induce any person to purchase any Securities; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent active trading in or of raising the price of the Securities; (n) in connection with the offering of the Securities, to make its officers, employees, independent accountants and legal counsel reasonably available upon request by the Initial Purchasers; 19 -19- (o) to furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (p) to do and perform all things required to be done and performed by it under this Agreement that are within its reasonable control prior to or after the Closing Date, and to use its reasonable best efforts to satisfy all conditions precedent on its part to the delivery of the Securities; (q) to not take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (r) to not take any action prior to the Closing Date which would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(d); (s) prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchasers are notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (t) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds." 5. Conditions to Initial Purchasers' Obligations. The respective obligation of the several Initial Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to the accuracy of the statements of the Company, the Guarantors and each of their respective officers made in any certificates delivered pursuant hereto, to the performance by the Company and the Guarantors of their obligations hereunder required to be performed through the Closing Date, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order 20 -20- suspending the sale of the Securities in any jurisdiction shall have been issued and no proceedings for the purpose shall have been commenced or shall be pending or threatened. (b) None of the Initial Purchasers shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate or limited liability company proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and the Company and each of the Guarantors shall have furnished to the Initial Purchasers all documents and information that the Initial Purchasers or their counsel may reasonably request to enable them to pass upon such matters. (d) Latham & Watkins shall have furnished to the Initial Purchasers a written opinion, as special counsel to the Company and the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-1 hereto. (e) Douglas J. Babb, General Counsel of the Company, shall have furnished to the Initial Purchasers his written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-2 hereto. (f) Proskauer Rose LLP, special regulatory counsel for the Company, shall have furnished to the Initial Purchasers their written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form set forth in Annex B-3 hereto. (g) The Initial Purchasers shall have received from Cahill Gordon & Reindel, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they request for the purpose of enabling them to pass upon such matters. 21 -21- (h) Epstein Becker & Green, P.C., special regulatory counsel for the Initial Purchasers, shall have furnished to the Initial Purchasers their written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers. (i) Weil, Gotshal & Manges LLP, special counsel for the Company, shall have furnished to the Initial Purchasers their written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers. (j) The Company shall have furnished to the Initial Purchasers a letter (the "Comfort Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (k) The Company shall have furnished to the Initial Purchasers a letter (the "Bring-Down Comfort Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated the Closing Date (A) confirming that they are independent public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (B) stating, as of the date of the Bring-Down Comfort Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Comfort Letter), that the conclusions and findings of such accountants with respect to the financial information and other matters covered by the Comfort Letter are accurate and (C) confirming in all material respects the conclusions and findings set forth in the Comfort Letter. (l) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief executive officer or its chief financial officer (including any interim chief financial officer) stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and 22 -22- (C) as of the Closing Date, the representations and warranties of the Company and the each of the Guarantors, as applicable, in this Agreement are true and correct in all material respects, the Company and the each of the Guarantors, as applicable, have complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), there has been no material adverse change in the financial position or results of operation of the Company or any of its subsidiaries, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole that could reasonably be expected to have a Material Adverse Effect, except as set forth in the Offering Memorandum (exclusive of amendments or supplements after the date hereof). (m) The Initial Purchasers shall have received a counterpart of the Registration Rights Agreement that shall have been executed and delivered by a duly authorized officer or agent of the Company and of each of the Guarantors. (n) The Indenture shall have been duly executed and delivered by the Company, each of the Guarantors and the Trustee, and the Securities shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (o) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (p) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. (q) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities contemplated hereby. (r) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in 23 -23- the capital stock or long-term debt or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (s) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities or the issuance of the Guarantees; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities or issuance of the Guarantees. (t) Subsequent to the execution and delivery of this Agreement no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other debt securities by a "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act and no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or any of the Company's other debt securities. (u) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: trading in securities generally on the New York Stock Exchange, the American Stock Exchange, or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in any securities of the Company on any exchange or in the over-the-counter market shall have been suspended or any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such), the effect of which, in the case of this clause (u), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Securities on the terms and in the manner 24 -24- contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to Cahill Gordon & Reindel. 6. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(q), (r), (s), (t) or (u) shall have occurred and be continuing. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchasers may make arrangements for the purchase of the Securities which such defaulting Initial Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchasers, but if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers, the Company, or the Guarantors, except that the Company and the Guarantors will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 2 hereto that, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company, the Guarantors or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to Purchase the Securities of a defaulting Initial Purchaser, any of the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement and the Company agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement shall have been terminated due to the failure to comply with any subsection of Section 5 (other than due to the events described in Section 5(q), (s) or (u), in which case each party will be responsible for its own expenses) or pursuant to Section 6, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under 25 -25- this Agreement or (c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company and the each of the Guarantors shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Securities. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, neither the Company nor the Guarantors shall be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 9. Indemnification. (a) The Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which that Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company or any Guarantor pursuant to Section 4(e), or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made not misleading and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and each of the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such 26 -26- person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum was corrected in the Offering Memorandum unless, in either case, such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company with the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information provided by such Initial Purchaser, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified 27 -27- party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood, that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceedings. The obligations of the Company, each of the Guarantors and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company, each of the Guarantors or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 28 -28- 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and each of the Guarantors, on the one hand and the Initial Purchasers on the other, from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company and each of the Guarantors on the one hand and the Initial Purchasers on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors on the one hand and the Initial Purchasers on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omissions. The Company, each of the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from, any person who was not guilty of such 29 -29- fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company, each of the Guarantors and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company, each of the Guarantors and the Initial Purchasers and in Section 4(e) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Company and each of the Guarantors agrees with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (c) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(g) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchasers); (g) any fee charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; and (j) all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement which are not otherwise specifically provided for in this Section 12; provided, however, that except as provided in this Section 12 and Section 8, the Initial Purchasers shall pay their own costs and expenses, including the fees and disbursements of their counsel and any advertising expenses (other than with respect to any roadshow presentation) connected with any offers they may make. 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, each of the Guarantors and the Initial Purchasers contained in this Agreement (and any other agreement between or among the parties hereto relating to the subject matter hereof) or made by or on behalf of the Company, 30 -30- each of the Guarantors or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to JPMorgan, a division of Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Legal Department (telecopier no.: (212) 270-7487); or (b) if to the Company or the Guarantors, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: Douglas J. Babb (telecopier no.: (501) 201-4810). Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by JPMorgan. 15. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the Now York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Initial Purchasers' Information consists solely of the following information in the Preliminary Offering Memorandum and the Offering Memorandum; (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchasers; and (ii) the statements concerning the Initial Purchasers contained in the third, fifth, tenth, the fourth sentence of the eleventh paragraph, twelfth and thirteenth paragraphs under the heading "Plan of Distribution." 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 18. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more 31 -31- than one counterpart, the executed agreement, counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 19. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of this Agreement. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company, the Guarantors and the several Initial Purchasers in accordance with its terms. [Signature Pages Follow] 32 S-1 Very truly yours, BEVERLY ENTERPRISES, INC. By: /s/ Schuyler Hollingsworth, Jr. -------------------------------------- Name: Schuyler Hollingsworth, Jr. Title: Senior Vice President and Treasurer GUARANTORS listed on Schedule 1 attached hereto, By: /s/ John W. Mackenzie -------------------------------------- Name: John W. Mackenzie Title: Vice President and Secretary of each of the Guarantors 33 S-2 Accepted: CHASE SECURITIES INC., as Representative of the Initial Purchasers named on Schedule 2 attached hereto By: /s/ Earl McClanahan ------------------------------- Name: Earl McClanahan Title: Managing Director Address for notices pursuant to Section 9(c): 1 Chase Manhattan Plaza, 26th floor New York, New York 10081 Attention: Legal Department 34 SCHEDULE 1 GUARANTORS
Employer State of Corporation ID Number Incorporation AEGIS Therapies, Inc. (f/k/a Beverly Rehabilitation, Inc.) 71-0811574 Delaware AGI-Camelot, Inc. 43-1253376 Missouri Arborland Management Company, Inc. 58-2340689 South Carolina Associated Physical Therapy Practitioners, Inc. 23-2638708 Pennsylvania Beverly Assisted Living, Inc. 71-0777901 Delaware Beverly - Bella Vista Holding, Inc. 71-0797481 Delaware Beverly - Branson Holdings, Inc. 71-0817008 Delaware Beverly-Indianapolis, LLC 71-0824184 Indiana Beverly - Missouri Valley Holding, Inc. 71-0797485 Delaware Beverly - Plant City Holdings, Inc. 71-0817010 Delaware Beverly - Rapid City Holding, Inc. 71-0797483 Delaware Beverly - Tamarac Holdings, Inc. 71-0817009 Delaware Beverly - Tampa Holdings, Inc. 71-0817007 Delaware Beverly Clinical, Inc. 71-0796035 Delaware Beverly Enterprises International Limited 95-3982125 California Beverly Enterprises - Alabama, Inc. 95-3742145 California Beverly Enterprises - Arizona, Inc. 95-3750871 California
35 -2-
Employer State of Corporation ID Number Incorporation Beverly Enterprises - Arkansas, Inc. 95-3751272 California Beverly Enterprises - California, Inc. 95-2499218 California Beverly Enterprises - Colorado, Inc. 95-3750882 California Beverly Enterprises - Connecticut, Inc. 95-3849642 California Beverly Enterprises - Delaware, Inc. 95-3849628 California Beverly Enterprises - Distribution Services, Inc. 95-4081567 California Beverly Enterprises - District of Columbia, Inc. 95-3750889 California Beverly Enterprises - Florida, Inc. 95-3742251 California Beverly Enterprises - Garden Terrace, Inc. 95-3849648 California Beverly Enterprises - Georgia, Inc. 95-3750880 California Beverly Enterprises - Hawaii, Inc. 95-3750890 California Beverly Enterprises - Idaho, Inc. 95-3750886 California Beverly Enterprises - Illinois, Inc. 95-3750883 California Beverly Enterprises - Indiana, Inc. 95-3744258 California Beverly Enterprises - Iowa, Inc. 95-3751271 California Beverly Enterprises - Kansas, Inc. 95-3751269 California Beverly Enterprises - Kentucky, Inc. 95-3750894 California Beverly Enterprises - Louisiana, Inc. 95-3849633 California Beverly Enterprises - Maine, Inc. 95-3849627 California Beverly Enterprises - Maryland, Inc. 95-3750892 California
36 -3-
Employer State of Corporation ID Number Incorporation Beverly Enterprises - Massachusetts, Inc. 95-3750893 California Beverly Enterprises - Michigan, Inc. 95-3898661 California Beverly Enterprises - Minnesota, Inc. 95-3742698 California Beverly Enterprises - Mississippi, Inc. 95-3742144 California Beverly Enterprises - Missouri, Inc. 95-3750895 California Beverly Enterprises - Montana, Inc. 95-3849636 California Beverly Enterprises - Nebraska, Inc. 95-3750873 California Beverly Enterprises - Nevada, Inc. 95-3750896 California Beverly Enterprises - New Hampshire, Inc. 95-3849630 California Beverly Enterprises - New Jersey, Inc. 95-3750884 California Beverly Enterprises - New Mexico, Inc. 95-3750869 California Beverly Enterprises - North Carolina, Inc. 95-3742257 California Beverly Enterprises - North Dakota, Inc. 95-3751270 California Beverly Enterprises - Ohio, Inc. 95-3750867 California Beverly Enterprises - Oklahoma, Inc. 95-3849624 California Beverly Enterprises - Oregon, Inc. 95-3750881 California Beverly Enterprises - Pennsylvania, Inc. 95-3750870 California Beverly Enterprises - Rhode Island, Inc. 95-3849621 California Beverly Enterprises - South Carolina, Inc. 95-3750866 California Beverly Enterprises - Tennessee, Inc. 95-3742261 California
37 -4-
Employer State of Corporation ID Number Incorporation Beverly Enterprises - Texas, Inc. 95-3744256 California Beverly Enterprises - Utah, Inc. 95-3751089 California Beverly Enterprises - Vermont, Inc. 95-3750885 California Beverly Enterprises - Virginia, Inc. 95-3742694 California Beverly Enterprises - Washington, Inc. 95-3750868 California Beverly Enterprises - West Virginia, Inc. 95-3750888 California Beverly Enterprises - Wisconsin, Inc. 95-3742696 California Beverly Enterprises - Wyoming, Inc. 95-3849638 California Beverly Health and Rehabilitation Services, Inc. 95-2301514 California Beverly Healthcare, LLC 71-0817438 Indiana Beverly Healthcare Acquisition, Inc. 71-0812407 Delaware Beverly Healthcare - California, Inc. 95-3750879 California Beverly Holdings I, Inc. 71-0768985 Delaware Beverly Indemnity, Ltd. 71-0712927 Vermont Beverly Manor Inc. of Hawaii 99-0144750 California Beverly Real Estate Holdings, Inc. 71-0768984 Delaware Beverly Savana Cay Manor, Inc. 95-4217381 California Carrollton Physical Therapy Clinic, Inc. 75-2102832 Texas Commercial Management, Inc. 42-0891358 Iowa
38 -5-
Employer State of Corporation ID Number Incorporation Community Care, Inc. 56-1487367 North Carolina Compassion and Personal Care Services, Inc. 56-1904822 North Carolina Eastern Home Health Supply & Equipment Co., Inc. 56-1581980 North Carolina Greenville Rehabilitation Services, Inc. 75-2059145 Texas Hallmark Convalescent Homes, Inc. 41-1413478 Michigan HomeCare Preferred Choice, Inc. 62-1702864 Delaware Home Health and Rehabilitation Services, Inc. 75-2012280 Texas Hospice of Eastern Carolina, Inc. 56-1951841 North Carolina Hospice Preferred Choice, Inc. 71-0761314 Delaware HTHC Holdings, Inc. 71-0807323 Delaware Las Colinas Physical Therapy Center, Inc. 75-2402177 Texas Liberty Nursing Homes, Incorporated 54-0784334 Virginia MATRIX Occupational Health, Inc. 58-2380955 Delaware MATRIX Rehabilitation, Inc. 71-0783147 Delaware MATRIX Rehabilitation - Delaware, Inc. 71-0842504 Delaware MATRIX Rehabilitation - Georgia, Inc. 58-2554073 Delaware MATRIX Rehabilitation - Maryland, Inc. 71-0842503 Delaware MATRIX Rehabilitation - Ohio, Inc. 71-0842505 Delaware MATRIX Rehabilitation - South Carolina, Inc. 73-1575603 Delaware MATRIX Rehabilitation - Texas, Inc. 73-1589542 Delaware MATRIX Rehabilitation - Washington, Inc. 58-2554074 Delaware
39 -6-
Employer State of Corporation ID Number Incorporation Medical Arts Health Facility of Lawrenceville, Inc. 58-1329700 Georgia Moderncare of Lumberton, Inc. 56-1217025 North Carolina Nebraska City S-C-H, Inc. 41-1413481 Nebraska Network for Physical Therapy, Inc. 74-2453469 Texas North Dallas Physical Therapy Associates, Inc. 75-2075331 Texas Nursing Home Operators, Inc. 34-0949279 Ohio Petersen Health Care, Inc. 59-2043392 Florida PT NET, Inc. 62-1575533 Tennessee PT Net (Colorado), Inc. 84-1277912 Colorado Rehabilitation Associates of Lafayette, Inc. 72-1118473 Louisiana South Alabama Nursing Home, Inc. 95-3809397 Alabama South Dakota - Beverly Enterprises, Inc. 95-3750887 California Spectra Healthcare Alliance, Inc. 71-0759298 Delaware Tar Heel Infusion Company, Inc. 56-1767308 North Carolina The Parks Physical Therapy and Work Hardening Center, Inc. 75-2452926 Texas Theraphysics Corp. 13-3643705 Delaware Theraphysics of New York IPA, Inc. 71-0817011 New York Theraphysics Partners of Colorado, Inc. 51-0372115 Delaware Theraphysics Partners of Texas, Inc. 62-1659976 Delaware
40 -7-
Employer State of Corporation ID Number Incorporation Theraphysics Partners of Western Pennsylvania, Inc. 23-2901884 Delaware TMD Disposition Company 59-3151568 Florida Vantage Healthcare Corporation 35-1572998 Delaware
41 SCHEDULE 2 INITIAL PURCHASERS Principal Amount Initial Purchasers of Securities - ------------------ ---------------- JPMorgan $80,000,000 Banc of America Securities LLC $80,000,000 BNY Capital Markets, Inc. $20,000,000 BMO Nesbitt Burns Corp. $20,000,000 Total $200,000,000 ============ 42 SCHEDULE 3 PLEDGED SHARES Beverly Enterprises - Alabama, Inc. 95-3742145 California Beverly Enterprises - Arkansas, Inc. 95-3751272 California Beverly Enterprises - Georgia, Inc. 95-3750880 California Beverly Enterprises - Florida, Inc. 95-3742251 California Beverly Enterprises - Massachusetts, Inc. 95-3750893 California Beverly Enterprises - Minnesota, Inc. 95-3742698 California Beverly Enterprises - Mississippi, Inc. 95-3742144 California Beverly Enterprises - Missouri, Inc. 95-3750895 California Beverly Enterprises - Nebraska, Inc. 95-3750873 California Beverly Enterprises - North Carolina, Inc. 95-3742257 California Beverly Enterprises - Ohio, Inc. 95-3750867 California Beverly Enterprises - Pennsylvania, Inc. 95-3750870 California Beverly Enterprises - South Carolina, Inc. 95-3750866 California Beverly Enterprises - Virginia, Inc. 95-3742694 California Beverly Enterprises - Wisconsin, Inc. 95-3742696 California South Dakota - Beverly Enterprises, Inc. 95-3750887 California 43 ANNEX A FORM OF REGISTRATION RIGHTS AGREEMENT 44 ANNEX B-1 FORM OF OPINION OF LATHAM & WATKINS, COUNSEL TO THE COMPANY 45 ANNEX B-2 FORM OF OPINION OF DOUGLAS J. BABB, GENERAL COUNSEL OF THE COMPANY 46 ANNEX B-3 FORM OF OPINION OF PROSKAUER ROSE LLP, SPECIAL REGULATORY COUNSEL TO THE COMPANY EX-12.1 7 c63210ex12-1.txt STATEMENT RE: COMPUTATION OF RATIOS 1 EXHIBIT 12.1 BEVERLY ENTERPRISES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, -------------------------------------------------------------- ------------------ 2000 1999 1998 1997 1996 1995 2001 2000 -------- --------- -------- -------- -------- -------- -------- ------- Income (loss) before provision for (benefit from) income taxes, extraordinary charge and cumulative effect of change in accounting for income taxes.................................. $(76,764) $(213,726) $(50,882) $108,506 $125,507 $ (6,154) $(95,045) $10,098 ======== ========= ======== ======== ======== ======== ======== ======= Add fixed charges: Interest expense (including capitalized interest).................................... 79,771 71,324 64,967 81,702 89,911 83,294 18,803 19,615 Interest factor in rent expense............... 37,913 38,147 37,541 37,849 33,572 46,740 9,342 9,470 Amortization of debt issue costs.............. 2,571 2,909 2,336 3,163 3,210 4,379 666 624 Amortization of debt discounts................ 0 0 0 39 101 144 0 0 -------- --------- -------- -------- -------- -------- -------- ------- Total fixed charges............................ 120,255 112,380 104,844 122,753 126,794 134,557 28,811 29,709 -------- --------- -------- -------- -------- -------- -------- ------- Less capitalized interest...................... (2,326) (1,655) (1,365) (2,191) (2,111) (3,572) (359) (621) -------- --------- -------- -------- -------- -------- -------- ------- Total earnings................................. $ 41,165 $(103,001) $ 52,597 $229,068 $250,190 $124,831 $(66,593) $39,186 ======== ========= ======== ======== ======== ======== ======== ======= Ratio of earnings to fixed charges............. (a) (a) (a) 1.87 1.97 (a) (a) 1.32 ======== ========= ======== ======== ======== ======== ======== =======
(a) Earnings were inadequate to cover fixed charges by $79,090,000, $215,381,000, $52,247,000 and $9,726,000 for the years ended December 31, 2000, 1999, 1998 and 1995, respectively and $95,404,000 for the three-months ended March 31, 2001. EX-13.1 8 c63210ex13-1.txt ANNUAL REPORT ON FORM 10-K FOR YEAR END 12/31/2000 1 Exhibit 13.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) COMMISSION FILE NUMBER: 1-9550 BEVERLY ENTERPRISES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 62-1691861 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
ONE THOUSAND BEVERLY WAY FORT SMITH, ARKANSAS 72919 (Address of principal executive offices) Registrant's telephone number, including area code: (501) 201-2000 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $.10 par value New York Stock Exchange Pacific Stock Exchange 9% Senior Notes due February 15, 2006 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. [X] YES [ ]NO INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF REGISTRANT WAS $784,036,126 AS OF FEBRUARY 28, 2001. 103,740,906 (NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, NET OF TREASURY SHARES, AS OF FEBRUARY 28, 2001) PART III IS INCORPORATED BY REFERENCE FROM THE PROXY STATEMENT FOR THE ANNUAL STOCKHOLDERS MEETING TO BE HELD ON MAY 24, 2001. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 FORWARD-LOOKING STATEMENTS References throughout this document to the Company include Beverly Enterprises, Inc. and its wholly-owned subsidiaries. In accordance with the Securities and Exchange Commission's "Plain English" guidelines, this Annual Report on Form 10-K has been written in the first person. In this document, the words "we," "our," "ours" and "us" refer only to Beverly Enterprises, Inc. and its wholly-owned subsidiaries and not any other person. This Annual Report on Form 10-K, and other information we provide from time to time, contains certain "forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations or cash flows, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, ability to control our patient care liability costs, ability to respond to changes in government regulations, ability to execute our three-year strategic plan, ability to execute a transaction with respect to our Florida nursing operations, and similar statements including, without limitation, those containing words such as "believes," "anticipates," "expects," "intends," "estimates," "plans," and other similar expressions are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors: - national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials; - the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations; - changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries; - liabilities and other claims asserted against the Company, including patient care liabilities, as well as the resolution of the Class Action and Derivative Lawsuits (see "Item 3. Legal Proceedings"); - the ability to refinance certain debt obligations maturing within the next 12 months; - the ability to attract and retain qualified personnel; - the availability and terms of capital to fund acquisitions and capital improvements; - the competitive environment in which we operate; - the ability to maintain and increase census levels; and - demographic changes. See "Item 1. Business" for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. You should carefully consider the risks described below before making any investment decisions in the Company. The risks and uncertainties described below are not the only ones facing the Company. There may be additional risks that we do not presently know of or that we currently deem immaterial. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our Common Stock could decline, and you may lose all or part of your investment. Given these risks and uncertainties, we can give no assurances that these forward-looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them. 1 3 PART I ITEM 1. BUSINESS. GENERAL Our business consists principally of providing healthcare services, including the operation of nursing facilities, assisted living centers, hospice and home care centers, outpatient therapy clinics and rehabilitation therapy services. We are one of the largest operators of nursing facilities in the United States. On February 28, 2001, we operated 531 nursing facilities with 59,580 licensed beds. Our nursing facilities are located in 29 states and the District of Columbia, and range in capacity from 20 to 355 beds. On February 28, 2001, we also operated 34 assisted living centers containing 1,132 units, 165 outpatient therapy clinics, and 58 hospice and home care centers. (See "Item 2. Properties"). Our nursing facilities had average occupancy, based on operational beds, of 87.0%, 87.2% and 88.7% during the years ended December 31, 2000, 1999 and 1998, respectively. OPERATIONS At December 31, 2000, we were organized into two operating segments, which included: - Beverly Healthcare, which provides long-term healthcare through the operation of nursing facilities and assisted living centers; and - Beverly Care Alliance, which operates outpatient therapy clinics, hospice and home care centers and an inpatient rehabilitation therapy services business. Business in each operating segment is conducted by one or more corporations. The corporations comprising each of the two operating segments also have separate boards of directors. See "Part II, Item 8 -- Note 11 of Notes to Consolidated Financial Statements" for segment information. Beverly Healthcare's nursing facilities provide patients with routine long-term care services, including daily nursing, dietary, social and recreational services and a full range of pharmacy services and medical supplies. Beverly Healthcare's skilled staff also offers complex and intensive medical services to patients with higher acuity disorders outside the traditional acute care hospital setting. In addition, Beverly Healthcare provides assisted living services. Approximately 92%, 91%, and 90% of our total net operating revenues for the years ended December 31, 2000, 1999 and 1998, respectively, were derived from services provided by Beverly Healthcare. Beverly Care Alliance provides outpatient and rehabilitative therapy services, hospice and home care services, and managed care contract services within Beverly Healthcare's nursing facilities and to other healthcare providers. Approximately 8%, 9% and 7% of our total net operating revenues for the years ended December 31, 2000, 1999 and 1998, respectively, were derived from services provided by Beverly Care Alliance. In January 2001, we implemented a new three-year strategic plan aimed at accomplishing four fundamental strategies: - streamline our nursing home portfolio to strengthen our long-term financial position; - accelerate the growth of our service and knowledge business; - establish a leadership position in eldercare; and - reengineer our organization in order to focus our resources on profitable growth and new opportunities. 2 4 In order to support the implementation of these strategies, in the first quarter of 2001, we reorganized our business into three primary operating segments: - nursing homes, which will be operated in three divisions -- Coastal, Heartland and Florida; - service companies, which will include rehabilitation therapy, hospice, home care and a research and development division; and - Matrix/Theraphysics, which will operate outpatient therapy clinics and a managed care network. This reorganization also establishes alignment around core processes, with individuals being fully accountable for the outcomes of each core process. Our core processes include delivering quality care, driving census and revenues, collecting for services rendered, influencing government policy, and recruiting, retaining and developing the best associates. WE RELY ON REIMBURSEMENT FROM GOVERNMENTAL PROGRAMS FOR A MAJORITY OF OUR REVENUES. As a provider of healthcare services, we are subject to various federal, state and local healthcare statutes and regulations. We must comply with state licensing requirements in order to operate healthcare facilities and to be able to participate in government-sponsored healthcare funding programs, such as Medicaid and Medicare. Medicaid is a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government. Medicare is a health insurance program for the aged and certain other chronically disabled individuals, operated by the federal government. These programs are increasingly seeking to control healthcare costs and to reduce or limit increases in reimbursement rates for healthcare services. Changes in the reimbursement policies of these funding programs as a result of budget cuts by federal and state governments or other legislative and regulatory actions could have a material adverse effect on our consolidated financial position, results of operations and cash flows. We receive payments for services provided to patients from: - each of the states in which our facilities are located under the Medicaid program; - the federal government under the Medicare program; and - private payors, including commercial insurers, managed care payors and the Veterans Administration ("VA"). The following table sets forth, for the periods indicated: - patient days derived from the indicated sources of payment as a percentage of total patient days; - room and board revenues derived from the indicated sources of payment as a percentage of total net operating revenues; and - ancillary and other revenues derived from all sources of payment as a percentage of total net operating revenues.
MEDICAID MEDICARE PRIVATE AND VA ------------------ ------------------ ------------------ ROOM AND ROOM AND ROOM AND PATIENT BOARD PATIENT BOARD PATIENT BOARD ANCILLARY AND DAYS REVENUES DAYS REVENUES DAYS REVENUES OTHER REVENUES ------- -------- ------- -------- ------- -------- -------------- Year ended: December 31, 2000............ 71% 53% 10% 15% 19% 18% 14% December 31, 1999............ 71% 52% 9% 14% 20% 19% 15% December 31, 1998............ 69% 46% 11% 13% 20% 18% 23%
Changes in the mix of our patient population among the Medicaid, Medicare and private categories can significantly affect our revenues and profitability. In most states, private patients are the most profitable, and Medicaid patients are the least profitable. 3 5 We receive ancillary revenues by providing occupational, physical, speech, respiratory and intravenous therapy, as well as sales of pharmaceuticals and other services. Such services are currently provided primarily to Medicare and private pay patients. Medicaid programs currently exist in all of the states in which we operate nursing facilities. These programs differ in certain respects from state to state, but they are all subject to federally-imposed requirements. At least 50% of the funds available under these programs is provided by the federal government under a matching program. Currently, many state Medicaid programs use a cost-based reimbursement system. This means that a facility is reimbursed for the reasonable direct and indirect allowable costs it incurs in providing routine patient care services (as defined by the programs). In addition, certain states provide for efficiency incentives or a return on equity, subject to certain cost ceilings. These costs normally include allowances for administrative and general costs, as well as the costs of property and equipment (e.g. depreciation and interest, fair rental allowance or rental expense). State Medicaid reimbursement programs vary as to the level of allowable costs which are reimbursed to operators. In some states, cost-based reimbursement is subject to retrospective adjustment through cost report settlement. In other states, reimbursements made to a facility that are subsequently determined to be less than or in excess of allowable costs may be adjusted through future reimbursements to the facility and to other facilities owned by the same operator. Several states in which we currently operate have enacted reimbursement programs which are based on patient acuity versus traditional cost-based methodologies. Many other states are actively developing reimbursement systems based on patient acuity or that follow a methodology similar to Medicare's prospective payment system. We are unable to estimate the ultimate impact of any changes in reimbursement programs on our future consolidated financial position, results of operations, or cash flows. While federal regulations do not provide states with grounds to curtail funding of their Medicaid cost reimbursement programs due to state budget deficiencies, states have done so in the past. No assurance can be given that states will not do so in the future or that the future funding of Medicaid programs will remain at levels comparable to the present levels. The United States Supreme Court ruled in 1990 that healthcare providers could use the Boren Amendment to require states to comply with their legal obligation to adequately fund Medicaid programs. The 1997 Act (as discussed below) repealed the Boren Amendment and authorized states to develop their own standards for setting payment rates. It requires each state to use a public process for establishing proposed rates whereby the methodologies and justifications used for setting such rates are available for public review and comment. This requires facilities to become more involved in the rate setting process since failure to do so may interfere with a facility's ability to challenge rates later. Currently, a few states in which we operate are experiencing deficits in their fiscal operating budgets. There can be no assurance that those states in which we operate that are experiencing budget deficits, as well as other states in which we operate, will not reduce payment rates. Under the Nursing Home Resident Protection Amendments of 1999, a nursing facility is required to continue providing care to Medicaid residents, as well as current non-Medicaid residents who may qualify for Medicaid in the future, even if the facility decides to withdraw from the Medicaid program. Healthcare system reform and concerns over rising Medicare and Medicaid costs have been high priorities for both the federal and state governments. In August 1997, the Balanced Budget Act of 1997 (the "1997 Act") was signed into law. The 1997 Act included numerous program changes directed at balancing the federal budget. The legislation changed Medicare and Medicaid policy in a number of ways, including the phase in of the Medicare prospective payment system ("PPS"). PPS reimburses a skilled nursing facility based upon the acuity level of Medicare patients in the skilled nursing facility. Acuity level is measured by which one of 44 Resource Utilization Grouping ("RUG") categories a particular patient is classified. In November 1999, the Medicare, Medicaid and State Child Health Insurance Program ("SCHIP") Balanced Budget Refinement Act of 1999 ("BBRA 1999") was signed into law. BBRA 1999 refined the 1997 4 6 Act and restored approximately $2.7 billion in Medicare funding for skilled nursing providers over the next three years. The provisions of BBRA 1999 included: - the option for a skilled nursing provider to continue being reimbursed in accordance with the payment schedule set forth under the 1997 Act, or 100% of the federally-determined acuity-adjusted rate, effective for cost reporting periods starting on or after January 1, 2000; - a temporary increase of 20% in the federal adjusted per diem rates for 15 RUG categories covering extensive services, special care, clinically complex, and high and medium rehabilitation, for the period from April 1, 2000 through September 30, 2000; however, HCFA did not recalculate the necessary refinements to the overall RUG-III system, and the 20% increase was extended until such time as the calculations are completed; - a 4% increase in the federal adjusted per diem rates for all 44 RUG categories for each of the periods October 1, 2000 through September 30, 2001 and October 1, 2001 through September 30, 2002; - a two-year moratorium on implementing the two Part B $1,500 therapy limitations contained in the 1997 Act, effective January 1, 2000 through January 1, 2002; - a retroactive provision that corrects a technical error in the 1997 Act denying payment of Part B services to skilled nursing facilities participating in PPS demonstration projects; and - the exclusion from the Medicare PPS rates of ambulance services to and from dialysis, prosthetic devices, radioisotopes and chemotherapy furnished on or after April 1, 2000. We chose to be reimbursed at 100% of the federally-determined acuity-adjusted rate on approximately 300 of our nursing facilities effective January 1, 2000 and an additional 48 effective January 1, 2001. In December 2000, the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 ("BIPA") was signed into law. BIPA is intended to invest an additional $35 billion in enhanced medical benefits and to increase Medicare and Medicaid payments to providers over the next five years. Approximately $2 billion of this amount is expected to benefit nursing home providers and approximately $2 billion is intended to benefit home health agencies. The specific provisions of BIPA include, among other things: - an inflation update to the full market basket for 2001 for skilled nursing facilities and home health agencies, and market basket minus .5% in 2002 and 2003 for skilled nursing facilities; - a 16.66% increase in the nursing component of all 44 RUG categories effective April 1, 2001, with a requirement that all skilled nursing facilities post on a daily basis for each shift the current number of licensed and unlicensed nursing staff directly responsible for resident care in the facility beginning January 1, 2003; - an additional one-year moratorium on therapy caps through 2002; - a 6.7% increase in the federal adjusted per diem rates for certain rehabilitation RUG categories starting April 1, 2002; - a 5% increase in the base Medicare daily payment rates for hospice care beginning April 1, 2001; and - an additional one-year delay until October 1, 2002 in the 15% reduction in aggregate PPS rates for home health agencies. Certain of the BIPA provisions supercede those of the 1997 Act and BBRA 1999, and other provisions are supplements to those regulations. Assuming a similar volume and mix of Medicare census as those we experienced in 2000, we expect our net operating revenues for 2001 to increase approximately $30 million over 2000 as a result of the BIPA provisions. 5 7 OUR INDUSTRY IS HEAVILY REGULATED BY THE GOVERNMENT WHICH REQUIRES OUR COMPLIANCE WITH A VARIETY OF LAWS. The operation of our facilities and the services we provide are subject to periodic inspection by governmental authorities to ensure that we are complying with various standards established for continued licensure under state law and certification for participation under the Medicare and Medicaid programs. Additionally, in certain states, certificates of need or other similar approvals are required for expansion of our operations. We could be adversely affected if we cannot obtain these approvals, if the standards applicable to approvals or the interpretation of those standards change and by possible delays and expenses associated with obtaining approvals. Our failure to obtain, retain or renew any required regulatory approvals, licenses or certificates could prevent us from being reimbursed for our services. The Health Care Financing Administration ("HCFA") of the Department of Health and Human Services ("HHS") published survey, certification and enforcement guidelines in July 1999 and December 1999 to implement the Medicare and Medicaid provisions of the Omnibus Budget Reconciliation Act of 1987 ("OBRA 1987"). OBRA 1987 authorized HCFA to develop regulations governing survey, certification and enforcement of the requirements for participation by skilled nursing facilities under Medicare and nursing facilities under Medicaid. Among the provisions that HCFA adopted were requirements that: - surveys focus on residents' outcomes; - all deviations from the participation requirements will be considered deficiencies, but all deficiencies will not constitute noncompliance; and - penalties will result for certain types of deficiencies. The regulations also identify remedies, as alternatives to termination from participation, and specify the categories of deficiencies for which these remedies will be applied. These remedies include: - temporary management; - denial of payment for new admissions; - denial of payment for all patients; - civil monetary penalties of $50 to $10,000; - closure of facility and/or transfer of patients in emergencies; - directed plans of correction; and - directed in-service training. HCFA's most recent enforcement guidelines established criteria that: - mandate the immediate application of remedies before the provider has an opportunity to correct the deficiency; - impose a "per instance" civil monetary penalty up to $10,000 per day; and - allow termination in as few as two days. We have analyzed the revised HCFA regulations with respect to our programs and facilities, as well as compliance data for the past year. Results of HCFA surveys for the past year determined that over 94% of our nursing facilities surveyed were in compliance with the HCFA criteria. Although we could be adversely affected if a substantial portion of our programs or facilities were eventually determined not to be in compliance with the HCFA regulations, we believe our programs and facilities are generally in compliance. In the ordinary course of our business, we receive notices of deficiencies for failure to comply with various regulatory requirements. We review such notices and take appropriate corrective action. In most cases, the facility and the reviewing agency will agree upon the steps to be taken to bring the facility into compliance 6 8 with regulatory requirements. In some cases or upon repeat violations, the reviewing agency may take a number of adverse actions against a facility. These adverse actions include: - the imposition of fines; - temporary suspension of admission of new patients to the facility; - decertification from participation in the Medicaid or Medicare programs; or - in extreme circumstances, revocation of a facility's license. We have been subject to certain of these adverse actions in the past and could be subject to adverse actions in the future which could result in significant penalties, as well as adverse publicity. We have a Quality Management ("QM") program to help ensure that high quality care is provided in each of our facilities. Our nationwide network of healthcare professionals includes physician medical directors, registered nurses, dieticians, social workers and other specialists who work with regional, district and facility based professionals. Facility based QM is structured through our Beverly Quality System. With a philosophy of quality improvement, internal evaluations are used by local quality improvement teams to identify and correct possible problems and improve care delivery. The Social Security Act and regulations of HHS state that providers and related persons who have been convicted of a criminal offense related to the delivery of an item or service under the Medicare or Medicaid programs or who have been convicted, under state or federal law, of a criminal offense relating to neglect or abuse of residents in connection with the delivery of a healthcare item or service cannot participate in the Medicare or Medicaid programs. Furthermore, providers and related persons who have been convicted of fraud, who have had their licenses revoked or suspended, or who have failed to provide services of adequate quality may be excluded from the Medicare and Medicaid programs. In February 2000, as part of the settlement of an investigation by the federal government into our allocation of certain costs to the Medicare program (See "Item 3. Legal Proceedings"), we entered into a Corporate Integrity Agreement with the Office of Inspector General (the "OIG"), which requires that we monitor, on an ongoing basis, our compliance with the requirements of the federal healthcare programs. This agreement addresses our obligations to ensure that we comply with the requirements for participation in the federal healthcare programs. It also includes our functional and training obligations, audit and review requirements, recordkeeping and reporting requirements, as well as penalties for breach/noncompliance of the agreement. We believe that we are in substantial compliance with the requirements of the Corporate Integrity Agreement. The "fraud and abuse" anti-kickback provisions of the Social Security Act (the "Antifraud Amendments") make it a criminal felony offense to knowingly and willfully offer, pay, solicit or receive payment in order to induce business for which reimbursement is provided under government health programs, including Medicare and Medicaid. In addition, violators can be subject to civil penalties, as well as exclusion from government health programs. The Antifraud Amendments have been broadly interpreted to make payment of any kind, including many types of business and financial arrangements among providers and between providers and beneficiaries, potentially illegal if any purpose of the payment or financial arrangement is to induce a referral. Accordingly, joint ventures, space and equipment rentals, management and personal services contracts, and certain investment arrangements among providers may be subject to increased regulatory scrutiny. From time to time, HHS puts into effect regulations describing, or clarifying, certain arrangements that are not subject to enforcement action under the Social Security Act (the "Safe Harbors"). The Safe Harbors described in the regulations are narrow, leaving a wide range of economic relationships, which many hospitals, physicians and other healthcare providers consider to be legitimate business arrangements, possibly subject to enforcement action under the Antifraud Amendments. The regulations do not intend to comprehensively describe all lawful relationships between healthcare providers and referral sources. The regulations clearly state that just because an arrangement does not qualify for Safe Harbor protection does not mean it violates 7 9 the Antifraud Amendments. However, it may subject a particular arrangement or relationship to increased regulatory scrutiny. In addition to the Antifraud Amendments, Section 1877 of the Social Security Act (known as the "Stark Law") imposes restrictions on financial relationships between physicians and certain entities. The Stark Law provides that if a physician (or an immediate family member of a physician) has a financial relationship with an entity that provides certain designated health services, the physician may not refer a Medicare or Medicaid patient to the entity. In addition, the entity may not bill for services provided by that physician unless an exception to the financial relationship exists. Designated health services include certain services, such as physical therapy, occupational therapy, prescription drugs and home health. The types of financial relationships that can trigger the referral and billing prohibitions include ownership or investment interests, as well as compensation arrangements. Penalties for violating the law are severe, and include: - denial of payment for services provided; - civil monetary penalties of $15,000 for each item claimed; - assessments equal to 200% of the dollar value of each such service provided; and - exclusion from the Medicare and Medicaid programs. Many states where we operate have laws similar to the Antifraud Amendments and the Stark Law, but with broader effect since they apply regardless of the source of payment for care. These laws typically provide criminal and civil penalties, as well as loss of licensure. The scope of these state laws is broad and little precedent exists for their interpretation or enforcement. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") includes comprehensive revisions or supplements to the Antifraud Amendments. Under HIPAA, it is a federal criminal offense to commit healthcare fraud. Healthcare fraud is defined as knowingly and willfully executing or attempting to execute a "scheme or device" to defraud any healthcare benefit program. In addition, for the first time, federal enforcement officials have the ability to exclude from the Medicare and Medicaid programs any investors, officers and managing employees associated with business entities that have committed healthcare fraud, even if the investor, officer or employee had no actual knowledge of the fraud. HIPAA established that it is a violation to pay a Medicare or Medicaid beneficiary so as to influence such beneficiary to order or receive services from a particular provider or practitioner. Most of the provisions of HIPAA became effective January 1, 1997. The 1997 Act also contained a significant number of new fraud and abuse provisions. For example, civil monetary penalties may also be imposed for violations of the Antifraud Amendments (previously, exclusion or criminal prosecution were the only actions under the Antifraud Amendments), as well as for contracting with an individual or entity that a provider knows or should know is excluded from a federal healthcare program. The 1997 Act provides for civil monetary penalties of $50,000 and damages of not more than three times the amount of payment received from the prohibited activity. In 1976, Congress established the OIG at HHS to identify and eliminate fraud, abuse and waste in HHS programs and to promote efficiency and economy in HHS departmental operations. The OIG carries out this mission through a nationwide program of audits, investigations and inspections. In order to provide guidance to healthcare providers on ways to engage in legitimate business practices and avoid scrutiny under the fraud and abuse statutes, the OIG has from time to time issued "fraud alerts" identifying segments of the healthcare industry and particular practices that are vulnerable to abuse. The OIG has issued three fraud alerts targeting the skilled nursing industry: - an August 1995 alert which relates to the providing of medical supplies to nursing facilities, the fraudulent billing for medical supplies and equipment and fraudulent supplier transactions; - a May 1996 alert which focuses on the providing of fraudulent professional services to nursing facility residents; and 8 10 - a March 1998 alert which addresses the interrelationship between hospice services and the nursing home industry, and potentially illegal practices and arrangements. The fraud alerts encourage persons having information about potentially abusive practices or transactions to report such information to the OIG. In addition to laws addressing referral relationships, several federal laws impose criminal and civil sanctions for fraudulent and abusive billing practices. The federal False Claims Act imposes sanctions, consisting of monetary penalties of up to $11,000 for each claim and three times the amount of damages, on entities and persons who knowingly present or cause to be presented to the federal government a false or fraudulent claim for payment. The Social Security Act prohibits the knowing and willful making of a false statement or misrepresentation of a material fact with respect to the submission of a claim for payment under government health programs (including the Medicare and Medicaid programs). Violations of this provision are a felony offense punishable by fines and imprisonment. The HIPAA provisions establish criminal penalties for fraud, theft, embezzlement, and the making of false statements with respect to healthcare benefits programs (which includes private, as well as government programs). Government prosecutors are increasing their use of the federal False Claims Act to prosecute quality of care deficiencies in healthcare facilities. Their theory behind this is that the submission of a claim for services provided in a manner which falls short of quality of care standards can constitute the submission of a false claim. Under federal law, private parties may bring qui tam whistle-blower lawsuits alleging false claims. Some states have adopted similar whistle-blower and/or false claims provisions. In addition to increasing the resources devoted to investigating allegations of fraud and abuse in the Medicare and Medicaid programs, federal and state regulatory and law enforcement authorities are taking an increasingly strict view of the requirements imposed on healthcare providers by the Social Security Act and Medicare and Medicaid regulations. From time to time, the Company, like other healthcare providers, is required to provide records to state or federal agencies to aid in such investigations. It is possible that these entities could initiate investigations in the future at facilities we operate and that such investigations could result in significant penalties, as well as adverse publicity. A joint federal/state initiative, Operation Restore Trust, was created in 1995 to focus audit and law enforcement efforts on geographic areas and provider types receiving large concentrations of Medicare and Medicaid funds. Under Operation Restore Trust, the OIG and HCFA have undertaken a variety of activities to address fraud and abuse by nursing homes, home health providers and medical equipment suppliers. These activities include financial audits, creation of a Fraud and Waste Report Hotline, and increased investigations and enforcement activity. In addition to its antifraud provisions, HIPAA also requires improved efficiency in healthcare delivery by standardizing electronic data interchange and by protecting the confidentiality and security of health data. More specifically, HIPAA calls for: - standardization of electronic patient health, administrative and financial data; - unique health identifiers for individuals, employers, health plans and healthcare providers; and - security standards protecting the confidentiality and integrity of individually identifiable health information. In August 2000, final regulations surrounding standards for electronic transactions and code sets, as required under HIPAA, were released. These standards will allow entities within the healthcare system to exchange medical, billing and other information and to process transactions in a more timely and cost effective manner. These new transactions and code sets must be implemented by October 2002. In December 2000, the final privacy standards were released and must be implemented by February 2003. The privacy standards are designed to protect the privacy of patients' medical records. While the Bush administration and Congress are reexamining these privacy standards, it is uncertain whether there will be changes to the standards or to the effective date. Security and other standards are expected to be issued in 2001. All standards are required to be 9 11 fully implemented within two years of final issuance, with civil and criminal penalties established for noncompliance. HHS estimates that implementation of the electronic transactions and code sets, the privacy standards and the security standards will cost the healthcare industry between $1.8 billion and $6.3 billion over the next five years. We have established a working group to assess our current systems and processes, as well as to design plans to implement these new standards. We are currently evaluating the impact of the new standards on our consolidated financial position and results of operations. WE ARE SUBJECT TO INCREASINGLY EXPENSIVE AND UNPREDICTABLE PATIENT CARE LIABILITY COSTS. General liability and professional liability costs for the long-term care industry, especially in the state of Florida, have become increasingly expensive and difficult to estimate. We, along with most of our competitors, are experiencing substantial increases in both the number of claims and lawsuits, as well as the size of the typical claim and lawsuit. This phenomenon is most evident in the state of Florida, where well-intended patient rights' statutes tend to be exploited by plaintiffs' attorneys. These statutes allow for actual damages, punitive damages and plaintiff attorney fees to be included in any proven violation. Industry statistics show that Florida long-term care providers: - incur more than four times the number of general liability claims as compared to the rest of the country; - have general liability claims that are approximately 300% higher in cost than the rest of the country; and - incur 44% of the cost for general liability claims for the country, but only represent approximately 10% of the total nursing facility beds. Insurance companies are exiting the state of Florida, or severely restricting their capacity to write long-term care general liability insurance. Insurers cannot provide coverage when faced with the magnitude of losses and the explosive growth of claims. Our overall general liability costs per bed in Florida are severely out of line with the rest of the country and continue to escalate. We have been exploring strategic alternatives for our nursing home operations in Florida. Several parties have expressed an interest in purchasing all, or a portion, of these operations, which include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities"). We plan to sell one remaining nursing facility (56 beds) in Florida and certain other assets located in Florida in separate transactions. Due diligence research is currently underway by potential buyers interested in the Florida facilities. During 2000, the Florida facilities had net operating revenues of approximately $267,000,000 and had total assets of approximately $237,000,000 at December 31, 2000. It is too early to speculate on timing or pricing of a potential transaction or to estimate the ultimate impact of the sale of the Florida facilities on our consolidated financial position, results of operations or cash flows. OUR FAILURE TO ATTRACT QUALIFIED PERSONNEL COULD HARM OUR BUSINESS. At December 31, 2000, we had approximately 64,000 associates. We are subject to both federal minimum wage and applicable federal and state wage and hour laws. In addition, we maintain various employee benefit plans. Due to nationwide low unemployment rates, we are currently experiencing difficulty attracting and retaining nursing assistants, nurses' aides and other facility-based personnel. Our weighted average wage rate and use of contract nursing personnel have increased, indicating the difficulty our facilities are having in attracting these personnel. We are addressing this challenge through recruiting and retention programs and training initiatives. These programs and initiatives may not stabilize or improve our ability to attract and retain these personnel. Our inability to control labor availability and cost could have a material adverse affect on our future operating results. 10 12 Approximately 7% of our associates, who work in approximately 100 of our nursing facilities, are represented by various labor unions. Certain labor unions have publicly stated that they are concentrating their organizing efforts within the long-term healthcare industry. Being one of the largest employers within the long-term healthcare industry, we have been the target of a "corporate campaign" by two AFL-CIO affiliated unions attempting to organize certain of our facilities. We have never experienced any material work stoppages and believe that our relations with our associates are generally good. However, we cannot predict the effect continued union representation or organizational activities will have on our future activities. There can be no assurance that continued union representation and organizational activities will not result in material work stoppages, which could have a material adverse effect on our operations. Excessive litigation is a tactic common to "corporate campaigns" and one that is being employed against us. There are several proceedings against facilities we operate before the National Labor Relations Board ("NLRB"). These proceedings consolidate individual cases from separate facilities. Certain of these proceedings are currently pending before the NLRB. We are vigorously defending these proceedings. We believe, based on advice from our Deputy General Counsel, that many of these cases are without merit. Further, it is our belief that the NLRB-related proceedings, individually and in the aggregate, are not material to our consolidated financial position, results of operations, or cash flows. CERTAIN TRENDS IN THE HEALTHCARE INDUSTRY ARE PUTTING PRESSURE ON OUR ABILITY TO MAINTAIN NURSING FACILITY CENSUS. Over the past decade a number of trends have developed that have impacted our census. These trends include: - overbuilding of nursing facilities in states that have eliminated the certificate of need process for new construction; - creation of nursing facilities by acute care hospitals to keep discharged patients within their complex; - rapid growth of assisted living facilities, which sometimes are more attractive to less medically complex patients; and - the development of the scope and availability of health services delivered to the home. The impact of these trends on nursing facility census varies from facility to facility, from community to community and from state to state. OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. We have a significant amount of indebtedness. At December 31, 2000, we had approximately $791,358,000 of outstanding indebtedness. This outstanding indebtedness does not include approximately $94,871,000 of amounts we owe to the federal government under the civil settlement agreement. Our substantial indebtedness could: - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate activities; - limit our flexibility in planning for, or reacting to, changes in our business and industry; - place us at a competitive disadvantage compared to other less leveraged competitors; - increase our vulnerability to general adverse economic and industry conditions; or - limit our ability to pursue business opportunities that may be in our interest. If we add new indebtedness to our existing debt levels, it could increase the related risks that we face. 11 13 IF WE ARE UNABLE TO GENERATE SUFFICIENT CASH FLOW TO SERVICE OUR INDEBTEDNESS OR REFINANCE OUR INDEBTEDNESS AT COMMERCIALLY REASONABLE TERMS, OUR BUSINESS AND FINANCIAL RESULTS COULD SUFFER. Our ability to make payments on, or to refinance, our indebtedness and to fund planned expenditures depends on our ability to generate cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds under our $375,000,000 secured revolving credit facility, which expires on December 31, 2001, depends on our satisfying various covenants. These covenants, among other things: - limit our ability and the ability of our subsidiaries to borrow and place liens on our assets or their assets; - require us to comply with a coverage ratio test; - require us to maintain a minimum consolidated net worth; - limit our ability to merge with other parties or sell all or substantially all of our assets; and - limit our and our subsidiaries' ability to make investments. We cannot assure you that our business will generate cash flow from operations or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Our revolving credit facility matures on December 31, 2001, and we will be required to renegotiate, extend or refinance this facility in 2001. We cannot assure you that we will be able to refinance our credit facility, or any other outstanding indebtedness, at commercially reasonable terms, if at all. Refinancing our credit facility could result in: - an increase in the interest rate over the rate we currently pay; - additional or more restrictive covenants than those outlined above; or - granting of a security interest in additional collateral. Our inability to generate sufficient cash flow to service our indebtedness or refinance our indebtedness at commercially reasonable terms could have a material adverse affect on our business and results of operations. THERE MAY BE VOLATILITY IN OUR STOCK PRICE. The market price of our Common Stock is based in large part on professional securities analysts' expectations that our business will continue to grow and that we will achieve certain profit levels. If our financial performance in a particular quarter does not meet the expectations of securities analysts, this may adversely affect the views of those securities analysts concerning our growth potential and future financial performance. If the securities analysts who regularly follow our Common Stock lower their ratings of our Common Stock or lower their projections for our future growth and financial performance, the market price of our Common Stock is likely to drop significantly. ITEM 2. PROPERTIES. On February 28, 2001, we operated 531 nursing facilities, 34 assisted living centers, 165 outpatient therapy clinics and 58 hospice and home care centers in 33 states and the District of Columbia. Most of our 171 leased nursing facilities are subject to "net" leases which require us to pay all taxes, insurance and maintenance costs. Most of these leases have original terms from ten to fifteen years and contain at least one renewal option. Renewal options typically extend the original terms of the leases by five to fifteen years. Many of these leases also contain purchase options. We consider our physical properties to be in good operating condition and suitable for the purposes for which they are being used. Certain of our nursing facilities and assisted living centers are included in the collateral securing our obligations under various debt agreements. See "Part II, Item 8 -- Note 6 of Notes to Consolidated Financial Statements." 12 14 The following is a summary of our nursing facilities, assisted living centers, outpatient therapy clinics and hospice and home care centers at February 28, 2001:
NURSING FACILITIES ASSISTED LIVING ------------------- CENTERS OUTPATIENT HOSPICE AND ---------------- THERAPY HOME CARE TOTAL CLINICS CENTERS LICENSED TOTAL ---------- ----------- LOCATION NUMBER BEDS NUMBER UNITS NUMBER NUMBER - -------- ------- --------- ------- ------ ---------- ----------- Alabama....................... 21 2,743 -- -- -- -- Arizona....................... 3 480 -- -- -- -- Arkansas...................... 37 4,370 3 64 -- -- California.................... 66 7,127 3 185 39 17 Colorado...................... -- -- -- -- 15 -- Delaware...................... -- -- -- -- 4 -- District of Columbia.......... 1 355 -- -- -- -- Florida....................... 50 6,185 4 315 -- -- Georgia....................... 15 1,970 4 109 21 3 Hawaii........................ 2 396 -- -- -- -- Illinois...................... 3 275 -- -- -- -- Indiana....................... 32 4,887 1 16 -- 1 Kansas........................ 25 1,476 2 29 -- -- Kentucky...................... 8 1,039 -- -- -- -- Maryland...................... 4 585 1 16 6 -- Massachusetts................. 19 2,073 -- -- -- -- Michigan...................... 2 206 -- -- -- -- Minnesota..................... 30 2,390 2 28 -- -- Mississippi................... 21 2,598 -- -- -- -- Missouri...................... 26 2,598 3 101 -- 1 Nebraska...................... 24 2,125 1 19 -- 4 Nevada........................ -- -- -- -- -- 1 New Jersey.................... 1 120 -- -- -- -- North Carolina................ 10 1,278 1 16 10 23 Ohio.......................... 12 1,433 -- -- 5 -- Pennsylvania.................. 42 4,776 3 61 12 5 South Carolina................ 2 216 -- -- 15 -- South Dakota.................. 17 1,217 1 36 -- -- Tennessee..................... 7 929 2 57 -- -- Texas......................... -- -- -- -- 38 2 Virginia...................... 15 1,937 3 80 -- -- Washington.................... 7 648 -- -- -- -- West Virginia................. 3 310 -- -- -- -- Wisconsin..................... 26 2,838 -- -- -- 1 --- ------ -- ----- --- -- 531 59,580 34 1,132 165 58 === ====== == ===== === == CLASSIFICATION Owned......................... 358 39,306 29 846 -- -- Leased........................ 171 20,162 5 286 165 58 Managed....................... 2 112 -- -- -- -- --- ------ -- ----- --- -- 531 59,580 34 1,132 165 58 === ====== == ===== === ==
13 15 ITEM 3. LEGAL PROCEEDINGS. On February 3, 2000, we entered into a series of agreements with the U.S. Department of Justice and the Office of Inspector General (the "OIG") of the Department of Health and Human Services. These agreements settled the federal government's investigations of the Company relating to our allocation to the Medicare program of certain nursing labor costs in our skilled nursing facilities from 1990 to 1998 (the "Allocation Investigations"). The agreements consist of: - a Plea Agreement; - a Civil Settlement Agreement; - a Corporate Integrity Agreement; and - an agreement concerning the disposition of 10 nursing facilities. Under the Plea Agreement, one of our subsidiaries pled guilty to one count of mail fraud and 10 counts of making false statements to Medicare and paid a criminal fine of $5,000,000 during the first quarter of 2000. Under the Civil Settlement Agreement, we paid the federal government $25,000,000 during the first quarter of 2000 and are reimbursing the federal government an additional $145,000,000 through withholdings from our biweekly Medicare periodic interim payments in equal installments over eight years. In addition, we agreed to resubmit certain Medicare filings to reflect reduced labor costs allocated to the Medicare program. Under the Corporate Integrity Agreement, we are required to monitor, on an ongoing basis, our compliance with the requirements of the federal healthcare programs. This agreement addresses our obligations to ensure that we comply with the requirements for participation in the federal healthcare programs. It also includes our functional and training obligations, audit and review requirements, recordkeeping and reporting requirements, as well as penalties for breach/noncompliance of the agreement. We believe that we are in substantial compliance with the requirements of the Corporate Integrity Agreement. In accordance with our agreement to dispose of 10 nursing facilities, we disposed of seven of the facilities during 2000. We expect to dispose of the remainder during 2001. The carrying values of these facilities have been adjusted to our best estimate of their net realizable values. On July 6, 1999, an amended complaint was filed by the plaintiffs in a previously disclosed purported class action lawsuit pending against the Company and certain of our officers in the United States District Court for the Eastern District of Arkansas (the "Class Action"). Plaintiffs filed a second amended complaint on September 9, 1999 which asserted claims under Section 10(b) (including Rule 10b-5 promulgated thereunder) and under Section 20 of the Securities Exchange Act of 1934 arising from practices that were the subject of the Allocation Investigations. The defendants filed a motion to dismiss that complaint on October 8, 1999. Oral agreement on this motion was held on April 6, 2000. Due to the preliminary state of the Class Action and the fact the second amended complaint does not allege damages with any specificity, we are unable at this time to assess the probable outcome of the Class Action or the materiality of the risk of loss. However, we believe that we acted lawfully with respect to plaintiff investors and will vigorously defend the Class Action. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. In addition, since July 29, 1999, eight derivative lawsuits have been filed in the federal and state courts of Arkansas, California and Delaware, as well as the federal district court in Arkansas, (collectively, the "Derivative Actions"), including: - Norman M. Lyons v. David R. Banks, et al., Case No. OT99-4041, was filed in the Chancery Court of Pulaski County, Arkansas (4th Division) on or about July 29, 1999, and the parties filed an Agreed Motion to Stay the proceedings on January 17, 2000; 14 16 - Alfred Badger, Jr. v. David R. Banks, et al., Case No. OT99-4353, was filed in the Chancery Court of Pulaski County, Arkansas (1st Division) on or about August 17, 1999 and voluntarily dismissed on November 30, 1999; - James L. Laurita v. David R. Banks, et al., Case No. 17348NC, was filed in the Delaware Chancery Court on or about August 2, 1999; - Kenneth Abbey v. David R. Banks, et al., Case No. 17352NC, was filed in the Delaware Chancery Court on or about August 4, 1999; - Alan Friedman v. David R. Banks, et al., Case No. 17355NC, was filed in the Delaware Chancery Court on or about August 9, 1999; - Elles Trading Company v. David R. Banks, et al., was filed in the Superior Court for San Francisco County, California on or about August 4, 1999 and removed to federal district court; - Kushner v. David R. Banks, et al., Case No. LR-C-98-646, was filed in the United States District Court for the Eastern District of Arkansas (Western Division) on September 30, 1999; and - Richardson v. David R. Banks, et al., Case No. LR-C-99-826, was filed in the United States District Court for the Eastern District of Arkansas (Western Division) on November 4, 1999. The Laurita, Abbey and Friedman actions were subsequently consolidated by order of the Delaware Chancery Court. On or about October 1, 1999, the defendants moved to dismiss the Laurita, Abbey and Friedman actions. The parties have agreed to stay the consolidated action pending the outcome of the motion to dismiss in the Class Action. The plaintiffs in the Elles Trading Company action filed a notice of voluntary dismissal on February 3, 2000. The Kushner and Richardson actions were ordered to be consolidated as In Re Beverly Enterprises, Inc. Derivative Litigation and by agreed motion, Plaintiffs filed an amended, consolidated complaint on April 21, 2000. Defendants filed a motion to dismiss the consolidated derivative complaint and a motion to strike portions thereof on July 21, 2000. The parties have agreed to stay the consolidated action pending the outcome of the motion to dismiss in the Class Action, but the stipulation has not been entered by the Court. The Derivative Actions each name the Company's directors as defendants, as well as the Company as a nominal defendant. The Badger and Lyons actions also name as defendants certain of the Company's officers. The Derivative Actions each allege breach of fiduciary duties to the Company and its stockholders arising primarily out of the Company's alleged exposure to loss due to the Class Action and the Allocation Investigations. The Lyons, Badger and Richardson actions also assert claims for abuse of control and constructive fraud arising from the same allegations, and the Richardson action also claims unjust enrichment. Due to the preliminary state of the Derivative Actions and the fact the complaints do not allege damages with any specificity, we are unable at this time to assess the probable outcome of the Derivative Actions or the materiality of the risk of loss. However, we believe that we acted lawfully with respect to the allegations of the Derivative Actions and will vigorously defend the Derivative Actions. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. There are various other lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages that are generally not covered by insurance. We do not believe that the ultimate resolution of such other matters will have a material adverse effect on our consolidated financial position or results of operations. 15 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of our security holders during the last quarter of our fiscal year ended December 31, 2000. EXECUTIVE OFFICERS AND DIRECTORS Each of our executive officers and directors holds office until a successor is elected, or until the earliest of death, resignation or removal. Each executive officer is elected or appointed by the Board of Directors. The executive officers and directors, as of February 28, 2001, are as follows:
NAME POSITION AGE ---- -------- --- David R. Banks(3)......................... Chairman of the Board and Director 64 William R. Floyd.......................... President, Chief Executive Officer and Director 56 Douglas J. Babb........................... Executive Vice President -- Law and Government Relations and Secretary 48 William A. Mathies........................ Executive Vice President -- Innovation/Services 41 T. Jerald Moore........................... Executive Vice President -- Human Resources 60 Philip W. Small........................... Executive Vice President -- Operational Finance 44 Bobby W. Stephens......................... Executive Vice President -- Procurement 56 Scott M. Tabakin.......................... Executive Vice President and Chief Financial Officer 42 Patrice K. Acosta......................... Senior Vice President -- Professional Services 44 Eugene B. Clarke.......................... Senior Vice President -- Quality Management 60 Pamela H. Daniels......................... Senior Vice President, Controller and Chief Accounting Officer 37 David L. Devereaux........................ Senior Vice President -- Operations 38 Cletus C. Hess............................ Senior Vice President -- Compliance 36 Schuyler Hollingsworth, Jr. .............. Senior Vice President and Treasurer 54 Beryl F. Anthony, Jr.(2)(3)(4)............ Director 63 Carolyne K. Davis, R.N., Ph.D.(3)(5)...... Director 69 James R. Greene(1)(2)(5).................. Director 79 Edith E. Holiday(1)(4)(5)................. Director 49 Jon E.M. Jacoby(1)(3)..................... Director 62 Risa J. Lavizzo-Mourey, M.D.(2)(5)........ Director 46 James W. McLane(1)(2)..................... Director 62 Marilyn R. Seymann, Ph.D.(1)(4)(5)........ Director 58
- --------------- (1) Member of the Audit and Compliance Committee. (2) Member of the Compensation Committee. (3) Member of the Executive Committee. (4) Member of the Nominating Committee. (5) Member of the Quality Management Committee. Mr. Banks has been a director of the Company since 1979 and Chairman of the Board since March 1990. Mr. Banks served as Chief Executive Officer from May 1989 to February 2001 and was President of the Company from 1979 to September 1995. Mr. Banks is a director of Nationwide Health Properties, Inc., Ralston Purina Company and Agribrands International, Inc. Mr. Floyd joined the Company in April 2000 as President and Chief Operating Officer and was elected Chief Executive Officer in February 2001. From 1996 to 1998, he was Chief Executive Officer of Choice Hotels International, and from 1995 to 1996, he was Senior Vice President -- Operations of Taco Bell Corporation. He has been a director of the Company since July 2000. 16 18 Mr. Babb joined the Company in April 2000 as Executive Vice President, General Counsel and Secretary. He was named head of Government Relations in January 2001. Mr. Babb was Senior Vice President and Chief of Staff for Burlington Northern Santa Fe Corporation ("BNSF") from 1995 to 1997 and Senior Vice President -- Merchandise Business Unit for BNSF from 1997 to 1999. Mr. Mathies joined the Company in 1981 as an Administrator in training. He was an Administrator until 1986 at which time he became a Regional Manager. In 1988, Mr. Mathies was elected Vice President of Operations for the California region and was elected Executive Vice President of the Company in September 1995 and served as President of the corporations within Beverly Healthcare from September 1995 to January 2001. In January 2001, he was named head of the Company's Innovation/Services division. Mr. Moore joined the Company as Executive Vice President in December 1992 and served as President of the corporations within Beverly Specialty Hospitals from June 1996 to June 1998. He was named interim head of Human Resources in January 2001. Mr. Moore was employed at Aetna Life and Casualty from 1963 to 1992 and was elected Senior Vice President in 1990. Mr. Small joined the Company in January 1986 as Reimbursement Manager, was promoted to Division Controller in September 1986 and Director of Finance for the California Region in 1989. He was elected Vice President -- Reimbursement in September 1990, Senior Vice President -- Finance in 1995, Executive Vice President -- Strategic Planning and Operations Support in August 1998 and named head of Operational Finance in January 2001. Mr. Stephens joined the Company as a staff accountant in 1969. He was elected Assistant Vice President in 1978, Vice President of the Company and President of the Company's Central Division in 1980, and Executive Vice President in February 1990. Mr. Stephens is a director of Sparks Regional Medical Center, City National Bank in Fort Smith, Arkansas, Beverly Japan Corporation, and Harbortown Properties, Inc. Mr. Tabakin joined the Company in October 1992 as Vice President, Controller and Chief Accounting Officer. He was elected Senior Vice President in May 1995 and Executive Vice President and Chief Financial Officer in October 1996. From 1980 to 1992, Mr. Tabakin was with Ernst & Young LLP. Mr. Tabakin is a director of St. Edward Mercy Medical Center. Ms. Acosta joined the Company in October 1996 as Vice President -- Risk Management. She was elected Senior Vice President -- Professional Services in January 2001. Prior to joining the Company, Ms. Acosta was Vice President -- Risk Management at Regency Health Services. Mr. Clarke joined the Company in 1987 as Director of Government Program Compliance. He was elected Vice President in 1989 and Senior Vice President -- Quality Assurance in December 1991. Mr. Clarke is a director of St. Edward Mercy Medical Center. Ms. Daniels joined the Company in May 1988 as Audit Coordinator. She was promoted to Financial Reporting Senior Manager in 1991 and Director of Financial Reporting in 1992. She was elected Vice President, Controller and Chief Accounting Officer in October 1996 and Senior Vice President in December 1999. From 1985 to 1988, Ms. Daniels was with Price Waterhouse Coopers LLP. Mr. Devereaux joined the Company in August 1998 as Senior Vice President -- Operations for Specialty Services Division of Beverly Healthcare and was elected President of the corporations within Beverly Healthcare in January 2001. From 1996 to 1998, Mr. Devereaux was District Vice President of Manor Care Health Services. Mr. Hess joined the Company in May 1995 as Senior Attorney -- Reimbursement. He was elected Vice President -- Compliance in May 1998 and Senior Vice President in December 1999. From 1990 to 1995, Mr. Hess was with Duane Morris & Heckscher. Mr. Hollingsworth joined the Company in June 1985 as Assistant Treasurer. He was elected Treasurer in 1988, Vice President in 1990 and Senior Vice President in March 1992. 17 19 Mr. Anthony served as a member of the United States Congress and was Chairman of the Democratic Congressional Campaign Committee from 1987 through 1990. In 1993, he became a partner in the Winston & Strawn law firm. He has been a director of the Company since January 1993. Dr. Davis has been an international health care consultant since 1985. She is a director of Beckman Coulter, Inc., The Prudential Insurance Company of America, Inc., MiniMed, Inc. and Merck & Co., Inc. She has been a director of the Company since December 1997. Mr. Greene's principal occupation has been that of a director and consultant to various U.S. and international businesses since 1986. He is a director of Buck Engineering Company and Bank Leumi. He has been a director of the Company since January 1991. Ms. Holiday is an attorney. She served as White House Liaison for the Cabinet and all federal agencies during the George H.W. Bush administration. Prior to that, Ms. Holiday served as General Counsel of the U.S. Treasury Department, as well as its Assistant Secretary of Treasury for Public Affairs and Public Liaison. She is a director of Amerada Hess Corporation, Hercules Incorporated, H.J. Heinz Company and RTI International Metals, Inc. She is also a director or trustee of various investment companies in the Franklin Templeton group of funds. She has been a director of the Company since March 1995. Mr. Jacoby is Executive Vice President, Chief Financial Officer and a director of Stephens Group, Inc. Mr. Jacoby has held the indicated positions with Stephens Group, Inc. since 1986, and prior to that time, served as Manager of the Corporate Finance Department and Assistant to the President of Stephens Inc. Mr. Jacoby is a director of Power-One, Inc. and Delta and Pine Land Company, Inc. He has been a director of the Company since February 1987. Dr. Lavizzo-Mourey is Director of the Institute of Aging, Chief of the Division of Geriatric Medicine, Associate Executive Vice President for health policy and Professor of Medicine at the University of Pennsylvania, Ralston-Penn Center. She is a director of Hanger Orthopedic Group, Inc. She has been a director of the Company since March 1995. Mr. McLane is President and Chief Executive Officer of Healthaxis Inc. From 1997 until early 2000, he was President and Chief Operating Officer of NovaCare, Inc. He previously served as Executive Vice President of Aetna Life and Casualty and as Chief Executive Officer of Aetna Health Plans. He is a director of Healthaxis Inc. and UltraTouch, Inc. He has been a director of the Company since October 2000. Ms. Seymann is President and Chief Executive Officer of M One, Inc., a management and information systems consulting firm specializing in the financial services industry. She is a director of Community First Bankshares, Inc., True North Communications, Inc. and NorthWestern Corporation. She has been a director of the Company since March 1995. During 2000, there were seven meetings of the Board of Directors. Each director, except Jon E.M. Jacoby, attended at least 75% of the meetings of the Board and committees on which he or she served. In 2000, non-employee directors received a retainer fee of $25,000 for serving on the Board and an additional fee of $1,000 for each Board or committee meeting attended ($500 if attended by telephone). The chairperson of each committee received an additional $1,000 for each committee meeting attended. Such fees can be deferred, at the option of the director, as provided for under the Non-Employee Director Deferred Compensation Plan (discussed below). Mr. Banks, our current Chairman of the Board and Mr. Floyd, our current President and Chief Executive Officer, received no additional cash compensation during 2000 for serving on the Board or its committees. The Non-Employee Director Deferred Compensation Plan provides each non-employee director the opportunity to receive awards equivalent to shares of our Common Stock ("deferred share units") and to defer 18 20 receipt of compensation for services rendered to the Company. There are three types of contributions available under the plan: - deferral of all or part of retainer and meeting fees to a pre-tax deferred compensation account either into a cash account, which is credited with interest, or a deferred share unit account, with each unit having a value equivalent to one share of our Common Stock; - a 25% match on the amount of fees deferred in the deferred share unit account; and - a grant of 675 deferred share units each year. Distributions under the plan will commence upon retirement, termination, death or disability and will be made in shares of our Common Stock unless the Board of Directors approves payment in cash. Under the Non-Employee Directors Stock Option Plan, there are 300,000 shares of our $.10 par value common stock ("Common Stock") authorized for issuance, subject to certain adjustments. The plan, as amended, provides that 3,375 stock options be granted to each non-employee director on June 1 of each year until the plan is terminated, subject to the availability of shares. Such stock options are granted at a purchase price equal to the fair market value of our Common Stock on the date of grant, become exercisable one year after the date of grant and expire ten years after the date of grant. 19 21 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our Common Stock is listed on the New York and Pacific Stock Exchanges. The table below sets forth, for the periods indicated, the range of high and low sales prices of our Common Stock as reported on the New York Stock Exchange composite tape.
PRICES ------------- HIGH LOW ----- ----- 1999 First Quarter............................................. $6.94 $4.50 Second Quarter............................................ 8.19 4.31 Third Quarter............................................. 8.00 3.88 Fourth Quarter............................................ 5.19 3.50 2000 First Quarter............................................. $4.56 $2.50 Second Quarter............................................ 4.00 2.75 Third Quarter............................................. 6.38 2.56 Fourth Quarter............................................ 8.25 3.81 2001 First Quarter (through February 28)....................... $8.30 $5.94
We are subject to certain restrictions under our long-term debt agreements related to the payment of cash dividends on our Common Stock. During 2000 and 1999, we did not pay any cash dividends on our Common Stock and no future dividends are currently planned. On February 28, 2001, there were 5,249 record holders of our Common Stock. EMPLOYEE STOCK PURCHASE PLAN The Beverly Enterprises 1988 Employee Stock Purchase Plan (as amended and restated) enables all full-time employees having completed one year of continuous service to purchase shares of our Common Stock at the current market price through payroll deductions. We have historically made contributions in the amount of 30% of the participant's contribution. Effective January 1, 2001, we reduced such contributions to 15% of the participant's contribution. Each participant specifies the amount to be withheld from earnings per two-week pay period, subject to certain limitations. The total charge to our statement of operations for the year ended December 31, 2000 related to this plan was approximately $1,192,000. On December 31, 2000, there were approximately 2,600 participants in the plan. Merrill Lynch & Co., Merrill Lynch World Headquarters, North Tower, World Financial Center, New York, New York 10281, was appointed broker to open and maintain an account in each participant's name and to purchase shares of our Common Stock on the New York Stock Exchange for each participant. 20 22 ITEM 6. SELECTED FINANCIAL DATA. The following table of selected financial data should be read along with our consolidated financial statements and related notes thereto for 2000, 1999 and 1998 included elsewhere in this Annual Report on Form 10-K.
AT OR FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------ 2000 1999 1998(1) 1997(2) 1996 ------------ ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net operating revenues....................... $ 2,625,610 $ 2,546,672 $ 2,812,232 $ 3,217,099 $ 3,267,189 Interest income.............................. 2,650 4,335 10,708 13,201 13,839 ------------ ------------ ------------ ------------ ------------ Total revenues....................... 2,628,260 2,551,007 2,822,940 3,230,300 3,281,028 Costs and expenses: Operating and administrative............... 2,481,914 2,354,328 2,633,135 2,888,021 2,958,942 Interest................................... 80,016 72,578 65,938 82,713 91,111 Depreciation and amortization.............. 100,061 99,160 93,722 107,060 105,468 Asset impairments, workforce reductions and other unusual items...................... 43,033 23,818 69,443 44,000 -- Special charges related to settlements of federal government investigations........ -- 202,447 1,865 -- -- Year 2000 remediation...................... -- 12,402 9,719 -- -- ------------ ------------ ------------ ------------ ------------ Total costs and expenses............. 2,705,024 2,764,733 2,873,822 3,121,794 3,155,521 ------------ ------------ ------------ ------------ ------------ Income (loss) before provision for (benefit from) income taxes, extraordinary charge and cumulative effect of change in accounting for start-up costs.............. (76,764) (213,726) (50,882) 108,506 125,507 Provision for (benefit from) income taxes.... (22,262) (79,079) (25,936) 49,913 73,481 Extraordinary charge, net of income tax benefit of $1,057 in 1998 and $1,099 in 1996....................................... -- -- (1,660) -- (1,726) Cumulative effect of change in accounting for start-up costs, net of income tax benefit of $2,811.................................. -- -- (4,415) -- -- ------------ ------------ ------------ ------------ ------------ Net income (loss)............................ $ (54,502) $ (134,647) $ (31,021) $ 58,593 $ 50,300 ============ ============ ============ ============ ============ Diluted income (loss) per share of common stock: Before extraordinary charge and cumulative effect of change in accounting for start-up costs........................... $ (0.53) $ (1.31) $ (.24) $ .57 $ .50 Extraordinary charge....................... -- -- (.02) -- (.01) Cumulative effect of change in accounting for start-up costs....................... -- -- (.04) -- -- ------------ ------------ ------------ ------------ ------------ Net income (loss).......................... $ (0.53) $ (1.31) $ (.30) $ .57 $ .49 ============ ============ ============ ============ ============ Shares used to compute per share amounts... 102,452,000 102,491,000 103,762,000 103,422,000 110,726,000 CONSOLIDATED BALANCE SHEET DATA: Total assets................................. $ 1,875,993 $ 1,982,880 $ 2,160,511 $ 2,073,469 $ 2,525,082 Current portion of long-term debt............ $ 227,111 $ 34,052 $ 27,773 $ 31,551 $ 38,826 Long-term debt, excluding current portion.... $ 564,247 $ 746,164 $ 878,270 $ 686,941 $ 1,106,256 Stockholders' equity......................... $ 583,993 $ 641,124 $ 776,206 $ 862,505 $ 861,095 OTHER DATA: Average occupancy percentage(3).............. 87.0% 87.2% 88.7% 88.9% 87.4% Number of nursing home beds.................. 59,799 62,217 62,293 63,552 71,204
- --------------- (1) Amounts for 1998 include the operations of American Transitional Hospitals, Inc. through June 30, 1998. (2) Amounts for 1997 include the operations of Pharmacy Corporation of America through December 3, 1997. (3) Average occupancy percentage for 2000, 1999, 1998 and 1997 was based on operational beds, and for 1996, such percentage was based on licensed beds. Average occupancy percentage for 2000, 1999, 1998 and 1997 based on licensed beds was 84.9%, 85.3%, 86.9% and 87.1%, respectively. 21 23 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OPERATING RESULTS 2000 COMPARED TO 1999 RESULTS OF OPERATIONS Net loss was $54,502,000 for the year ended December 31, 2000, compared to net loss of $134,647,000 for the year ended December 31, 1999. Net loss for 2000 included a pre-tax charge of approximately $44,400,000 related to increasing reserves for patient care liability costs (See "Operating and Administrative Expenses"), as well as pre-tax charges totaling approximately $43,000,000 for asset impairments, workforce reductions and other unusual items (as described below). Net loss for 1999 included special pre-tax charges of approximately $202,400,000 related to the settlements of, and investigation costs related to, the Allocation Investigations, as well as pre-tax charges totaling approximately $23,800,000 for asset impairments, workforce reductions and other unusual items (See "1999 Compared to 1998 -- Results of Operations"). During 2000, we recorded pre-tax charges totaling approximately $43,000,000, including $35,500,000 for asset impairments, $6,100,000 for workforce reductions and $1,400,000 for other unusual items. The asset impairment charges of $35,500,000 primarily related to: - write-down of goodwill of $24,800,000 and property and equipment of $1,000,000 on certain under-performing outpatient therapy clinics having operating losses for the past three years and expected future operating losses. Management estimated the undiscounted future cash flows to be generated by each clinic and reduced the carrying value to its estimate of fair value. Management calculated the fair values of the impaired clinics by using the present value of estimated future cash flows. These assets were included in the total assets of Beverly Care Alliance. - write-down of property and equipment of $5,100,000 and recording of closing and other costs of $3,000,000 related to six nursing facilities with an aggregate carrying value of approximately $6,000,000 that management plans on closing, or terminating the leases on, during 2001. These assets generated pre-tax losses of approximately $2,400,000 during the year ended December 31, 2000 and were included in the total assets of Beverly Healthcare. Management calculated the fair values of these facilities by using the present value of estimated future cash flows, or its best estimate of what these facilities, or similar facilities in that state, would sell for in the open market. - write-off of abandoned projects totaling $2,100,000; - write-off of an investment in a physician practice management company of $2,000,000; and - reversal of $2,500,000 of prior year asset impairment charges (see "1999 Compared to 1998 -- Results of Operations"). The workforce reduction charges of $6,100,000 primarily related to severance agreements associated with seven executives. Approximately $2,200,000 was paid during 2000, and the remainder is expected to be paid during the first quarter of 2001. Four of the executives were notified in late 2000 that their positions would be eliminated as part of a reorganization of our operating and support group functions. Such reorganization was formally announced in the first quarter of 2001. The purpose of the reorganization is to improve the level of service provided to our nursing facilities and other business units (see "Part I, Item 1. Business"). We currently estimate that an additional pre-tax charge of approximately $20,000,000 will be recognized during the first quarter of 2001 related to this reorganization. INCOME TAXES We had an annual effective tax rate of 29% for the year ended December 31, 2000, compared to an annual effective tax rate of 37% for the year ended December 31, 1999. The annual effective tax rate for 2000 was different than the federal statutory rate primarily due to amortization of nondeductible goodwill and state income taxes, partially offset by the benefit of certain tax credits. Amortization of nondeductible goodwill was 22 24 impacted by the write-down of goodwill on certain under-performing outpatient therapy clinics (as discussed above). The annual effective tax rate for 1999 was different than the federal statutory rate primarily due to the impact of state income taxes. At December 31, 2000, we had federal net operating loss carryforwards of $152,824,000 for income tax purposes which expire in years 2018 through 2020 and general business tax credit carryforwards of $12,257,000 for income tax purposes which expire in years 2009 through 2020. For financial reporting purposes, the federal net operating loss carryforwards and the general business tax credit carryforwards have been utilized to offset existing net taxable temporary differences reversing during the carryforward periods. Our net deferred tax assets at December 31, 2000 will be realized through the reversal of temporary taxable differences, future taxable income and the implementation of tax planning strategies, as needed. We have relied on various factors to conclude that it is more likely than not that our future results of operations and/or tax planning strategies coupled with the reversal of existing taxable temporary differences will generate sufficient taxable income to realize our net deferred tax assets. Our results of operations for the last three years are not reflective of our future earnings potential. Our results of operations have been negatively impacted by the occurrence of several events that are not anticipated to recur in future periods. The 1997 Act phased in the Medicare prospective payment system, which was effective for us on January 1, 1999. We experienced a reduction in our 1999 net operating revenues of approximately $114,000,000 as compared to 1998 as a result of the 1997 Act. However, we experienced an increase in our 2000 net operating revenues as compared to 1999 related to the impact of BBRA 1999, and we anticipate that our net operating revenues for 2001 as compared to 2000 will increase approximately $30,000,000 as a result of the BIPA provisions. Our results of operations for the last three years have also included pre-tax charges totaling approximately $87,400,000, $270,300,000 and $163,200,000 for 2000, 1999 and 1998, respectively. These pre-tax charges primarily related to increasing reserves for patient care liability costs, asset impairments, workforce reductions and other unusual items, as well as special charges related to settlements of federal government investigations and year 2000 remediation costs (as discussed herein). Given the significant effects the above unusual charges and events had on our recent results of operations, we believe our expectation of future income is reasonable. In addition, we are exploring strategic alternatives, including the possible divestiture, for our nursing home operations in Florida, where we have incurred significant patient care liability costs. We would expect a positive impact on our future core operating results due to the divestiture of our Florida nursing operations; however, no assurances can be made of the ultimate impact of the sale of these operations on our future consolidated financial position, results of operations or cash flows. If additional income above that produced by ordinary and recurring operations is needed to realize the benefit of our net deferred tax assets, we could enter into sale-leaseback transactions involving operating assets that would accelerate reversal of taxable temporary differences. Therefore, we do not believe that a deferred tax valuation allowance is necessary at December 31, 2000. NET OPERATING REVENUES We reported net operating revenues of $2,625,610,000 during the year ended December 31, 2000 compared to $2,546,672,000 for the same period in 1999. Approximately 92% and 91% of our total net operating revenues for the years ended December 31, 2000 and 1999, respectively, were derived from services provided by Beverly Healthcare. The increase in net operating revenues of approximately $78,900,000 for the year ended December 31, 2000, as compared to the same period in 1999, consists of the following: - an increase of $96,800,000 due to facilities which the Company operated during each of the years ended December 31, 2000 and 1999 ("same facility operations"); - an increase of $50,500,000 due to acquisitions and openings of newly-constructed facilities; - partially offset by a decrease of $68,400,000 due to dispositions. 23 25 The increase in net operating revenues of $96,800,000 from same facility operations related to the following: - $123,100,000 due to an increase in Medicaid, Medicare and private rates; - $5,900,000 due to one additional calendar day during the year ended December 31, 2000, as compared to the same period in 1999; and - $18,600,000 due primarily to prior year cost report related settlements and various other items. Such increases were partially offset by decreases of: - $20,200,000 due to lower revenues from outpatient rehabilitation services primarily resulting from increased contractual adjustments; - $15,400,000 due to lower revenues from home care services; and - $15,200,000 due to a decline in same facility occupancy to 87.6% for the year ended December 31, 2000, as compared to 88.2% for the same period in 1999. Net operating revenues increased $50,500,000 for the year ended December 31, 2000, as compared to the same period in 1999, due to acquisitions which occurred during the years ended December 31, 2000 and 1999. During 2000, we acquired seven nursing facilities (1,210 beds), one previously leased nursing facility (105 beds) and certain other assets. Also during such period, we opened four newly-constructed nursing facilities (418 beds). During 1999, we purchased three outpatient therapy clinics, two home care centers, two nursing facilities (284 beds), one previously leased nursing facility (190 beds) and certain other assets. In addition, we opened eight newly-constructed nursing facilities (979 beds) and three assisted living centers (156 units) during 1999. The acquisitions of the facilities and other assets were accounted for as purchases. The operations of the acquired facilities and other assets, as well as the newly-constructed facilities, were immaterial to our consolidated financial position and results of operations. Net operating revenues decreased $68,400,000 for the year ended December 31, 2000, as compared to the same period in 1999, due to dispositions that occurred during the years ended December 31, 2000 and 1999. During 2000, we sold, closed or terminated the leases on 39 nursing facilities (4,263 beds) and certain other assets. We recognized net pre-tax gains, which were included in net operating revenues during the year ended December 31, 2000, of approximately $2,000,000 as a result of these dispositions. During 1999, we sold or terminated the leases on 12 nursing facilities (1,291 beds), one assisted living center (10 units), 17 home care centers and certain other assets. We recognized net pre-tax losses, which were included in net operating revenues during the year ended December 31, 1999, of approximately $4,000,000 as a result of these dispositions. The operations of the disposed facilities and other assets were immaterial to our consolidated financial position and results of operations. OPERATING AND ADMINISTRATIVE EXPENSES We reported operating and administrative expenses of $2,481,914,000 during the year ended December 31, 2000 compared to $2,354,328,000 for the same period in 1999. The increase of approximately $127,600,000 consists of the following: - an increase of $146,600,000 from same facility operations; - an increase of $57,100,000 due to acquisitions and openings of newly-constructed facilities; - partially offset by a decrease of $76,100,000 due to dispositions. 24 26 Operating and administrative expenses increased $146,600,000 from same facility operations for the year ended December 31, 2000, as compared to the same period in 1999. This increase was due primarily to the following: - $52,900,000 increase in wages and related expenses primarily due to an increase in our weighted average wage rate; - $10,800,000 increase in wages and related expenses due to increased use of contract nursing personnel; - $34,400,000 due primarily to increases in allowances for uncollectible patient accounts receivable; - $32,500,000 due to an increase in our provision for insurance and related items; and - $10,400,000 due to an increase in other contracted services. Our weighted average wage rate and use of contract nursing personnel increased in 2000 as compared to 1999. Many of our nursing facilities are having increasing difficulties attracting nursing aides, assistants and other personnel. We continue to address this challenge through several recruiting and retention programs and training initiatives. No assurance can be given that these programs and training initiatives will improve or stabilize our ability to attract these nursing and related personnel. We believe that adequate provision has been made in the financial statements for liabilities that may arise out of patient care services. Such provisions are made based upon the results of independent actuarial valuations and other information available, including management's best judgements and estimates. However, such provision and liability have been difficult to estimate and have been escalating in recent periods. Based on a study completed by an independent actuarial firm, we recorded a pre-tax charge during the third quarter of 2000 of approximately $44,400,000 related to increasing reserves for patient care liability costs, primarily in the state of Florida. There can be no assurance that such provision and liability will not require material adjustment in future periods. INTEREST EXPENSE, NET Interest income decreased to $2,650,000 for the year ended December 31, 2000, as compared to $4,335,000 for the same period in 1999 primarily due to the payoff of various notes receivable. Interest expense increased to $80,016,000 for the year ended December 31, 2000, as compared to $72,578,000 for the same period in 1999. This was primarily due to imputed interest on the civil settlement of approximately $4,400,000 and an increase in Revolver borrowings resulting from the $30,000,000 civil and criminal settlements paid in the first quarter of 2000. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense increased to $100,061,000 for the year ended December 31, 2000, as compared to $99,160,000 for the same period in 1999, primarily related to the impact of capital additions, improvements and acquisitions. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair market value. SFAS No. 133 will be effective for us during the first quarter of 2001. We do not expect there to be a material effect on our consolidated financial position or results of operations as a result of adopting SFAS No. 133. 25 27 1999 COMPARED TO 1998 RESULTS OF OPERATIONS Net loss was $134,647,000 for the year ended December 31, 1999, compared to net loss of $31,021,000 for the year ended December 31, 1998. Net loss for 1999 included special pre-tax charges of approximately $202,400,000 related to the settlements of, and investigation costs related to, the Allocation Investigations (as discussed below), as well as pre-tax charges totaling approximately $23,800,000 for asset impairments, workforce reductions and other unusual items (as discussed below). Net loss for 1998 included pre-tax charges totaling approximately $69,400,000 for asset impairments, workforce reductions and other unusual items (as discussed below). In addition, net loss for 1998 included a $1,660,000 extraordinary charge, net of income taxes, related to the write-off of unamortized deferred financing costs associated with the repayment of certain debt instruments, as well as certain bond refundings, and a cumulative effect adjustment of $4,415,000, net of income taxes, related to the adoption of SOP 98-5 (as defined below). On February 3, 2000, we entered into a series of separate agreements with the U.S. Department of Justice and the Office of Inspector General (the "OIG") of the Department of Health and Human Services. These agreements settled the federal government's investigations of the Company relating to our allocation to the Medicare program of certain nursing labor costs in our skilled nursing facilities from 1990 to 1998 (the "Allocation Investigations") (See "Part I, Item 3. Legal Proceedings"). In anticipation of such settlements, we recorded special pre-tax charges of approximately $202,400,000 ($127,500,000, net of income taxes, or $1.24 per share diluted) during the year ended December 31, 1999, which included: - provisions totaling $128,800,000 representing the net present value of the separate civil and criminal settlements; - impairment losses of $17,000,000 on 10 nursing facilities that pled guilty to submitting erroneous cost reports to the Medicare program in conjunction with the criminal settlement; - $39,000,000 for certain prior year cost report related items affected by the settlements; - $3,100,000 of debt issuance and refinancing costs related to various bank debt modifications as a result of the settlements; and - $14,500,000 for other investigation and settlement related costs. If, prior to January 1, 1999, the settlement obligations and related items had been finalized and recorded, our bank debt had been refinanced and we had closed or sold the facilities that were impacted by the criminal settlement, our results of operations, on an unaudited pro forma basis, would have been reduced by approximately $13,200,000, or $.13 per share diluted, for the year ended December 31, 1999. During the fourth quarter of 1999, we recorded pre-tax charges totaling approximately $23,800,000 related to restructuring of agreements on certain leased facilities, severance and other workforce reduction expenses, asset impairments and other unusual items. We negotiated the terminations of lease agreements on 19 nursing facilities (2,047 beds), which resulted in a pre-tax charge of $17,300,000. We disposed of 17 of these nursing facilities during 2000 and expect to dispose of the remainder during 2001. During 2000, we reversed $2,500,000 of the original charge for changes in our initial accounting estimates. In addition, we accrued $5,900,000 during the fourth quarter of 1999 primarily related to severance agreements associated with three executives. Substantially all of the $5,900,000 was paid during the first quarter of 2000. In preparing for the January 1, 1999 implementation of the new Medicare prospective payment system ("PPS"), as well as responding to other legislative and regulatory changes, we reorganized our inpatient rehabilitative operations, analyzed our businesses for impairment issues and implemented new care-delivery and tracking software. These initiatives, among others, resulted in a fourth quarter 1998 pre-tax charge of approximately $69,400,000, including $3,800,000 for workforce reductions, $58,700,000 for asset impairments and $6,900,000 for various other items. During the fourth quarter of 1998, we reorganized all employed therapy associates into a newly formed subsidiary, Beverly Rehabilitation, Inc. ("Bev Rehab"), which is part of Beverly Care Alliance, in order to create a more consolidated, strategic approach to managing our inpatient rehabilitation business under PPS. 26 28 We accrued $2,500,000 related to the termination of 835 therapy associates in conjunction with this reorganization. During 1999, 770 therapy associates were paid $2,300,000 and left the Company. We reversed the remaining $200,000 during 1999 for changes in our initial accounting estimates. In addition, our home care and outpatient therapy units underwent the consolidation and relocation of certain services, including billing and collections, which resulted in a workforce reduction charge of $1,300,000 associated with the termination of 236 associates. Of these 236 associates, 74 associates were paid $200,000 and left the Company by December 31, 1998. During 1999, 85 home care and outpatient therapy associates were paid $600,000 and left the Company. We reversed the remaining $500,000 during 1999 for changes in our initial accounting estimates. The significant regulatory changes under PPS and other provisions of the 1997 Act were an indicator to management that the carrying values of certain of our nursing facilities may not be fully recoverable. In addition, there were certain assets that had 1998 operating losses, and anticipated future operating losses, which led management to believe that these assets were impaired. Accordingly, management estimated the undiscounted future cash flows to be generated by each facility and reduced the carrying value to its estimate of fair value, resulting in an impairment charge of $9,000,000 in 1998. Management calculated the fair values of the impaired facilities by using the present value of estimated undiscounted future cash flows, or its best estimate of what that facility, or similar facilities in that state, would sell for in the open market. Management believes it has the knowledge to make such estimates of open market sales prices based on the volume of facilities we have purchased and sold in previous years. Also during the fourth quarter of 1998, management identified nine nursing facilities with an aggregate carrying value of approximately $14,000,000 which needed to be replaced in order to increase operating efficiencies, attract additional census or upgrade the nursing home environment. Management committed to a plan to construct new facilities to replace these buildings and reduced the carrying values of these facilities to their estimated salvage values. These assets were included in the total assets of Beverly Healthcare. In addition, management committed to a plan to dispose of 24 home care centers and nine outpatient therapy clinics which had 1998 and expected future period operating losses. These businesses had an aggregate carrying value of approximately $16,500,000 and were written down to their fair value less costs to sell. These assets generated pre-tax losses of approximately $5,100,000 during the year ended December 31, 1998. Substantially all of these assets were purchased during 1998. We disposed of a majority of these assets during 1999. These assets were included in the total assets of Beverly Care Alliance. We incurred a fourth quarter 1998 pre-tax charge of $30,300,000 related to these replacements, closings and planned disposals. In addition to the workforce reduction and impairment charges, we recorded a fourth quarter 1998 impairment charge for other long-lived assets of $19,400,000 primarily related to the write-off of software and software development costs. In conjunction with the implementation of business process changes, and the need for enhanced data-gathering and reporting required to operate effectively under PPS, we installed new clinical software in each of our nursing facilities during late 1998, which made obsolete the previously employed software. In addition, certain of our other ongoing software development projects were abandoned or written down due to obsolescence, feasibility or cost recovery issues. Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), provides guidance on the financial reporting of start-up and organization costs. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Prior to 1998, we capitalized start-up costs in connection with the opening of new facilities and businesses. We adopted the provisions of SOP 98-5 in our financial statements for the year ended December 31, 1998. The effect of adopting SOP 98-5 was to decrease our pre-tax loss from continuing operations in 1998 by approximately $1,000,000 and to record a charge for the cumulative effect of an accounting change, as of January 1, 1998, of $4,415,000, net of income taxes, or $0.04 per share, to expense costs that had previously been capitalized. INCOME TAXES We had an annual effective tax rate of 37% for the year ended December 31, 1999, compared to an annual effective tax rate of 51% for the year ended December 31, 1998. The annual effective tax rate in 1999 27 29 was different than the federal statutory rate primarily due to the impact of state income taxes. The annual effective tax rate in 1998 was different than the federal statutory rate primarily due to the impact of the sale of American Transitional Hospitals, Inc. ("ATH"), which operated as Beverly Specialty Hospitals, the benefit of certain tax credits and the pre-tax charge of $69,400,000 (as discussed above) which reduced our pre-tax income to a level where permanent tax differences and state income taxes had more significant impact on the effective tax rate. At December 31, 1999, we had federal net operating loss carryforwards of $84,259,000 for income tax purposes which expire in years 2018 through 2019 and general business tax credit carryforwards of $8,850,000 for income tax purposes which expire in years 2008 through 2015. For financial reporting purposes, the federal net operating loss carryforwards and the general business tax credit carryforwards have been utilized to offset existing net taxable temporary differences reversing during the carryforward periods. Our net deferred tax assets at December 31, 1999 will be realized through the reversal of temporary taxable differences, future taxable income and the implementation of tax planning strategies, as needed. Accordingly, we did not believe that a deferred tax valuation allowance was necessary at December 31, 1999. NET OPERATING REVENUES We reported net operating revenues of $2,546,672,000 during the year ended December 31, 1999 compared to $2,812,232,000 for the same period in 1998. Approximately 91% and 90% of our total net operating revenues for the years ended December 31, 1999 and 1998, respectively, were derived from services provided by Beverly Healthcare. The decrease in net operating revenues of approximately $265,600,000 for the year ended December 31, 1999, as compared to the same period in 1998, consists of the following: - a decrease of $204,000,000 due to dispositions; - a decrease of $180,100,000 due to facilities which the Company operated during each of the years ended December 31, 1999 and 1998 ("same facility operations"); - partially offset by an increase of $118,500,000 due to acquisitions. Net operating revenues decreased $204,000,000 for the year ended December 31, 1999, as compared to the same period in 1998, due to dispositions that occurred during the years ended December 31, 1999 and 1998. (See "2000 Compared to 1999 -- Results of Operations" for discussion of 1999 dispositions). During 1998, we sold or terminated the leases on 26 nursing facilities (3,203 beds) and certain other assets. We recognized net pre-tax gains, which were included in net operating revenues during the year ended December 31, 1998, of approximately $17,900,000 as a result of these dispositions. The operations of the disposed facilities and other assets were immaterial to our consolidated financial position and results of operations. In June 1998, we completed the sale of our ATH subsidiary which operated 15 transitional hospitals (743 beds) in eight states serving the needs of patients requiring intense therapy regimens, but not necessarily the breadth of services provided within traditional acute care hospitals. We recognized a pre-tax gain, which was included in net operating revenues during the year ended December 31, 1998, of approximately $16,000,000 as a result of this disposition. During the year ended December 31, 1999, we recorded a pre-tax charge to reduce the sales price of this disposition by approximately $4,500,000, which was included in net operating revenues. The operations of ATH were immaterial to our consolidated financial position and results of operations. The decrease in net operating revenues of $180,100,000 from same facility operations related primarily to the following: - $97,800,000 decrease in ancillary revenues and $48,800,000 decrease in Medicare rates, both primarily due to the impact of PPS and other provisions of the 1997 Act; - $49,300,000 decrease due to a shift in our patient mix; 28 30 - $47,200,000 decrease due to a decline in same facility occupancy to 87.9% for the year ended December 31, 1999, as compared to 89.3% for the same period in 1998; - partially offset by an increase of $78,700,000 due primarily to increases in Medicaid and private rates. Our Medicare, private and Medicaid census for same facility operations was 9%, 19% and 71%, respectively, for the year ended December 31, 1999, as compared to 10%, 20% and 69%, respectively, for the same period in 1998. Net operating revenues increased $118,500,000 for the year ended December 31, 1999, as compared to the same period in 1998, due to acquisitions which occurred during the years ended December 31, 1999 and 1998. (See "2000 Compared to 1999 -- Results of Operations" for discussion of 1999 acquisitions). During 1998, we purchased 111 outpatient therapy clinics, 50 home care centers, eight nursing facilities (823 beds), one assisted living center (48 units), two previously leased nursing facilities (228 beds) and certain other assets. The acquisitions of these facilities and other assets were accounted for as purchases. The operations of these acquired facilities and other assets were immaterial to our consolidated financial position and results of operations. OPERATING AND ADMINISTRATIVE EXPENSES We reported operating and administrative expenses of $2,354,328,000 during the year ended December 31, 1999 compared to $2,633,135,000 for the same period in 1998. The decrease of approximately $278,800,000 consists of the following: - a decrease of $216,700,000 from same facility operations; - a decrease of $172,300,000 due to dispositions; - partially offset by an increase of $110,200,000 due to acquisitions. Operating and administrative expenses decreased $216,700,000 from same facility operations for the year ended December 31, 1999, as compared to the same period in 1998. This decrease was due primarily to a shift in our patient mix, as well as a decline in same facility occupancy, and consists of the following: - $69,500,000 due to a decrease in wages and related expenses; - $65,900,000 decrease in our provision for insurance and related items primarily due to a loss portfolio transfer transaction that significantly increased insurance costs during the fourth quarter of 1998; - $50,200,000 due to a decrease in contracted therapy expenses; and - $31,100,000 due primarily to decreases in purchased ancillary products, nursing supplies and other variable costs. Although our wages and related expenses decreased for the year ended December 31, 1999, as compared to the same period in 1998, our weighted average wage rate and use of contract nursing personnel increased. These increases emphasize the difficulties many of our nursing facilities are having attracting nursing aides, assistants and other personnel. INTEREST EXPENSE, NET Interest income decreased to $4,335,000 for the year ended December 31, 1999, as compared to $10,708,000 for the same period in 1998 primarily due to the sale of investment securities in conjunction with the 1998 loss portfolio transfer transaction. Interest expense increased to $72,578,000 for the year ended December 31, 1999, as compared to $65,938,000 for the same period in 1998 primarily due to an increase in net borrowings under the Revolver/Letter of Credit Facility, imputed interest on the civil settlement of approximately $4,600,000, and the write-off of deferred financing costs in conjunction with certain bond refundings. 29 31 DEPRECIATION AND AMORTIZATION Depreciation and amortization expense increased to $99,160,000 for the year ended December 31, 1999, as compared to $93,722,000 for the same period in 1998, primarily related to the impact of capital additions, improvements and acquisitions. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2000, we had approximately $25,900,000 in cash and cash equivalents and approximately $178,200,000 of unused commitments under our Revolver/Letter of Credit Facility. Our Revolver/Letter of Credit Facility matures on December 31, 2001. As a result, $164,000,000 of Revolver borrowings have been classified as current liabilities at December 31, 2000, which resulted in negative working capital of approximately $89,300,000. We expect to renegotiate, extend or refinance the agreement covering the Revolver/Letter of Credit Facility prior to December 31, 2001. However, no assurances can be made that we will be able to do so at commercially reasonable terms, if at all. Net cash provided by operating activities for the year ended December 31, 2000 was approximately $37,000,000. Our operating cash flows were negatively impacted in 2000 by $30,000,000 of criminal and civil settlement payments made in the first quarter, as well as $16,700,000 which was withheld from our Medicare periodic interim payments throughout 2000 as a result of the civil settlement. Exclusive of these items, our operating cash flows would have been approximately $83,700,000. This amount is down approximately $105,300,000 from our reported operating cash flows for the year ended December 31, 1999 of approximately $189,000,000. The primary reasons for this decline include: - the deconsolidation of all Beverly Funding Corporation balances, which positively impacted the 1999 operating cash flows; - net income tax refunds which benefited the 1999 operating cash flows; as well as - an increase in patient revenues in 2000 over 1999 which led to an increase in patient accounts receivable. Net cash used for investing activities and net cash provided by financing activities were approximately $42,200,000 and $6,500,000, respectively, for the year ended December 31, 2000. We received net cash proceeds of approximately $24,300,000 from the dispositions of facilities and other assets and approximately $17,800,000 from collections on notes receivable. These net cash proceeds, along with $50,000,000 of net borrowings under our Revolver/Letter of Credit Facility and cash from operations, were used to fund capital expenditures totaling approximately $76,000,000, to repay approximately $39,200,000 of long-term debt, and to repurchase shares of Common Stock for approximately $3,900,000. At December 31, 2000, we leased 11 nursing facilities, one assisted living center and our corporate headquarters under an off-balance sheet financing arrangement subject to operating leases with the creditor. We have the option to purchase the facilities at the end of the initial lease terms at fair market value. The financing arrangement was entered into for the construction of these facilities and had an original commitment of $125,000,000. In April 2000, the agreement covering this financing arrangement was amended whereby availability under the original commitment was reduced to $113,500,000, which equaled the total construction advances made as of such date. We have $70,000,000 of Medium Term Notes due March 2005, which is off-balance sheet financing for the Company. The Medium Term Notes are collateralized by patient accounts receivable, which are sold by Beverly Health and Rehabilitation Services, Inc., one of our wholly-owned subsidiaries, to Beverly Funding Corporation ("BFC"), a wholly-owned bankruptcy remote subsidiary. In 1999, such debt was refinanced and we were required by Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," to deconsolidate BFC. At December 31, 2000, BFC had total assets of approximately $110,000,000, which cannot be used to satisfy claims of the Company or any of our subsidiaries. 30 32 Excluding Revolver borrowings, our debts due within one year amount to $63,111,000. We currently anticipate that cash flows from operations and borrowings under our banking arrangements will be adequate to repay these debts, to make normal recurring capital additions and improvements of approximately $77,000,000, to make selective acquisitions, including the purchase of previously leased facilities, to construct new facilities, and to meet working capital requirements for the twelve months ending December 31, 2001. If cash flows from operations or availability under our existing banking arrangements, including the Revolver/ Letter of Credit Facility, fall below expectations, we may be required to delay capital expenditures, dispose of certain assets, issue additional debt securities, or consider other alternatives to improve liquidity. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are exposed to market risk because we utilize financial instruments. The market risks inherent in these instruments are attributable to the potential loss from adverse changes in the general level of U.S. interest rates. We manage our interest rate risk exposure by maintaining a mix of fixed and variable rates for debt and notes receivable. The following table provides information regarding our market sensitive financial instruments and constitutes a forward-looking statement.
FAIR VALUE FAIR VALUE DECEMBER 31, DECEMBER 31, EXPECTED MATURITY DATES 2001 2002 2003 2004 2005 THEREAFTER TOTAL 2000 1999 - ----------------------- -------- ------- ------- ------- ------- ---------- -------- ------------ ------------ (DOLLARS IN THOUSANDS) ---------------------- Total long-term debt: Fixed Rate............. $ 62,344 $57,284 $29,655 $37,834 $40,647 $360,924 $588,688 $570,029 $591,199 Average Interest Rate................. 7.55% 7.41% 8.41% 7.88% 8.74% 8.88% Variable Rate.......... $164,767 $23,792 $ 913 $ 1,041 $ 1,270 $ 10,887 $202,670 $202,670 $153,321 Average Interest Rate................. 9.06% 8.77% 7.68% 7.67% 7.64% 7.63% Total notes receivable: Fixed Rate............. $ 2,200 $ 24 $ 3,524 $ -- $ -- $ -- $ 5,748 $ 2,243 $ 19,415 Average Interest Rate................. 10.38% 8.16% 8.99% -- -- -- Variable Rate.......... $ 49 $ 54 $ 60 $ 67 $ 74 $ 804 $ 1,108 $ 1,198 $ 1,152 Average Interest Rate................. 10.50% 10.50% 10.50% 10.50% 10.50% 10.50%
31 33 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE ---- Report of Ernst & Young LLP, Independent Auditors........... 33 Consolidated Balance Sheets................................. 34 Consolidated Statements of Operations....................... 35 Consolidated Statements of Stockholders' Equity............. 36 Consolidated Statements of Cash Flows....................... 37 Notes to Consolidated Financial Statements.................. 38 Supplementary Data (Unaudited) -- Quarterly Financial Data...................................................... 61
32 34 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Beverly Enterprises, Inc. We have audited the accompanying consolidated balance sheets of Beverly Enterprises, Inc. as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Beverly Enterprises, Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ERNST & YOUNG LLP Little Rock, Arkansas February 5, 2001 33 35 BEVERLY ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- ASSETS Current assets: Cash and cash equivalents................................. $ 25,908 $ 24,652 Accounts receivable -- patient, less allowance for doubtful accounts: 2000 -- $91,636; 1999 -- $64,398....................... 323,143 319,097 Accounts receivable -- nonpatient, less allowance for doubtful accounts: 2000 -- $1,106; 1999 -- $1,057......................... 19,831 30,890 Notes receivable, less allowance for doubtful notes: 2000 -- $72............................................ 2,197 16,930 Operating supplies........................................ 29,134 32,276 Deferred income taxes..................................... 24,379 54,932 Prepaid expenses and other................................ 18,787 15,019 ---------- ---------- Total current assets.............................. 443,379 493,796 Property and equipment, net................................. 1,063,247 1,110,065 Other assets: Goodwill, net............................................. 203,742 229,639 Deferred income taxes..................................... 27,721 -- Other, less allowance for doubtful accounts and notes: 2000 -- $3,767; 1999 -- $5,970......................... 137,904 149,380 ---------- ---------- Total other assets................................ 369,367 379,019 ---------- ---------- $1,875,993 $1,982,880 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 84,420 $ 93,168 Accrued wages and related liabilities..................... 106,300 92,514 Accrued interest.......................................... 15,744 14,138 Other accrued liabilities................................. 99,136 154,182 Current portion of long-term debt......................... 227,111 34,052 ---------- ---------- Total current liabilities......................... 532,711 388,054 Long-term debt.............................................. 564,247 746,164 Deferred income taxes payable............................... -- 28,956 Other liabilities and deferred items........................ 195,042 178,582 Commitments and contingencies Stockholders' equity: Preferred stock, shares authorized: 25,000,000............ -- -- Common stock, shares issued: 2000 -- 112,818,798; 1999 -- 110,382,356.................................... 11,282 11,038 Additional paid-in capital................................ 876,981 875,637 Accumulated deficit....................................... (193,931) (139,429) Accumulated other comprehensive income.................... 718 1,061 Treasury stock, at cost: 2000 -- 9,061,300 shares; 1999 -- 7,886,800 shares............................... (111,057) (107,183) ---------- ---------- Total stockholders' equity........................ 583,993 641,124 ---------- ---------- $1,875,993 $1,982,880 ========== ==========
See accompanying notes. 34 36 BEVERLY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- Net operating revenues................................... $2,625,610 $2,546,672 $2,812,232 Interest income.......................................... 2,650 4,335 10,708 ---------- ---------- ---------- Total revenues................................. 2,628,260 2,551,007 2,822,940 Costs and expenses: Operating and administrative: Wages and related................................... 1,591,519 1,542,148 1,664,741 Provision for insurance and related items........... 120,893 88,377 154,267 Other............................................... 769,502 723,803 814,127 Interest............................................... 80,016 72,578 65,938 Depreciation and amortization.......................... 100,061 99,160 93,722 Asset impairments, workforce reductions and other unusual items....................................... 43,033 23,818 69,443 Special charges related to settlements of federal government investigations........................... -- 202,447 1,865 Year 2000 remediation.................................. -- 12,402 9,719 ---------- ---------- ---------- Total costs and expenses....................... 2,705,024 2,764,733 2,873,822 ---------- ---------- ---------- Loss before benefit from income taxes, extraordinary charge and cumulative effect of change in accounting for start-up costs..................................... (76,764) (213,726) (50,882) Benefit from income taxes................................ (22,262) (79,079) (25,936) ---------- ---------- ---------- Loss before extraordinary charge and cumulative effect of change in accounting for start-up costs................ (54,502) (134,647) (24,946) Extraordinary charge, net of income tax benefit of $1,057................................................. -- -- (1,660) Cumulative effect of change in accounting for start-up costs, net of income tax benefit of $2,811............. -- -- (4,415) ---------- ---------- ---------- Net loss................................................. $ (54,502) $ (134,647) $ (31,021) ========== ========== ========== Basic and diluted loss per share of common stock: Before extraordinary charge and cumulative effect of change in accounting for start-up costs............. $ (0.53) $ (1.31) $ (.24) Extraordinary charge................................... -- -- (.02) Cumulative effect of change in accounting for start-up costs............................................... -- -- (.04) ---------- ---------- ---------- Net loss............................................... $ (0.53) $ (1.31) $ (.30) ========== ========== ========== Shares used to compute per share amounts............... 102,452 102,491 103,762 ========== ========== ==========
See accompanying notes. 35 37 BEVERLY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
RETAINED ACCUMULATED ADDITIONAL EARNINGS OTHER PREFERRED COMMON PAID-IN (ACCUMULATED COMPREHENSIVE TREASURY STOCK STOCK CAPITAL DEFICIT) INCOME (LOSS) STOCK TOTAL --------- ------- ---------- ------------ ------------- --------- --------- Balances at January 1, 1998............. $ -- $10,989 $874,335 $ 26,239 $ 1,332 $ (50,390) $ 862,505 Employee stock transactions related to 385,509 shares of common stock, net................................. -- 39 2,048 -- -- -- 2,087 Purchase of 3,886,800 shares of common stock for treasury.................. -- -- -- -- -- (51,120) (51,120) Settlement of amounts due from 1997 purchase of 4,000,000 shares of common stock for treasury........... -- -- -- -- -- (5,673) (5,673) Comprehensive income (loss): Unrealized gains on securities, net of income taxes of $795........... -- -- -- -- 1,183 -- 1,183 Gains reclassified into earnings from other comprehensive income, net of income tax benefit of $1,180............................ -- -- -- -- (1,755) -- (1,755) Net loss............................ -- -- -- (31,021) -- -- (31,021) --------- Total comprehensive loss.............. -- -- -- -- -- -- (31,593) ---- ------- -------- --------- ------- --------- --------- Balances at December 31, 1998........... -- 11,028 876,383 (4,782) 760 (107,183) 776,206 Employee stock transactions related to 106,642 shares of common stock, net................................. -- 10 (746) -- -- -- (736) Comprehensive income (loss): Unrealized gains on securities, net of income taxes of $202........... -- -- -- -- 301 -- 301 Net loss............................ -- -- -- (134,647) -- -- (134,647) --------- Total comprehensive loss.............. -- -- -- -- -- -- (134,346) ---- ------- -------- --------- ------- --------- --------- Balances at December 31, 1999........... -- 11,038 875,637 (139,429) 1,061 (107,183) 641,124 Employee stock transactions related to 2,436,442 shares of common stock, net................................. -- 244 1,344 -- -- -- 1,588 Purchase of 1,174,500 shares of common stock for treasury.................. -- -- -- -- -- (3,874) (3,874) Comprehensive income (loss): Foreign currency translation adjustments, net of income taxes of $257........................... -- -- -- -- 383 -- 383 Unrealized losses on securities, net of income tax benefit of $177..... -- -- -- -- (263) -- (263) Gains reclassified into earnings from other comprehensive income, net of income tax benefit of $311.............................. -- -- -- -- (463) -- (463) Net loss............................ -- -- -- (54,502) -- -- (54,502) --------- Total comprehensive loss.............. -- -- -- -- -- -- (54,845) ---- ------- -------- --------- ------- --------- --------- Balances at December 31, 2000........... $ -- $11,282 $876,981 $(193,931) $ 718 $(111,057) $ 583,993 ==== ======= ======== ========= ======= ========= =========
See accompanying notes. 36 38 BEVERLY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Cash flows from operating activities: Net loss.................................................. $ (54,502) $ (134,647) $ (31,021) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization........................... 100,061 99,160 93,722 Provision for reserves on patient, notes and other receivables, net...................................... 72,481 32,089 25,249 Amortization of deferred financing costs................ 2,571 2,909 2,336 Asset impairments, workforce reductions and other unusual items......................................... 43,033 23,818 69,443 Special charges related to settlements of federal government investigations............................. -- 202,447 1,865 Extraordinary charge.................................... -- -- 2,717 Cumulative effect of change in accounting for start-up costs................................................. -- -- 7,226 (Gains) losses on dispositions of facilities and other assets, net........................................... (2,013) 4,004 (33,853) Deferred income taxes................................... (26,262) (83,079) (28,105) Insurance related accounts.............................. 38,376 33,500 39,587 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable -- patient........................ (78,608) 901 (132,199) Operating supplies.................................... 2,367 (800) (1,239) Prepaid expenses and other receivables................ (3,188) 1,121 240 Accounts payable and other accrued expenses........... (47,144) (16,536) 23,080 Income taxes payable.................................. 1,348 25,175 (27,729) Other, net............................................ (11,510) (921) (4,530) ----------- ----------- ----------- Total adjustments.................................. 91,512 323,788 37,810 ----------- ----------- ----------- Net cash provided by operating activities.......... 37,010 189,141 6,789 Cash flows from investing activities: Capital expenditures...................................... (76,027) (95,414) (150,451) Payments for acquisitions, net of cash acquired........... (3,797) (6,985) (162,969) Proceeds from dispositions of facilities and other assets.................................................. 24,335 41,941 82,119 Collections on notes receivable........................... 17,804 22,185 6,089 Other, net................................................ (4,555) (33,264) (5,374) ----------- ----------- ----------- Net cash used for investing activities............. (42,240) (71,537) (230,586) Cash flows from financing activities: Revolver borrowings....................................... 1,508,000 1,132,000 1,328,000 Repayments of Revolver borrowings......................... (1,458,000) (1,284,000) (1,077,000) Proceeds from issuance of long-term debt.................. -- 125,820 9,495 Repayments of long-term debt.............................. (39,217) (80,605) (70,878) Purchase of common stock for treasury..................... (3,874) -- (56,793) Proceeds from exercise of stock options................... 81 129 3,092 Deferred financing costs paid............................. (1,007) (3,830) (730) Proceeds from designated funds, net....................... 503 256 659 ----------- ----------- ----------- Net cash provided by (used for) financing activities....................................... 6,486 (110,230) 135,845 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents........ 1,256 7,374 (87,952) Cash and cash equivalents at beginning of year.............. 24,652 17,278 105,230 ----------- ----------- ----------- Cash and cash equivalents at end of year.................... $ 25,908 $ 24,652 $ 17,278 =========== =========== =========== Supplemental schedule of cash flow information: Cash paid (received) during the year for: Interest, net of amounts capitalized.................... $ 75,839 $ 68,314 $ 65,927 Income tax payments (refunds), net...................... 2,652 (21,175) 26,030
See accompanying notes. 37 39 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation References herein to the Company include Beverly Enterprises, Inc. and its wholly-owned subsidiaries. We provide healthcare services in 33 states and the District of Columbia. Our operations include nursing facilities, assisted living centers, hospice and home care centers, outpatient therapy clinics and rehabilitation therapy services. In addition, prior to June 30, 1998, we operated acute long-term transitional hospitals. Our consolidated financial statements include the accounts of the Company and all of our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates Generally accepted accounting principles require management to make estimates and assumptions when preparing financial statements that affect: - the reported amounts of assets and liabilities at the date of the financial statements; and - the reported amounts of revenues and expenses during the reporting period. They also require management to make estimates and assumptions regarding any contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less. Property and Equipment Property and equipment is stated at cost less accumulated depreciation or, where appropriate, the present value of the related capital lease obligations less accumulated amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Intangible Assets Goodwill (stated at cost less accumulated amortization of $34,985,000 in 2000 and $31,196,000 in 1999) is being amortized over periods not to exceed 40 years using the straight-line method. Operating and leasehold rights and licenses, which are included in the consolidated balance sheet caption "Other assets," (stated at cost less accumulated amortization of $17,538,000 in 2000 and $18,891,000 in 1999) are being amortized over the lives of the related assets (principally 40 years) and leases (principally 10 to 15 years), using the straight-line method. On an ongoing basis, we review the carrying value of our intangible assets in light of any events or circumstances that indicate they may be impaired or that the amortization period may need to be adjusted. If such circumstances suggest the intangible value cannot be recovered, calculated based on undiscounted cash flows over the remaining amortization period, the carrying value of the intangible will be reduced by such shortfall. In addition, we assess long-lived assets for impairment under SFAS No. 121 (see below). Under those rules, intangible assets associated with assets acquired in a purchase business combination are included in impairment evaluations when events or circumstances exist that indicate the carrying value of those assets may not be recoverable. As of December 31, 2000, we do not believe there is any indication that the carrying 38 40 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) value or the amortization period of our intangibles needs to be adjusted, after consideration of impairments recorded in 2000. Impairment of Long-Lived Assets Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," ("SFAS No. 121") requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the assets' carrying amounts. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. In accordance with SFAS No. 121, we assess the need for an impairment write-down when such indicators of impairment are present. See Notes 2 and 3. Insurance General liability and professional liability costs for the long-term care industry, especially in the state of Florida, have become increasingly expensive and difficult to estimate. We believe that adequate provision has been made in the financial statements for liabilities that may arise out of patient care services. Such provisions are made based upon the results of independent actuarial valuations and other information available, including management's best judgements and estimates. However, such provision and liability have been escalating in recent periods. Our provision for insurance and related items increased approximately $32,500,000 for the year ended December 31, 2000, as compared to the same period in 1999. Based on a study completed by an independent actuarial firm, we recorded a pre-tax charge during the third quarter of 2000 of approximately $44,400,000 related to increasing reserves for patient care liability costs, primarily in the state of Florida. There can be no assurance that such provision and liability will not require material adjustment in future periods. On December 31, 1998, Beverly Indemnity, Ltd., one of our wholly-owned subsidiaries, completed a risk transfer of substantially all of its pre-May 1998 auto liability, general liability and workers' compensation claims liability to a third party insurer effected through a loss portfolio transfer ("LPT") valued as of December 31, 1998. In exchange for a premium of approximately $116,000,000 (paid primarily from restricted cash and investments), we acquired reinsurance of approximately $180,000,000 to insure such auto liability, general liability and workers' compensation losses. In addition, in exchange for a premium of approximately $4,000,000, we acquired excess coverage of approximately $20,000,000 for general liability losses. Our provision for insurance and related items increased approximately $82,200,000 during 1998 primarily as a result of this transaction. As of December 31, 2000, based upon estimates and analyses by our outside actuaries, the liabilities for the excess co-insurance were approximately $2,000,000, and the liabilities for those losses exceeding the total aggregate limit were approximately $23,000,000 on a discounted basis. We are required to cover such excess and increased our insurance reserves during 2000 to take such expected losses into consideration. Prior to the LPT, and for periods not covered by the LPT, we insure the majority of our auto liability, general liability and workers' compensation risks through insurance policies with third parties, some of which are subject to reinsurance agreements between the insurer and Beverly Indemnity, Ltd. The liabilities for estimated incurred losses not covered by third party insurance are discounted at 10% to their present value based on expected loss payment patterns determined by independent actuaries. Had the discount rate been reduced by one-half of a percentage point, we would have incurred a pre-tax charge of approximately $400,000 39 41 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) for the year ended December 31, 2000. The discounted insurance liabilities are included in the consolidated balance sheet captions as follows (in thousands):
2000 1999 -------- ------- Accrued wages and related liabilities....................... $ 2,128 $ 1,310 Other accrued liabilities................................... 8,655 10,000 Other liabilities and deferred items........................ 97,025 75,224 -------- ------- $107,808 $86,534 ======== =======
On an undiscounted basis, the total insurance liabilities as of December 31, 2000 and 1999 were approximately $126,400,000 and $99,400,000, respectively. As of December 31, 2000, we had deposited approximately $700,000 in funds (the "Beverly Indemnity funds") that are restricted for the payment of insured claims. In addition, we anticipate that approximately $5,000,000 of our existing cash at December 31, 2000, while not legally restricted, will be utilized primarily to fund certain workers' compensation and general liability claims and expenses. We do not expect to use such cash for other purposes. We purchased traditional indemnity insurance coverage for our 2000, 1999 and 1998 workers' compensation and auto liabilities. During 1997, we transferred a portion of our liabilities for workers' compensation and general liability related to sold nursing facilities in the state of Texas to a third-party indemnity insurance company. As of December 31, 2000, based upon estimates and analyses by our outside actuaries, we expect the ultimate losses on such transferred liabilities to exceed the aggregate insurance limit available by approximately $3,700,000. Such amount has been reflected in our insurance reserves at December 31, 2000. Stock Based Awards Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") encourages, but does not require, companies to recognize compensation expense for stock-based awards based on their fair market value on the date of grant. We have elected to continue accounting for our stock-based awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, we do not recognize compensation expense for our stock option grants, which are issued at fair market value on the date of grant. However, we recognize compensation expense for our restricted stock grants at the fair market value of our Common Stock on the date of grant over their respective vesting periods on a straight-line basis. See Note 8 for the pro forma effects on our reported net loss and diluted loss per share assuming we elected to recognize compensation expense on stock-based awards in accordance with SFAS No. 123. Revenues Our revenues are derived primarily from providing long-term healthcare services. Approximately 74%, 72% and 74% of our net operating revenues for 2000, 1999 and 1998, respectively, were derived from funds under federal and state medical assistance programs. Approximately 52% and 42% of our net patient accounts receivable at December 31, 2000 and 1999, respectively, are due from such programs. We accrue for revenues when services are provided at standard charges adjusted to amounts estimated to be received under governmental programs and other third-party contractual arrangements based on contractual terms and historical experience. These revenues and receivables are reported at their estimated net realizable amounts and are subject to audit and retroactive adjustment. 40 42 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Retroactive adjustments are considered in the recognition of revenues on an estimated basis in the period the related services are rendered. Such amounts are adjusted in future periods as adjustments become known or as cost reporting years are no longer subject to audits, reviews or investigations. Due to the complexity of the laws and regulations governing the Medicare and Medicaid programs, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Changes in estimates related to third party receivables resulted in an increase in net operating revenues of approximately $8,100,000 and $10,900,000 for the years ended December 31, 2000 and 1998, respectively, and a decrease in net operating revenues of approximately $2,000,000 for the year ended December 31, 1999. Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Compliance with laws and regulations governing the Medicare and Medicaid programs is subject to government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medicaid programs. Concentration of Credit Risk We have significant accounts receivable and notes receivable whose collectibility or realizability is dependent upon the performance of certain governmental programs, primarily Medicare and Medicaid. These receivables represent our only concentration of credit risk. We do not believe there are significant credit risks associated with these governmental programs. We believe that an adequate provision, based on historical experience, has been made for the possibility of these receivables proving uncollectible and continually monitor and adjust these allowances as necessary. Income Taxes We follow the liability method in accounting for income taxes. The liability method requires deferred tax assets and liabilities to be recorded at currently enacted tax rates based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss), as well as charges and credits to stockholders' equity not included in net income (loss). Accumulated other comprehensive income, net of income taxes, consists of foreign currency translation adjustments of $383,000 and net unrealized gains on available-for-sale securities of $335,000 at December 31, 2000 and net unrealized gains on available-for-sale securities of $1,061,000 at December 31, 1999. During the year ended December 31, 2000, we transferred one of our securities from the available-for-sale category to the trading category. As a result of such transfer, we reversed $463,000 of unrealized gains, net of income taxes, on such security and recognized a pre-tax gain of $1,477,000, which was included in net operating revenues during the year ended December 31, 2000. 41 43 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) New Accounting Standards Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair market value. SFAS No. 133 will be effective for us during the first quarter of 2001. We do not expect there to be a material effect on our consolidated financial position or results of operations as a result of adopting SFAS No. 133. Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), provides guidance on the financial reporting of start-up and organization costs. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Prior to 1998, we capitalized start-up costs in connection with the opening of new facilities and businesses. We adopted the provisions of SOP 98-5 in our financial statements for the year ended December 31, 1998. The effect of adopting SOP 98-5 was to decrease our pre-tax loss from continuing operations in 1998 by approximately $1,000,000 and to record a charge for the cumulative effect of an accounting change, as of January 1, 1998, of $4,415,000, net of income taxes, or $0.04 per share, to expense costs that had previously been capitalized. Other Certain prior year amounts have been reclassified to conform with the 2000 financial statements presentation. 2. SPECIAL CHARGES RELATED TO SETTLEMENTS OF FEDERAL GOVERNMENT INVESTIGATIONS On February 3, 2000, we entered into a series of separate agreements with the U.S. Department of Justice and the Office of Inspector General of the Department of Health and Human Services. These agreements settled the Allocation Investigations (See Note 7). In anticipation of such settlements, we recorded a special pre-tax charge of approximately $202,400,000 ($127,500,000, net of income taxes, or $1.24 per share diluted) during the year ended December 31, 1999, which included: - provisions totaling $128,800,000 representing the net present value of the separate civil and criminal settlements; - impairment losses of $17,000,000 on 10 nursing facilities that pled guilty to submitting erroneous cost reports to the Medicare program in conjunction with the criminal settlement; - $39,000,000 for certain prior year cost report related items affected by the settlements; - $3,100,000 of debt issuance and refinancing costs related to various bank debt modifications as a result of the settlements; and - $14,500,000 for other investigation and settlement related costs. At December 31, 2000, such liability totaled $143,074,000, with $84,846,000 included in the balance sheet caption "Other liabilities and deferred items," $39,327,000 included in "Allowances for accounts receivable -- patient" and $18,901,000 included in "Other accrued liabilities." 42 44 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 3. ASSET IMPAIRMENTS, WORKFORCE REDUCTIONS AND OTHER UNUSUAL ITEMS During 2000, we recorded pre-tax charges totaling approximately $43,000,000, including $35,500,000 for asset impairments, $6,100,000 for workforce reductions and $1,400,000 for other unusual items. The asset impairment charges of $35,500,000 primarily related to: - write-down of goodwill of $24,800,000 and property and equipment of $1,000,000 on certain under-performing outpatient therapy clinics having operating losses for the past three years and expected future operating losses. Management estimated the undiscounted future cash flows to be generated by each clinic and reduced the carrying value to its estimate of fair value. Management calculated the fair values of the impaired clinics by using the present value of estimated future cash flows. These assets were included in the total assets of Beverly Care Alliance. - write-down of property and equipment of $5,100,000 and recording of closing and other costs of $3,000,000 related to six nursing facilities with an aggregate carrying value of approximately $6,000,000 that management plans on closing, or terminating the leases on, during 2001. These assets generated pre-tax losses of approximately $2,400,000 during the year ended December 31, 2000 and were included in the total assets of Beverly Healthcare. Management calculated the fair values of these facilities by using the present value of estimated future cash flows, or its best estimate of what these facilities, or similar facilities in that state, would sell for in the open market. - write-off of abandoned projects totaling $2,100,000; - write-off of an investment in a physician practice management company of $2,000,000; and - reversal of $2,500,000 of prior year asset impairment charges (discussed below). The workforce reduction charges of $6,100,000 primarily related to severance agreements associated with seven executives. Approximately $2,200,000 was paid during 2000, and the remainder is expected to be paid during the first quarter of 2001. Four of the executives were notified in late 2000 that their positions would be eliminated as part of a reorganization of our operating and support group functions. Such reorganization was formally announced in the first quarter of 2001. The purpose of the reorganization is to improve the level of service provided to our nursing facilities and other business units (see "Part I, Item 1. Business"). We currently estimate that an additional pre-tax charge of approximately $20,000,000 will be recognized during the first quarter of 2001 related to this reorganization. During the fourth quarter of 1999, we recorded pre-tax charges totaling approximately $23,800,000 related to restructuring of agreements on certain leased facilities, severance and other workforce reduction expenses, asset impairments, and other unusual items. We negotiated the terminations of lease agreements on 19 nursing facilities (2,047 beds), which resulted in a charge of $17,300,000. We disposed of 17 of these nursing facilities during 2000 and expect to dispose of the remainder during 2001. During 2000, we reversed $2,500,000 of the original charge for changes in our initial accounting estimates. In addition, we accrued $5,900,000 during the fourth quarter of 1999 primarily related to severance agreements associated with three executives. Substantially all of the $5,900,000 was paid during the first quarter of 2000. In preparing for the January 1, 1999 implementation of the new Medicare prospective payment system ("PPS"), as well as responding to other legislative and regulatory changes, we reorganized our inpatient rehabilitative operations, analyzed our businesses for impairment issues and implemented new care-delivery and tracking software. These initiatives, among others, resulted in a fourth quarter 1998 pre-tax charge of approximately $69,400,000, including $3,800,000 for workforce reductions, $58,700,000 for asset impairments and $6,900,000 for various other items. 43 45 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 3. ASSET IMPAIRMENTS, WORKFORCE REDUCTIONS AND OTHER UNUSUAL ITEMS -- (CONTINUED) During the fourth quarter of 1998, we reorganized all employed therapy associates into a newly formed subsidiary, Beverly Rehabilitation, Inc. ("Bev Rehab"), which is part of Beverly Care Alliance, in order to create a more consolidated, strategic approach to managing our inpatient rehabilitation business under PPS. We accrued $2,500,000 related to the termination of 835 therapy associates in conjunction with this reorganization. During 1999, 770 therapy associates were paid $2,300,000 and left the Company. We reversed the remaining $200,000 during 1999 for changes in our initial accounting estimates. In addition, our home care and outpatient therapy units underwent the consolidation and relocation of certain services, including billing and collections, which resulted in a workforce reduction charge of $1,300,000 associated with the termination of 236 associates. Of these 236 associates, 74 associates were paid $200,000 and left the Company by December 31, 1998. During 1999, 85 home care and outpatient therapy associates were paid $600,000 and left the Company. We reversed the remaining $500,000 during 1999 for changes in our initial accounting estimates. The significant regulatory changes under PPS and other provisions of the 1997 Act were an indicator to management that the carrying values of certain of our nursing facilities may not be fully recoverable. In addition, there were certain assets that had 1998 operating losses, and anticipated future operating losses, which led management to believe that these assets were impaired. Accordingly, management estimated the undiscounted future cash flows to be generated by each facility and reduced the carrying value to its estimate of fair value, resulting in an impairment charge of $9,000,000 in 1998. Management calculated the fair values of the impaired facilities by using the present value of estimated undiscounted future cash flows, or its best estimate of what that facility, or similar facilities in that state, would sell for in the open market. Management believes it has the knowledge to make such estimates of open market sales prices based on the volume of facilities we have purchased and sold in previous years. Also during the fourth quarter of 1998, management identified nine nursing facilities with an aggregate carrying value of approximately $14,000,000 which needed to be replaced in order to increase operating efficiencies, attract additional census or upgrade the nursing home environment. Management committed to a plan to construct new facilities to replace these buildings and reduced the carrying values of these facilities to their estimated salvage values. These assets were included in the total assets of Beverly Healthcare. In addition, management committed to a plan to dispose of 24 home care centers and nine outpatient therapy clinics which had 1998 and expected future period operating losses. These businesses had an aggregate carrying value of approximately $16,500,000 and were written down to their fair value less costs to sell. These assets generated pre-tax losses of approximately $5,100,000 during the year ended December 31, 1998. Substantially all of these assets were purchased during 1998. We disposed of a majority of these assets during 1999. These assets were included in the total assets of Beverly Care Alliance. We incurred a fourth quarter 1998 pre-tax charge of $30,300,000 related to these replacements, closings and planned disposals. In addition to the workforce reduction and impairment charges, we recorded a fourth quarter 1998 impairment charge for other long-lived assets of $19,400,000 primarily related to the write-off of software and software development costs. In conjunction with the implementation of business process changes, and the need for enhanced data-gathering and reporting required to operate effectively under PPS, we installed new clinical software in each of our nursing facilities during late 1998, which made obsolete the previously employed software. In addition, certain of our other ongoing software development projects were abandoned or written down due to obsolescence, feasibility or cost recovery issues. 44 46 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 4. ACQUISITIONS AND DISPOSITIONS During the year ended December 31, 2000, we acquired seven nursing facilities (1,210 beds), one previously leased nursing facility (105 beds) and certain other assets for cash of approximately $3,000,000, closing and other costs of approximately $1,500,000 and write-off of notes receivable of approximately $900,000. The acquisitions of such facilities and other assets were accounted for as purchases. Also during such period, we sold, closed or terminated the leases on 39 nursing facilities (4,263 beds) and certain other assets for cash proceeds of approximately $24,200,000 and notes receivable of approximately $100,000. We did not operate five of these nursing facilities (409 beds), which were leased to other nursing home operators in prior year transactions. We recognized net pre-tax gains, which were included in net operating revenues during the year ended December 31, 2000, of approximately $2,000,000 as a result of these dispositions. The operations of these facilities and certain other assets were immaterial to our consolidated financial position and results of operations. During the year ended December 31, 1999, we purchased three outpatient therapy clinics, two home care centers, two nursing facilities (284 beds), one previously leased nursing facility (190 beds) and certain other assets for cash of approximately $6,000,000, acquired debt of approximately $15,100,000 and closing and other costs of approximately $1,700,000. The acquisitions of such facilities and other assets were accounted for as purchases and resulted in the recording of goodwill of approximately $8,400,000. Also during such period, we sold or terminated the leases on 12 nursing facilities (1,291 beds), one assisted living center (10 units), 17 home care centers and certain other assets for cash proceeds of approximately $7,100,000 and notes receivable of approximately $1,000,000. We did not operate two of the nursing facilities (166 beds), which were leased to other nursing home operators in prior year transactions. We recognized net pre-tax losses, which were included in net operating revenues during the year ended December 31, 1999, of approximately $4,000,000 as a result of these dispositions. The operations of these facilities and certain other assets were immaterial to our consolidated financial position and results of operations. During the year ended December 31, 1998, we purchased 111 outpatient therapy clinics, 50 home care centers, eight nursing facilities (823 beds), one assisted living center (48 units), two previously leased nursing facilities (228 beds) and certain other assets for cash of approximately $163,200,000, acquired debt of approximately $8,000,000 and closing and other costs of approximately $7,000,000. The acquisitions of such facilities and other assets were accounted for as purchases and resulted in the recording of goodwill of approximately $143,000,000. Also during such period, we sold or terminated the leases on 26 nursing facilities (3,203 beds) and certain other assets for cash proceeds of approximately $52,500,000, notes receivable of approximately $21,300,000, assumed debt of approximately $4,600,000 and closing and other costs of approximately $2,300,000. We did not operate seven of these nursing facilities (893 beds), which were leased to other nursing home operators in prior year transactions. We recognized net pre-tax gains, which were included in net operating revenues during the year ended December 31, 1998, of approximately $17,900,000 as a result of these dispositions. The operations of these facilities and certain other assets were immaterial to our consolidated financial position and results of operations. In June 1998, we completed the sale of American Transitional Hospitals, Inc. ("ATH"), which operated as Beverly Specialty Hospitals, for cash of approximately $65,300,000 and assumed debt of approximately $2,400,000. ATH operated 15 transitional hospitals (743 beds) in eight states serving the needs of patients requiring intense therapy regimens, but not necessarily the breadth of services provided within traditional acute care hospitals. We recognized a pre-tax gain, which was included in net operating revenues, of approximately $16,000,000 during the year ended December 31, 1998 as a result of this disposition. During the year ended December 31, 1999, we recorded a pre-tax charge to reduce the sales price of this disposition by approximately $4,500,000, which was included in net operating revenues. The operations of ATH were immaterial to our consolidated financial position and results of operations. 45 47 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 4. ACQUISITIONS AND DISPOSITIONS -- (CONTINUED) We have been exploring strategic alternatives for our nursing home operations in Florida. During the first quarter of 2001, a formal plan was initiated by management to pursue the sale of these operations. Several parties have expressed an interest in purchasing all, or a portion, of these operations, which include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities"). We plan to sell one remaining nursing facility (56 beds) in Florida and certain other assets located in Florida in separate transactions. Due diligence research is currently underway by potential buyers interested in the Florida facilities. During 2000, the Florida facilities had net operating revenues of approximately $267,000,000 and had total assets of approximately $237,000,000 at December 31, 2000. It is too early to speculate on timing or pricing of a potential transaction or to estimate the ultimate impact of the sale of the Florida facilities on our consolidated financial position, results of operations or cash flows. 5. PROPERTY AND EQUIPMENT Following is a summary of property and equipment and related accumulated depreciation and amortization, by major classification, at December 31 (in thousands):
TOTAL OWNED LEASED ----------------------- ----------------------- ----------------- 2000 1999 2000 1999 2000 1999 ---------- ---------- ---------- ---------- ------- ------- Land, buildings and improvements............ $1,455,859 $1,446,004 $1,426,088 $1,412,715 $29,771 $33,289 Furniture and equipment... 383,749 374,855 377,197 369,388 6,552 5,467 Construction in progress................ 29,196 32,543 29,196 32,543 -- -- ---------- ---------- ---------- ---------- ------- ------- 1,868,804 1,853,402 1,832,481 1,814,646 36,323 38,756 Less accumulated depreciation and amortization............ 805,557 743,337 780,474 716,228 25,083 27,109 ---------- ---------- ---------- ---------- ------- ------- $1,063,247 $1,110,065 $1,052,007 $1,098,418 $11,240 $11,647 ========== ========== ========== ========== ======= =======
We record depreciation and amortization using the straight-line method over the following estimated useful lives: land improvements -- 5 to 15 years; buildings -- 35 to 40 years; building improvements -- 5 to 20 years; leasehold improvements -- 5 to 20 years or term of lease, if less; furniture and equipment -- 5 to 15 years. Capitalized lease assets are amortized over the remaining initial terms of the leases. Depreciation and amortization expense related to property and equipment, including the amortization of assets under capital lease obligations, for the years ended December 31, 2000, 1999 and 1998 was $83,311,000, $83,328,000 and $81,722,000, respectively. 46 48 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 6. LONG-TERM DEBT Long-term debt consists of the following at December 31 (dollars in thousands):
2000 1999 -------- -------- Credit Agreement due December 31, 2001...................... $164,000 $114,000 9% Senior Notes due February 15, 2006, unsecured............ 180,000 180,000 Notes and mortgages, less imputed interest: 2000 -- $46, 1999 -- $67; due in installments through the year 2031, at effective interest rates of 7.00% to 12.50%, a portion of which is secured by property, equipment and other assets with a net book value of $229,064 at December 31, 2000.... 183,416 199,831 Industrial development revenue bonds, less imputed interest: 1999 -- $9; due in installments through the year 2013, at effective interest rates of 4.88% to 10.71%, a portion of which is secured by property and other assets with a net book value of $187,668 at December 31, 2000............... 134,015 145,896 7% A.I. Credit Corp. Note due in installments through January 2002, secured by a surety bond.................... 65,000 65,000 8 3/4% First Mortgage Bonds due July 1, 2008, secured by first mortgages on eight nursing facilities with an aggregate net book value of $15,094 at December 31, 2000...................................................... 12,238 12,841 8 5/8% First Mortgage Bonds due October 1, 2008, secured by first mortgages on 10 nursing facilities with an aggregate net book value of $24,799 at December 31, 2000............ 19,700 20,640 7.24% Series 1995 Bonds due June 2005, secured by a letter of credit................................................. 18,000 25,000 Term Loan under the GE Capital Facility..................... -- 735 -------- -------- 776,369 763,943 Present value of capital lease obligations, less imputed interest: 2000 -- $349, 1999 -- $384, at effective interest rates of 6.04% to 16.49%......................... 14,989 16,273 -------- -------- 791,358 780,216 Less amounts due within one year............................ 227,111 34,052 -------- -------- $564,247 $746,164 ======== ========
The $375,000,000 Credit Agreement (the "Credit Agreement") provides for a Revolver/Letter of Credit Facility (the "Revolver/LOC Facility"). At December 31, 2000, we had approximately $164,000,000 of outstanding borrowings and approximately $32,800,000 of outstanding letters of credit under the Revolver/ LOC Facility. Borrowings under the Credit Agreement bear interest at adjusted LIBOR plus 2.25%, the Base Rate, as defined, plus 1.25% or the adjusted CD rate, as defined, plus 2.375%, at our option. Such interest rates may be adjusted quarterly based on certain financial ratio calculations. We pay certain commitment fees and commissions with respect to the Revolver/LOC Facility and had approximately $178,200,000 of unused commitments under such facility at December 31, 2000. The Credit Agreement is secured by property, equipment and other assets associated with nine nursing facilities with an aggregate net book value of approximately $14,100,000 at December 31, 2000, is guaranteed by substantially all of our present and future subsidiaries (collectively, the "Subsidiary Guarantors") and imposes on us certain financial tests and restrictive covenants. Effective September 30, 1999, we executed an amendment to our Credit Agreement, as well as amendments with certain of our other lenders covering debt of approximately $199,000,000 (collectively, the "Amendments"), which modified certain financial covenant levels and increased the annual interest rates for 47 49 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 6. LONG-TERM DEBT -- (CONTINUED) such debt and added real and personal property as collateral, including stock of certain of our subsidiaries. The Amendments were required since recording of the special charges related to the Allocation Investigations, as discussed herein, would have resulted in our noncompliance with certain financial covenants contained in those debt agreements. In December 2000, we executed a second amendment to our Credit Agreement and various other debt to modify certain financial covenant levels. These amendments were required since recording of the pre-tax charges during 2000 (as discussed herein) would have resulted in our noncompliance with those financial covenants. The Credit Agreement matures on December 31, 2001. As a result, all borrowings under the Revolver are classified as current liabilities at December 31, 2000. We expect to renegotiate, extend or refinance the Credit Agreement prior to December 31, 2001. However, no assurances can be made that we will be able to refinance the Credit Agreement at commercially reasonable terms, if at all. We have $180,000,000 of 9% Senior Notes due February 15, 2006 (the "Senior Notes") which were sold through a public offering. The Senior Notes are unsecured obligations guaranteed by the Subsidiary Guarantors and impose on us certain restrictive covenants. Separate financial statements of the Subsidiary Guarantors are not considered to be material to holders of the Senior 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 Beverly Enterprises, Inc., the parent, has no operations or assets separate from its investment in its subsidiaries. We have $70,000,000 of Medium Term Notes due March 2005, which is off-balance sheet financing for the Company. The Medium Term Notes are collateralized by patient accounts receivable, which are sold by Beverly Health and Rehabilitation Services, Inc., one of our wholly-owned subsidiaries, to Beverly Funding Corporation ("BFC"), a wholly-owned bankruptcy remote subsidiary. In 1999, such debt was refinanced and we were required by Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," to deconsolidate BFC. At December 31, 2000, BFC had total assets of approximately $110,000,000, which cannot be used to satisfy claims of the Company or any of our subsidiaries. Maturities and sinking fund requirements of long-term debt, including capital leases, for the years ended December 31 are as follows (in thousands):
2001 2002 2003 2004 2005 THEREAFTER TOTAL -------- ------- ------- ------- ------- ---------- -------- Future minimum lease payments............. $ 2,887 $ 2,644 $ 2,184 $ 2,223 $ 1,669 $ 15,194 $ 26,801 Less interest.......... (1,368) (1,236) (1,109) (1,014) (910) (6,175) (11,812) -------- ------- ------- ------- ------- -------- -------- Net present value of future minimum lease payments............. 1,519 1,408 1,075 1,209 759 9,019 14,989 Notes, mortgages and bonds................ 225,592 79,668 29,493 37,666 41,158 362,792 776,369 -------- ------- ------- ------- ------- -------- -------- $227,111 $81,076 $30,568 $38,875 $41,917 $371,811 $791,358 ======== ======= ======= ======= ======= ======== ========
48 50 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 6. LONG-TERM DEBT -- (CONTINUED) Most of our capital leases, as well as our operating leases, have original terms from ten to fifteen years and contain at least one renewal option (which could extend the term of the leases by five to fifteen years), purchase options, escalation clauses and provisions for payments by us of real estate taxes, insurance and maintenance costs. The industrial development revenue bonds were originally issued prior to 1985 primarily for the construction or acquisition of nursing facilities. Bond reserve funds of approximately $415,000 and $594,000 at December 31, 2000 and 1999, respectively, are included in the consolidated balance sheet caption "Other assets." These funds are invested primarily in certificates of deposit and in United States government securities and are carried at cost, which approximates market value. Net capitalized interest relating to construction was not material in 2000, 1999, or 1998. 7. COMMITMENTS AND CONTINGENCIES Our future minimum rental commitments required by all noncancelable operating leases with initial or remaining terms in excess of one year as of December 31, 2000, are as follows (in thousands):
YEAR ENDING DECEMBER 31, - ------------ 2001........................................................ $ 85,655 2002........................................................ 71,744 2003........................................................ 46,299 2004........................................................ 30,082 2005........................................................ 23,680 Thereafter.................................................. 47,283 -------- $304,743 ========
Our total future minimum rental commitments are net of approximately $3,697,000 of minimum sublease rental income due in the future under noncancelable subleases. Rent expense on operating leases, net of sublease rental income, for the years ended December 31 was as follows: 2000 -- $114,889,000; 1999 -- $115,598,000; 1998 -- $113,762,000. Sublease rent income was approximately $3,312,000, $7,096,000, and $6,772,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Contingent rent expense, based primarily on revenues, was approximately $14,000,000, $18,000,000 and $17,000,000 for the years ended December 31, 2000, 1999 and 1998, respectively. At December 31, 2000, we leased 11 nursing facilities, one assisted living center and our corporate headquarters under an off-balance sheet financing arrangement subject to operating leases with the creditor. We have the option to purchase the facilities at the end of the initial lease terms at fair market value. The financing arrangement was entered into for the construction of these facilities and had an original commitment of $125,000,000. In April 2000, the agreement covering this financing arrangement was amended whereby availability under the original commitment was reduced to $113,500,000, which equaled the total construction advances made as of such date. We outsource our management information systems data processing functions under an agreement which expires in 2002. Our future minimum commitments as of December 31, 2000 under this agreement are as follows: 2001 -- $3,894,000; and 2002 -- $2,884,000. We incurred approximately $5,221,000, $6,515,000 and $5,673,000 under this agreement during the years ended December 31, 2000, 1999 and 1998, respectively. 49 51 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 7. COMMITMENTS AND CONTINGENCIES -- (CONTINUED) We are contingently liable for approximately $57,191,000 of long-term debt maturing on various dates through 2019, as well as annual interest and letter of credit fees totaling approximately $5,362,000. Such contingent liabilities principally arose from our sale of nursing facilities and retirement living centers. We operate the facilities related to approximately $27,331,000 of the principal amount for which we are contingently liable, pursuant to long-term agreements accounted for as operating leases. In addition, we are contingently liable for various operating leases that were assumed by purchasers and are secured by the rights thereto, as well as approximately $2,260,000 of loans to certain of our officers, which are collateralized by shares of our Common Stock pledged by the officers. On February 3, 2000, we entered into a series of separate agreements with the U.S. Department of Justice and the Office of Inspector General (the "OIG") of the Department of Health and Human Services. These agreements settled the federal government's investigations of the Company relating to our allocation to the Medicare program of certain nursing labor costs in our skilled nursing facilities from 1990 to 1998 (the "Allocation Investigations"). The agreements consist of: - a Plea Agreement; - a Civil Settlement Agreement; - a Corporate Integrity Agreement; and - an agreement concerning the disposition of 10 nursing facilities. Under the Plea Agreement, one of our subsidiaries pled guilty to one count of mail fraud and 10 counts of making false statements to Medicare and paid a criminal fine of $5,000,000 during the first quarter of 2000. Under the Civil Settlement Agreement, we paid the federal government $25,000,000 during the first quarter of 2000 and are reimbursing the federal government an additional $145,000,000 through withholdings from our biweekly Medicare periodic interim payments in equal installments over eight years. It is anticipated that cash flows from operations will decline approximately $18,100,000 per year as a result of the reduction in Medicare periodic interim payments. Our cash flows from operations were negatively impacted by approximately $16,700,000 during the year ended December 31, 2000. At December 31, 2000, our obligations to the federal government totaled approximately $94,900,000, which was included in the balance sheet captions "Other accrued liabilities" and "Other liabilities and deferred items." In addition, we agreed to resubmit certain Medicare filings to reflect reduced labor costs allocated to the Medicare program. Under the Corporate Integrity Agreement, we are required to monitor, on an ongoing basis, our compliance with the requirements of the federal healthcare programs. This agreement addresses our obligations to ensure that we comply with the requirements for participation in the federal healthcare programs. It also includes our functional and training obligations, audit and review requirements, recordkeeping and reporting requirements, as well as penalties for breach/noncompliance of the agreement. We believe that we are in substantial compliance with the requirements of the Corporate Integrity Agreement. In accordance with our agreement to dispose of 10 nursing facilities, we disposed of seven of the facilities during 2000. We expect to dispose of the remainder during 2001. The carrying values of these facilities have been adjusted to our best estimate of their net realizable values. On July 6, 1999, an amended complaint was filed by the plaintiffs in a previously disclosed purported class action lawsuit pending against the Company and certain of our officers in the United States District Court for the Eastern District of Arkansas (the "Class Action"). Due to the preliminary state of the 50 52 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 7. COMMITMENTS AND CONTINGENCIES -- (CONTINUED) Class Action, we are unable at this time to assess the probable outcome of the Class Action or the materiality of the risk of loss. However, we believe that we acted lawfully with respect to plaintiff investors and will vigorously defend the Class Action. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. In addition, since July 29, 1999, eight derivative lawsuits have been filed in the state courts of Arkansas, California and Delaware, as well as the federal district court in Arkansas, (collectively, the "Derivative Actions"). Due to the preliminary state of the Derivative Actions and the fact the complaints do not allege damages with any specificity, we are unable at this time to assess the probable outcome of the Derivative Actions or the materiality of the risk of loss. However, we believe that we acted lawfully with respect to the allegations of the Derivative Actions and will vigorously defend the Derivative Actions. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. There are various other lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages that are generally not covered by insurance. We do not believe that the ultimate resolution of such other matters will have a material adverse effect on our consolidated financial position or results of operations. 8. STOCKHOLDERS' EQUITY We had 300,000,000 shares of authorized $.10 par value common stock ("Common Stock") at December 31, 2000 and 1999. We are subject to certain restrictions under our long-term debt agreements related to the payment of cash dividends on our Common Stock. During 2000 and 1999, we did not pay any cash dividends on our Common Stock and no future dividends are currently planned. We had 25,000,000 shares of authorized $1 par value preferred stock at December 31, 2000 and 1999, all of which remain unissued. The Board of Directors has authority, without further stockholder action, to set rights, privileges and preferences for any unissued shares of preferred stock. In June 1996, our Board of Directors authorized a stock repurchase program whereby we may repurchase, from time to time on the open market, up to a total of 10,000,000 shares of our outstanding Common Stock. On June 2, 1998, the Board of Directors authorized an increase to this stock repurchase program. From June 1996 through December 1999, we repurchased approximately 10,200,000 shares of our outstanding Common Stock under the stock repurchase program. During the first quarter of 2000, we repurchased approximately 1,200,000 additional shares of our outstanding Common Stock under the stock repurchase program at a cost of approximately $3,900,000. The repurchases were financed primarily through borrowings under our Revolver/LOC Facility. If we had repurchased these additional shares prior to January 1, 2000, the impact on our operating results per share for the year ended December 31, 2000 would have been immaterial. We have no current plans to continue such repurchases. We are subject to certain restrictions under our credit arrangements related to the repurchase of our outstanding Common Stock. During 1997, the New Beverly 1997 Long-Term Incentive Plan was approved (the "1997 Long-Term Incentive Plan"). Such plan became effective December 3, 1997 and will remain in effect until December 31, 2006, subject to early termination by the Board of Directors. The Compensation Committee of the Board of Directors (the "Committee") is responsible for administering the 1997 Long-Term Incentive Plan and has complete discretion in determining the number of shares or units to be granted, in setting performance goals and in applying other restrictions to awards, as needed, under the plan. We have 10,000,000 shares of Common Stock authorized for issuance, subject to certain adjustments, under the 1997 Long-Term Incentive Plan in the form of nonqualified stock options, incentive stock options, stock appreciation rights, restricted 51 53 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 8. STOCKHOLDERS' EQUITY -- (CONTINUED) stock, restricted stock units, performance awards, bonus stock and other stock unit awards. Except for options granted upon the assumption of, or in substitution for, options of another company in which we participate in a corporate transaction, nonqualified and incentive stock options must be granted at a purchase price equal to the fair market value of our Common Stock on the date of grant. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine and expire no later than 10 years from the grant date. Stock appreciation rights may be granted alone, in tandem with an option or in addition to an option. Stock appreciation rights shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine and expire no later than 10 years from the grant date. Restricted stock awards are outright stock grants which have a minimum vesting period of one year for performance-based awards and three years for other awards. Performance awards, bonus stock and other stock unit awards may be granted based on the achievement of certain performance or other goals and will carry certain restrictions, as defined. During 1997, the New Beverly Non-Employee Directors Stock Option Plan was approved (the "Non-Employee Directors Stock Option Plan"). Such plan became effective December 3, 1997 and will remain in effect until December 31, 2007, subject to early termination by the Board of Directors. We have 300,000 shares of Common Stock authorized for issuance, subject to certain adjustments, under the Non-Employee Directors Stock Option Plan. The Non-Employee Directors Stock Option Plan was amended by the Board of Directors on December 11, 1997 to provide that each nonemployee director be granted an option to purchase 3,375 shares of our Common Stock on June 1 of each year until the plan is terminated, subject to the availability of shares. Such options are granted at a purchase price equal to the fair market value of our Common Stock on the date of grant, become exercisable one year after the date of grant and expire 10 years after the date of grant. During the third quarter of 2000, we offered all employees holding stock options granted prior to February 2000 the opportunity to exchange all or part of their stock options for shares of restricted stock. This resulted in the issuance of approximately 2,400,000 shares of restricted stock, which vest four years after the grant date, in exchange for approximately 4,800,000 stock options. Had we issued these additional shares prior to January 1, 2000, our operating results per share would have been reduced by $.01 per share for the year ended December 31, 2000. In January 2001, we filed a registration statement under Form S-8 with the Securities and Exchange Commission registering 1,174,500 shares of our Common Stock. These shares were previously repurchased by the Company and are being held in treasury. Such shares are expected to be issued under the Beverly Enterprises, Inc. Stock Grant Plan (the "Stock Grant Plan"). Shares of Common Stock will be issued under the Stock Grant Plan to holders of restricted shares who by virtue of the terms of their employment contracts, severance agreements or other similar arrangements have a claim to the immediate vesting of their restricted stock. In conjunction with the reorganization in the first quarter of 2001, 545,542 shares of Common Stock under the Stock Grant Plan were issued to various officers who made such claims. 52 54 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 8. STOCKHOLDERS' EQUITY -- (CONTINUED) The following table summarizes stock option and restricted stock data relative to our long-term incentive plans for the years ended December 31:
2000 1999 1998 ---------------------- --------------------- ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE OF EXERCISE OF EXERCISE OF EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- --------- --------- --------- ---------- --------- Options outstanding at beginning of year........................ 7,307,459 $9.08 8,163,565 $9.20 6,561,903 $9.29 Changes during the year: Granted........................ 2,569,325 3.32 121,627 6.51 3,341,994 8.81 Exercised...................... (134,035) 3.52 (40,450) 6.44 (428,069) 6.89 Cancelled...................... (5,952,423) 9.31 (937,283) 9.88 (1,312,263) 9.42 ---------- --------- ---------- Options outstanding at end of year........................... 3,790,326 5.02 7,307,459 9.08 8,163,565 9.20 ========== ========= ========== Options exercisable at end of year........................... 1,104,815 7.30 4,107,067 8.56 3,761,259 8.50 ========== ========= ========== Options available for grant at end of year.................... 3,343,233 2,413,967 1,701,426 ========== ========= ========== Restricted stock outstanding at beginning of year.............. 67,519 -- -- Changes during the year: Granted........................ 2,453,832 84,491 -- Vested......................... (90,181) (16,972) -- Forfeited...................... (76,297) -- -- ---------- --------- ---------- Restricted stock outstanding at end of year.................... 2,354,873 67,519 -- ========== ========= ==========
Exercise prices for options outstanding as of December 31, 2000 ranged from $3.00 to $14.38. The weighted-average remaining contractual life of these options is eight years. The following table provides certain information with respect to stock options outstanding at December 31, 2000:
OPTIONS OUTSTANDING ----------------------------------------------- OPTIONS EXERCISABLE WEIGHTED- ---------------------------- WEIGHTED- AVERAGE WEIGHTED- OPTIONS AVERAGE REMAINING OPTIONS AVERAGE RANGE OF EXERCISE PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE - ------------------------ ----------- -------------- ---------------- ----------- -------------- $ 3.00 - $ 6.50.................... 3,175,010 $3.57 7.99 673,967 $4.31 $ 7.19 - $ 9.44.................... 175,500 8.82 5.69 175,500 7.85 $10.46 - $12.88.................... 64,125 11.94 6.65 55,689 11.80 $14.25 - $14.38.................... 375,691 14.26 7.18 199,659 14.27 --------- --------- $ 3.00 - $14.38.................... 3,790,326 $5.02 7.78 1,104,815 $7.30 ========= =========
We recognize compensation expense for our restricted stock grants at the fair market value of our Common Stock on the date of grant, amortized over their respective vesting periods on a straight-line basis. The total charges to our consolidated statements of operations for the years ended December 31, 2000 and 1999 related to these restricted stock grants were approximately $1,149,000 and $198,000, respectively. 53 55 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 8. STOCKHOLDERS' EQUITY -- (CONTINUED) Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if we accounted for our stock option grants under the fair market value method as prescribed by such statement. The fair market value of our stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31, 2000, 1999 and 1998, respectively: - risk-free interest rates of 5.3%, 6.8% and 5.0%; - volatility factors of the expected market price of our Common Stock of .57, .46 and .41; and - expected option lives of 10 years. We do not currently pay cash dividends on our Common Stock and no future dividends are currently planned. Such weighted-average assumptions resulted in a weighted average fair market value of options granted during 2000, 1999 and 1998 of $2.40 per share, $4.27 per share and $5.35 per share, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair market value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair market value estimates, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair market value of our stock options. For purposes of pro forma disclosures, the estimated fair market value of the stock options is amortized to expense over their respective vesting periods. The pro forma effects on our reported net loss and diluted loss per share assuming we accounted for our stock option grants in accordance with SFAS No. 123 for the years ended December 31, 2000, 1999 and 1998 would have been a net loss of $51,256,000 or $.50 per share, a net loss of $137,015,000 or $1.34 per share and a net loss of $32,202,000 or $.31 per share, respectively. The pro forma amounts for 2000 reflect the impact of the cancellation of approximately 4,800,000 stock options in exchange for approximately 2,400,000 shares of restricted stock (as discussed above). Such pro forma effects are not necessarily indicative of the effects on future years. The Beverly Enterprises 1988 Employee Stock Purchase Plan (as amended and restated) enables all full-time employees having completed one year of continuous service to purchase shares of our Common Stock at the current market price through payroll deductions. We have historically made contributions in the amount of 30% of the participant's contribution. Effective January 1, 2001, we reduced such contributions to 15% of the participant's contribution. Each participant specifies the amount to be withheld from earnings per two-week pay period, subject to certain limitations. The total charges to our consolidated statements of operations for the years ended December 31, 2000, 1999 and 1998 related to this plan were approximately $1,192,000, $1,723,000 and $2,435,000, respectively. 54 56 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 9. INCOME TAXES The benefit from taxes on loss before extraordinary charge and the cumulative effect of change in accounting for start-up costs (see Note 1) consists of the following for the years ended December 31 (in thousands):
2000 1999 1998 -------- -------- -------- Federal: Current............................................ $ -- $ -- $ -- Deferred........................................... (26,962) (72,001) (28,227) State: Current............................................ 4,000 4,000 2,169 Deferred........................................... 700 (11,078) 122 -------- -------- -------- $(22,262) $(79,079) $(25,936) ======== ======== ========
We had an annual effective tax rate of 29% for the year ended December 31, 2000, compared to annual effective tax rates of 37% and 51% for the years ended December 31, 1999 and 1998, respectively. The annual effective tax rate in 2000 was different than the federal statutory rate primarily due to the impact of amortization of nondeductible goodwill and state income taxes, partially offset by the benefit of certain tax credits. Amortization of nondeductible goodwill was impacted by the write-down of goodwill on certain under-performing outpatient therapy clinics (see Note 3). The annual effective tax rate in 1999 was different than the federal statutory rate primarily due to the impact of state income taxes. The annual effective tax rate in 1998 was different than the federal statutory rate primarily due to the impact of the sale of ATH (see Note 4), the benefit of certain tax credits, and the pre-tax charge of approximately $69,400,000 (see Note 3) which reduced our pre-tax income to a level where permanent tax differences and state income taxes had a more significant impact on the effective tax rate. A reconciliation of the benefit from income taxes, computed at the statutory rate, to our annual effective tax rate is summarized as follows for the years ended December 31 (dollars in thousands):
2000 1999 1998 -------------- -------------- -------------- AMOUNT % AMOUNT % AMOUNT % -------- --- -------- --- -------- --- Benefit at statutory rate............ $(26,868) 35 $(74,804) 35 $(17,809) 35 General business tax credits......... (2,138) 3 (2,470) 1 (2,315) 5 State tax provision, net............. 3,055 (4) (4,601) 2 1,489 (3) Nondeductible amortization of intangibles........................ 5,701 (8) 1,192 -- (74) -- Sale of ATH.......................... -- -- -- -- (6,867) 13 Other................................ (2,012) 3 1,604 (1) (360) 1 -------- -- -------- -- -------- -- $(22,262) 29 $(79,079) 37 $(25,936) 51 ======== == ======== == ======== ==
55 57 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 9. INCOME TAXES -- (CONTINUED) Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of temporary differences giving rise to our deferred tax assets and liabilities at December 31, 2000 and 1999 are as follows (in thousands):
2000 1999 -------------------- -------------------- ASSET LIABILITY ASSET LIABILITY -------- --------- -------- --------- Insurance reserves......................... $ 40,399 $ -- $ 25,512 $ -- General business tax credit carryforwards............................ 12,257 -- 8,850 -- Alternative minimum tax credit carryforwards............................ 15,873 -- 15,772 -- Provision for dispositions................. 17,705 2,688 35,454 3,882 Provision for Medicare repayment........... 40,757 -- 55,175 -- Provision for doubtful accounts............ 22,451 -- 11,483 -- Depreciation and amortization.............. 2,388 123,548 6,582 132,863 Operating supplies......................... -- 13,246 -- 13,004 Federal net operating loss carryforwards... 53,489 -- 29,491 -- Other...................................... 11,913 25,650 13,224 25,818 -------- -------- -------- -------- $217,232 $165,132 $201,543 $175,567 ======== ======== ======== ========
At December 31, 2000, we had federal net operating loss carryforwards of $152,824,000 for income tax purposes which expire in years 2018 through 2020 and general business tax credit carryforwards of $12,257,000 for income tax purposes which expire in years 2009 through 2020. For financial reporting purposes, the federal net operating loss carryforwards and the general business tax credit carryforwards have been utilized to offset existing net taxable temporary differences reversing during the carryforward periods. Our net deferred tax assets at December 31, 2000 will be realized through the reversal of temporary taxable differences, future taxable income and the implementation of tax planning strategies, as needed. We have relied on various factors to conclude that it is more likely than not that our future results of operations and/or tax planning strategies coupled with the reversal of existing taxable temporary differences will generate sufficient taxable income to realize our net deferred tax assets. Our results of operations for the last three years are not reflective of our future earnings potential. Our results of operations have been negatively impacted by the occurrence of several events that are not anticipated to recur in future periods. The 1997 Act phased in the Medicare prospective payment system, which was effective for us on January 1, 1999. We experienced a reduction in our 1999 net operating revenues of approximately $114,000,000 as compared to 1998 as a result of the 1997 Act. However, we experienced an increase in our 2000 net operating revenues as compared to 1999 related to the impact of BBRA 1999, and we anticipate that our net operating revenues for 2001 as compared to 2000 will increase approximately $30,000,000 as a result of the BIPA provisions. Our results of operations for the last three years have also included pre-tax charges totaling approximately $87,400,000, $270,300,000 and $163,200,000 for 2000, 1999 and 1998, respectively. These pre-tax charges primarily related to increasing reserves for patient care liability costs, asset impairments, workforce reductions and other unusual items, as well as special charges related to settlements of federal government investigations and year 2000 remediation costs (as discussed herein). Given the significant effects the above unusual charges and events had on our recent results of operations, we believe our expectation of future income is reasonable. In addition, we are exploring strategic alternatives, including the possible divestiture, for our nursing home operations in Florida, where we have incurred 56 58 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 9. INCOME TAXES -- (CONTINUED) significant patient care liability costs. We would expect a positive impact on our future core operating results due to the divestiture of our Florida nursing operations; however, no assurances can be made of the ultimate impact of the sale of these operations on our future consolidated financial position, results of operations or cash flows. If additional income above that produced by ordinary and recurring operations is needed to realize the benefit of our net deferred tax assets, we could enter into sale-leaseback transactions involving operating assets that would accelerate reversal of taxable temporary differences. Therefore, we do not believe that a deferred tax valuation allowance is necessary at December 31, 2000. 10. FAIR VALUES OF FINANCIAL INSTRUMENTS Financial Accounting Standards Statement No. 107, "Disclosures about Fair Value of Financial Instruments" requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent our underlying value. We used the following methods and assumptions in estimating our fair value disclosures for financial instruments: Cash and Cash Equivalents The carrying amount reported in the consolidated balance sheets for cash and cash equivalents approximates its fair value. Notes Receivable, Net (Including Current Portion) For variable-rate notes that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for fixed-rate notes are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Beverly Indemnity Funds The carrying amount reported in the consolidated balance sheets for the Beverly Indemnity funds approximates its fair value and is included in the consolidated balance sheet caption "Prepaid expenses and other". Long-term Debt (Including Current Portion) The carrying amounts of our variable-rate borrowings approximate their fair values. The fair values of the remaining long-term debt are estimated using discounted cash flow analyses, based on our incremental borrowing rates for similar types of borrowing arrangements. Federal Government Settlements (Including Current Portion) The carrying amount of our obligations to the federal government resulting from the settlements of the Allocation Investigations is included in the consolidated balance sheet captions "Other accrued liabilities" and 57 59 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 10. FAIR VALUES OF FINANCIAL INSTRUMENTS -- (CONTINUED) "Other liabilities and deferred items." Such obligations are non-interest bearing, and as such, were imputed at their approximate fair market rate of 9% for accounting purposes. Therefore, the carrying amount of such obligations should approximate its fair value. The carrying amounts and estimated fair values of our financial instruments at December 31, 2000 and 1999 are as follows (in thousands):
2000 1999 --------------------- --------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Cash and cash equivalents.................... $ 25,908 $ 25,908 $ 24,652 $ 24,652 Notes receivable, net (including current portion)................................... 3,304 3,441 20,588 20,567 Beverly Indemnity funds...................... 669 669 561 561 Long-term debt (including current portion)... 791,358 772,699 780,216 744,520 Federal government settlements (including current portion)........................... 94,871 94,871 133,314 133,314
At December 31, 2000 and 1999, we had outstanding defeased long-term debt with aggregate carrying values of $1,750,000 and $13,785,000, respectively. The fair values of such defeased debt were approximately $1,821,000 and $14,071,000 at December 31, 2000 and 1999, respectively. The fair values were estimated using discounted cash flow analyses, based on our incremental borrowing rates for similar types of borrowing arrangements. In order to consummate certain dispositions and other transactions, we have agreed to guarantee the debt assumed or acquired by the purchaser or the performance under a lease, by the lessor. It is not practicable to estimate the fair value of our off-balance sheet guarantees (See Note 7). We do not charge a fee for entering into such agreements and contracting with a financial institution to estimate such amounts could not be done without incurring excessive costs. In addition, unlike us, a financial institution would not be in a position to assume the underlying obligations and operate the nursing facilities collateralizing the obligations, which would significantly impact the calculation of the fair value of such off-balance sheet guarantees. At December 31, 2000 and 1999, we guaranteed approximately $2,260,000 and $2,784,000, respectively, of loans to certain of our officers, which are collateralized by shares of our Common Stock pledged by the officers. The fair values of such loans were approximately $2,341,000 and $2,806,000 at December 31, 2000 and 1999, respectively. The fair values were estimated using discounted cash flow analyses, based on our incremental borrowing rates for similar types of borrowing arrangements. 11. SEGMENT INFORMATION Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" provides disclosure guidelines for segments of a company based on a management approach to defining operating segments. Description of the Types of Services from which each Operating Segment Derives its Revenues At December 31, 2000 and 1999, we were organized into two operating segments, which support our delivery of long-term healthcare services. These operating segments included: - Beverly Healthcare, which provides long-term healthcare through the operation of nursing facilities and assisted living centers; and 58 60 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 11. SEGMENT INFORMATION -- (CONTINUED) - Beverly Care Alliance, which operates outpatient therapy clinics, hospice and home care centers and an inpatient rehabilitation therapy services business. In addition to the two operating segments mentioned above, we operated Beverly Specialty Hospitals through June 1998. Beverly Specialty Hospitals operated transitional hospitals. In June 1998, we completed the sale of this segment (see Note 4). Measurement of Segment Income or Loss and Segment Assets The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (see Note 1). We evaluate performance and allocate resources based on income or loss from operations before income taxes, excluding any unusual items. Factors Management Used to Identify Our Operating Segments Our operating segments are strategic business units that offer different services within the long-term healthcare continuum. Business in each operating segment is conducted by one or more corporations. The corporations comprising each operating segment also have separate boards of directors. 59 61 BEVERLY ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 11. SEGMENT INFORMATION -- (CONTINUED) The following table summarizes certain information for each of our operating segments (in thousands):
BEVERLY BEVERLY BEVERLY CARE SPECIALTY HEALTHCARE ALLIANCE HOSPITALS ALL OTHER(1) TOTALS ---------- -------- --------- ------------ ---------- Year ended December 31, 2000 Revenues from external customers... $2,427,554 $202,555 $ -- $ (4,499) $2,625,610 Intercompany revenues.............. -- 139,024 -- 11,695 150,719 Interest income.................... 225 130 -- 2,295 2,650 Interest expense................... 27,107 241 -- 52,668 80,016 Depreciation and amortization...... 78,984 14,802 -- 6,275 100,061 Pre-tax income (loss).............. 105,192 9,578 -- (191,534) (76,764) Total assets....................... 1,508,748 271,621 -- 95,624 1,875,993 Capital expenditures............... 59,818 7,259 -- 8,950 76,027 Year ended December 31, 1999 Revenues from external customers... $2,305,341 $237,014 $ -- $ 4,317 $2,546,672 Intercompany revenues.............. -- 140,216 -- 11,643 151,859 Interest income.................... 240 88 -- 4,007 4,335 Interest expense................... 28,434 425 -- 43,719 72,578 Depreciation and amortization...... 79,454 13,228 -- 6,478 99,160 Pre-tax income (loss).............. 109,884 23,417 -- (347,027) (213,726) Total assets....................... 1,501,670 325,771 -- 155,439 1,982,880 Capital expenditures............... 73,029 10,518 -- 11,867 95,414 Year ended December 31, 1998 Revenues from external customers... $2,531,496 $192,627 $61,775 $ 26,334 $2,812,232 Intercompany revenues.............. -- 13,518 539 10,682 24,739 Interest income.................... 410 160 3 10,135 10,708 Interest expense................... 29,359 108 93 36,378 65,938 Depreciation and amortization...... 78,269 8,662 1,578 5,213 93,722 Pre-tax income (loss).............. 165,707 6,878 (670) (222,797) (50,882) Total assets....................... 1,526,091 303,913 -- 330,507 2,160,511 Capital expenditures............... 87,209 15,149 4,937 43,156 150,451
- --------------- (1) All Other consists of the operations of our corporate headquarters and related overhead, as well as certain non-operating revenues and expenses. Such amounts also include pre-tax charges totaling approximately $87,400,000, $270,300,000 and $163,200,000 for 2000, 1999 and 1998, respectively. Such pre-tax charges primarily related to increasing reserves for patient care liability costs, asset impairments, workforce reductions and other unusual items, as well as special charges related to settlements of federal government investigations and year 2000 remediation costs (as discussed herein). 60 62 BEVERLY ENTERPRISES, INC. SUPPLEMENTARY DATA (UNAUDITED) QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following is a summary of our quarterly results of operations for the years ended December 31, 2000 and 1999.
2000 1999 ------------------------------------------------------ ------------------------------------------ 1ST 2ND 3RD 4TH TOTAL 1ST 2ND 3RD 4TH -------- -------- -------- -------- ---------- -------- --------- -------- -------- Total revenues............. $646,927 $655,888 $665,889 $659,556 $2,628,260 $635,029 $ 633,678 $638,331 $643,969 ======== ======== ======== ======== ========== ======== ========= ======== ======== Income (loss) before provision for (benefit from) income taxes....... $ 10,098 $ 13,001 $(32,831) $(67,032) $ (76,764) $ 9,377 $(183,901) $ 12,535 $(51,737) Provision for (benefit from) income taxes....... 3,837 4,479 (10,360) (20,218) (22,262) 3,470 (68,044) 4,638 (19,143) -------- -------- -------- -------- ---------- -------- --------- -------- -------- Net income (loss).......... $ 6,261 $ 8,522 $(22,471) $(46,814) $ (54,502) $ 5,907 $(115,857) $ 7,897 $(32,594) ======== ======== ======== ======== ========== ======== ========= ======== ======== Income (loss) per share of common stock: Basic and diluted: Net income (loss)...... $ .06 $ .08 $ (.22) $ (.45) $ (.53) $ .06 $ (1.13) $ .08 $ (.32) ======== ======== ======== ======== ========== ======== ========= ======== ======== Shares used to compute basic net income (loss) per share..... 102,281 101,321 102,473 103,720 102,452 102,480 102,494 102,495 102,496 ======== ======== ======== ======== ========== ======== ========= ======== ======== Shares used to compute diluted net income (loss) per share..... 102,402 101,323 102,473 103,720 102,452 102,693 102,494 102,715 102,496 ======== ======== ======== ======== ========== ======== ========= ======== ======== Common stock price range: High..................... $ 4.56 $ 4.00 $ 6.38 $ 8.25 $ 6.94 $ 8.19 $ 8.00 $ 5.19 Low...................... $ 2.50 $ 2.75 $ 2.56 $ 3.81 $ 4.50 $ 4.31 $ 3.88 $ 3.50 1999 ---------- TOTAL ---------- Total revenues............. $2,551,007 ========== Income (loss) before provision for (benefit from) income taxes....... $ (213,726) Provision for (benefit from) income taxes....... (79,079) ---------- Net income (loss).......... $ (134,647) ========== Income (loss) per share of common stock: Basic and diluted: Net income (loss)...... $ (1.31) ========== Shares used to compute basic net income (loss) per share..... 102,491 ========== Shares used to compute diluted net income (loss) per share..... 102,491 ========== Common stock price range: High..................... Low......................
- --------------- We had an annual effective tax rate of 29% for the year ended December 31, 2000 compared to an annual effective tax rate of 37% for the year ended December 31, 1999. The annual effective tax rate in 2000 was different than the federal statutory rate primarily due to the impact of amortization of nondeductible goodwill and state income taxes, partially offset by the benefit of certain tax credits. Amortization of nondeductible goodwill was impacted by the write-down of goodwill on certain under-performing outpatient therapy clinics (see Note 3). The annual effective tax rate in 1999 was different than the federal statutory rate primarily due to the impact of state income taxes. 61 63 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. Incorporated herein by reference from our definitive proxy statement for the Annual Stockholders Meeting to be held on May 24, 2001, to be filed pursuant to Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION. Incorporated herein by reference from our definitive proxy statement for the Annual Stockholders Meeting to be held on May 24, 2001, to be filed pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated herein by reference from our definitive proxy statement for the Annual Stockholders Meeting to be held on May 24, 2001, to be filed pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Jon E.M. Jacoby, a director, serves as Executive Vice President, Chief Financial Officer and director of Stephens Group, Inc. During the year ended December 31, 1998, we used Stephens Group, Inc., or its affiliates, for investment banking services. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1 and 2. The Consolidated Financial Statements and Consolidated Financial Statement Schedule The consolidated financial statements and consolidated financial statement schedule listed in the accompanying index to consolidated financial statements and financial statement schedules are filed as part of this annual report. 3. Exhibits The exhibits listed in the accompanying index to exhibits are incorporated by reference herein or are filed as part of this annual report. (b) Reports on Form 8-K We did not file any reports on Form 8-K during the quarter ended December 31, 2000. (c) Exhibits See the accompanying index to exhibits referenced in Item 14(a)(3) above for a list of exhibits incorporated herein by reference or filed as part of this annual report. (d) Financial Statement Schedule See the accompanying index to consolidated financial statements and financial statement schedules referenced in Item 14(a)1 and 2, above. 62 64 BEVERLY ENTERPRISES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (ITEM 14(A))
PAGE ---- 1. Consolidated financial statements: Report of Ernst & Young LLP, Independent Auditors........ 33 Consolidated Balance Sheets at December 31, 2000 and 1999................................................... 34 Consolidated Statements of Operations for each of the three years in the period ended December 31, 2000...... 35 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 2000................................................... 36 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2000...... 37 Notes to Consolidated Financial Statements............... 38 Supplementary Data (Unaudited) -- Quarterly Financial Data................................................... 61 2. Consolidated financial statement schedule for each of the three years in the period ended December 31, 2000: II -- Valuation and Qualifying Accounts.................. 64 All other schedules are omitted because they are either not applicable or the items do not exceed the various disclosure levels.
63 65 BEVERLY ENTERPRISES, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
CHARGED DUE TO BALANCE AT (CREDITED) ACQUISITIONS BALANCE BEGINNING TO WRITE-OFFS/ AND AT END OF DESCRIPTION OF YEAR OPERATIONS RECOVERIES DISPOSITIONS OTHER YEAR - ----------- ---------- ---------- ----------- ------------ ------- --------- Year ended December 31, 2000: Allowance for doubtful accounts: Accounts receivable -- patient...... $64,398 $ 72,420 $(42,090) $ 949 $(4,041) $91,636 Accounts receivable -- nonpatient... 1,423 932 (983) -- -- 1,372* Notes receivable.................... 5,604 (871) (709) (451) -- 3,573 ------- -------- -------- ------- ------- ------- $71,425 $ 72,481 $(43,782) $ 498 $(4,041) $96,581 ======= ======== ======== ======= ======= ======= Year ended December 31, 1999: Allowance for doubtful accounts: Accounts receivable -- patient...... $21,764 $ 67,400(A) $(26,901) $ 1,901 $ 234 $64,398 Accounts receivable -- nonpatient... 677 963 17 -- (234) 1,423* Notes receivable.................... 2,921 3,733 (1,400) -- 350 5,604 ------- -------- -------- ------- ------- ------- $25,362 $ 72,096 $(28,284) $ 1,901 $ 350 $71,425 ======= ======== ======== ======= ======= ======= Year ended December 31, 1998: Allowance for doubtful accounts: Accounts receivable -- patient...... $17,879 $ 25,549 $(19,807) $(1,857) $ -- $21,764 Accounts receivable -- nonpatient... 862 (90) (13) (82) -- 677 Notes receivable.................... 2,917 (210) (66) -- 280 2,921 ------- -------- -------- ------- ------- ------- $21,658 $ 25,249 $(19,886) $(1,939) $ 280 $25,362 ======= ======== ======== ======= ======= =======
- --------------- (A) Includes $39,000,000 for certain prior year cost report related items affected by the Allocation Investigations, as well as $1,007,000 for additional accounts receivable-patient reserves required on the 10 nursing facilities being disposed of as a result of the settlements of such investigations. These amounts are included in the "Special charges related to settlements of federal government investigations". * Includes amounts classified in long-term other assets as well as current assets. 64 66 BEVERLY ENTERPRISES, INC. INDEX TO EXHIBITS (ITEM 14(a)(3))
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 3.1 -- Form of Restated Certificate of Incorporation of New Beverly Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 3.2 -- Form of Certificate of Amendment of Certificate of Incorporation of New Beverly Holdings Inc., changing its name to Beverly Enterprises, Inc. (incorporated by reference to Exhibit 3.2 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 3.3 -- By-Laws of Beverly Enterprises, Inc. (incorporated by reference to Exhibit 3.4 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on June 4, 1997 (File No. 333-28521)) 4.1 -- Indenture dated as of February 1, 1996 between Beverly Enterprises, Inc. and Chemical Bank, as Trustee, with respect to Beverly Enterprises, Inc.'s 9% Senior Notes due February 15, 2006 (the "9% Indenture") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995) 4.2 -- Form of Supplemental Indenture No. 2 to the 9% Indenture dated as of November 19, 1997 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on September 8, 1997 (File No. 333-35137)) 4.3 -- Indenture dated as of April 1, 1993 (the "First Mortgage Bond Indenture"), among Beverly Enterprises, Inc., Delaware Trust Company, as Corporate Trustee, and Richard N. Smith, as Individual Trustee, with respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.4 -- First Supplemental Indenture dated as of April 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds due 2008 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.5 -- Second Supplemental Indenture dated as of July 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds due 2008 (replaces Exhibit 4.1 to Beverly Enterprises, Inc.'s Current Report on Form 8-K dated July 15, 1993) (incorporated by reference to Exhibit 4.15 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.6 -- Trust Indenture dated as of December 1, 1994 from Beverly Funding Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical Indenture") (incorporated by reference to Exhibit 10.45 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No.33-57663)) 4.7 -- First Amendment and Restatement, dated as of June 1, 1999, of Trust Indenture, dated as of December 1, 1994, from Beverly Funding Corporation, as Issuer, to The Chase Manhattan Bank, as Trustee (incorporated by reference to Exhibit 10.2 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
65 67
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 4.8 -- Series Supplement dated as of December 1, 1994 to the Chemical Indenture (incorporated by reference to Exhibit 10.46 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663)) 4.9 -- Series Supplement, dated as of June 1, 1999, by and between Beverly Funding Corporation and The Chase Manhattan Bank ("1999-1 Series Supplement") (incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 4.10 -- First Amendment, dated as of July 14, 1999, to the 1999-1 Series Supplement (incorporated by reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) In accordance with item 601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to Beverly Enterprises, Inc.'s long-term obligations have not been filed; copies thereof will be furnished to the Securities and Exchange Commission upon request. 10.1* -- Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663)) 10.2* -- New Beverly Holdings, Inc. 1997 Long-Term Incentive Plan (the "1997 LTIP") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Registration Statement on Form S-8 filed on December 8, 1997 (File No. 333-41669)) 10.3* -- Amendment No. 1 to the 1997 LTIP dated as of December 3, 1997 (incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.4* -- New Beverly Holdings, Inc. Non-Employee Directors' Stock Option Plan (the "Directors' Option Plan") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Registration Statement on Form S-8 filed on December 12, 1997 (File No. 333-42131)) 10.5* -- Amendment No. 1 to the Directors' Option Plan dated as of December 3, 1997 (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.6* -- Beverly Enterprises, Inc. Stock Grant Plan 10.7* -- Executive Medical Reimbursement Plan (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987) 10.8* -- Form of the Beverly Enterprises, Inc. Executive Life Insurance Plan Split Dollar Agreement 10.9* -- Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.10* -- Amended and Restated Deferred Compensation Plan effective July 18, 1991 (incorporated by reference to Exhibit 10.6 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1991) 10.11* -- Amendment No. 1, effective September 29, 1994, to the Deferred Compensation Plan (incorporated by reference to Exhibit 10.13 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663))
66 68
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.12* -- Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987) 10.13* -- Amendment No. 1, effective as of July 1, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly Enterprises, Inc.'s 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, Inc.'s 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, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992) 10.16* -- Amendment No. 4, effective as of January 1, 1993, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994) 10.17* -- Amendment No. 5, effective as of September 29, 1994, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994) 10.18* -- Amendment No. 6, effective as of January 1, 1996, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.19* -- Amendment No. 7, effective as of September 1, 1997, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.20* -- Amendment No. 8, dated as of December 11, 1997, to the Executive Retirement Plan, changing its name to the "Executive SavingsPlus Plan" (incorporated by reference to Exhibit 10.20 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.21* -- Beverly Enterprises, Inc. Amended and Restated Supplemental Executive Retirement Plan effective as of April 1, 2000 10.22* -- Beverly Enterprises, Inc. Amended and Restated Executive Deferred Compensation Plan effective July 1, 2000 10.23* -- Beverly Enterprises, Inc. Non-Employee Director Deferred Compensation Plan (the "Directors' Plan") (incorporated by reference to Exhibit 10.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997) 10.24* -- Amendment No. 1, effective as of December 3, 1997, to the Directors' Plan (incorporated by reference to Exhibit 10.26 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.25* -- Beverly Enterprises, Inc.'s Supplemental Long-Term Disability Plan (incorporated by reference to Exhibit 10.24 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996) 10.26* -- Form of Indemnification Agreement between Beverly Enterprises, Inc. and its officers, directors and certain of its employees (incorporated by reference to Exhibit 19.14 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1987)
67 69
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.27* -- Form of request by Beverly Enterprises, Inc. to certain of its officers or directors relating to indemnification rights (incorporated by reference to Exhibit 19.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.28* -- Form of request by Beverly Enterprises, Inc. to certain of its officers or employees relating to indemnification rights (incorporated by reference to Exhibit 19.6 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.29* -- Agreement dated December 29, 1986 between Beverly Enterprises, Inc. and Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on January 18, 1990 (File No. 33-33052)) 10.30* -- Employment Contract, made as of August 22, 1997, between New Beverly Holdings, Inc. and David R. Banks (incorporated by reference to Exhibit 10.17 to Amendment No. 2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on September 22, 1997 (File No. 333-28521)) 10.31* -- Employment Contract, made as of April 10, 2000, between Beverly Enterprises, Inc. and William R. Floyd 10.32* -- Form of Employment Contract, made as of August 22, 1997, between New Beverly Holdings, Inc. and certain of its officers (incorporated by reference to Exhibit 10.20 to Amendment No. 2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on September 22, 1997 (File No. 333-28521)) 10.33 -- Master Lease Document -- General Terms and Conditions dated December 30, 1985 for Leases between Beverly California Corporation and various subsidiaries thereof as lessees and Beverly Investment Properties, Inc. as lessor (incorporated by reference to Exhibit 10.12 to Beverly California Corporation's Annual Report on Form 10-K for the year ended December 31, 1985) 10.34 -- Agreement dated as of December 29, 1986 among Beverly California Corporation, Beverly Enterprises -- Texas, Inc., Stephens Inc. and Real Properties, Inc. (incor- porated by reference to Exhibit 28 to Beverly California Corporation's Current Report on Form 8-K dated December 30, 1986) and letter agreement dated as of July 31, 1987 among Beverly Enterprises, Inc., Beverly California Corporation, Beverly Enterprises -- Texas, Inc. and Stephens Inc. with reference thereto (incorporated by reference to Exhibit 19.13 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1987)
68 70
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.35 -- Participation Agreement, dated as of August 28, 1998, among Vantage Healthcare Corporation, Petersen Health Care, Inc., Beverly Savana Cay Manor, Inc., Beverly Enterprises -- Georgia, Inc., Beverly Enterprises -- California, Inc., Beverly Health and Rehabilitation Services, Inc., Beverly Enterprises -- Arkansas, Inc., Beverly Enterprises -- Florida, Inc. and Beverly Enterprises -- Washington, Inc. as Lessees and Structural Guarantors; Beverly Enterprises, Inc. as Representative, Construction Agent and Parent Guarantor; Bank of Montreal Global Capital Solutions, Inc. as Agent Lessor and Lessor; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency, Bank of America National Trust and Savings Association and Bank of Montreal, as Lenders; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency as Arranger; and Bank of Montreal as Co-Arranger and Syndication Agent and Administrative Agent for the Lenders with respect to the Lease Financing of New Headquarters for Beverly Enterprises, Inc., Assisted Living and Nursing Facilities for Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.37 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998) 10.36 -- Master Amendment No. 1 to Amended and Restated Participation Agreement and Amended and Restated Master Lease and Open-End Mortgage, entered into as of September 30, 1999, among Beverly Enterprises, Inc. as Representative, Construction Agent, Parent Guarantor and Lessee; Bank of Montreal Global Capital Solutions, Inc., as Lessor and Agent Lessor; and Bank of Montreal, as Administrative Agent, Arranger and Syndication Agent (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 10.37 -- Amendment No. 2 to Amended and Restated Participation Agreement entered into as of April 14, 2000 10.38 -- Amendment to Participation Agreement dated as of December 29, 2000 10.39 -- Amended and Restated Credit Agreement, dated as of April 30, 1998, among Beverly Enterprises, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Issuing Bank and Agent (the "Credit Agreement") (incorporated by reference to Exhibit 10.38 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998) 10.40 -- Amendment No. 1 to the Credit Agreement, dated as of September 30, 1999 (incorporated by reference to Exhibit 10.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 10.41 -- Amendment No. 2 to the Credit Agreement dated as of October 31, 1999 10.42 -- Amendment No. 3 to the Credit Agreement dated as of December 22, 2000 10.43 -- Master Services Agreement, dated as of September 18, 1997, by and between Alltel Information Services, Inc. and Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.41 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.44 -- Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc. Executive Benefits Plan (incorporated by reference to Exhibit 10.55 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663))
69 71
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.45 -- Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.43 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.46 -- Plea Agreement (incorporated by reference to Exhibit 10.44 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.47 -- Addendum to Plea Agreement (incorporated by reference to Exhibit 10.45 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.48 -- Settlement Agreement between the United States of America, Beverly Enterprises, Inc. and Domenic Todarello (incorporated by reference to Exhibit 10.46 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.49 -- Agreement Regarding the Operations of Beverly Enterprises -- California, Inc. (incorporated by reference to Exhibit 10.47 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 21.1 -- Subsidiaries of Registrant 23.1 -- Consent of Ernst & Young LLP, Independent Auditors
- --------------- * Exhibits 10.1 through 10.32 are the management contracts, compensatory plans, contracts and arrangements in which any director or named executive officer participates. 70 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BEVERLY ENTERPRISES, INC. Registrant Dated: March 30, 2001 By: /s/ WILLIAM R. FLOYD ---------------------------------- William R. Floyd President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated: /s/ DAVID R. BANKS Chairman of the Board and March 30, 2001 - ----------------------------------------------------- Director David R. Banks /s/ WILLIAM R. FLOYD President, Chief March 30, 2001 - ----------------------------------------------------- Executive Officer and William R. Floyd Director /s/ SCOTT M. TABAKIN Executive Vice President March 30, 2001 - ----------------------------------------------------- and Chief Financial Scott M. Tabakin Officer /s/ PAMELA H. DANIELS Senior Vice President, March 30, 2001 - ----------------------------------------------------- Controller and Chief Pamela H. Daniels Accounting Officer /s/ BERYL F. ANTHONY, JR. Director March 30, 2001 - ----------------------------------------------------- Beryl F. Anthony, Jr. /s/ CAROLYNE K. DAVIS Director March 30, 2001 - ----------------------------------------------------- Carolyne K. Davis /s/ JAMES R. GREENE Director March 30, 2001 - ----------------------------------------------------- James R. Greene /s/ EDITH E. HOLIDAY Director March 30, 2001 - ----------------------------------------------------- Edith E. Holiday /s/ JON E.M. JACOBY Director March 30, 2001 - ----------------------------------------------------- Jon E.M. Jacoby /s/ JAMES W. MCLANE Director March 30, 2001 - ----------------------------------------------------- James W. McLane /s/ RISA J. LAVIZZO-MOUREY Director March 30, 2001 - ----------------------------------------------------- Risa J. Lavizzo-Mourey /s/ MARILYN R. SEYMANN Director March 30, 2001 - ----------------------------------------------------- Marilyn R. Seymann
71 73 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 3.1 -- Form of Restated Certificate of Incorporation of New Beverly Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 3.2 -- Form of Certificate of Amendment of Certificate of Incorporation of New Beverly Holdings Inc., changing its name to Beverly Enterprises, Inc. (incorporated by reference to Exhibit 3.2 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 3.3 -- By-Laws of Beverly Enterprises, Inc. (incorporated by reference to Exhibit 3.4 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on June 4, 1997 (File No. 333-28521)) 4.1 -- Indenture dated as of February 1, 1996 between Beverly Enterprises, Inc. and Chemical Bank, as Trustee, with respect to Beverly Enterprises, Inc.'s 9% Senior Notes due February 15, 2006 (the "9% Indenture") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995) 4.2 -- Form of Supplemental Indenture No. 2 to the 9% Indenture dated as of November 19, 1997 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on September 8, 1997 (File No. 333-35137)) 4.3 -- Indenture dated as of April 1, 1993 (the "First Mortgage Bond Indenture"), among Beverly Enterprises, Inc., Delaware Trust Company, as Corporate Trustee, and Richard N. Smith, as Individual Trustee, with respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.4 -- First Supplemental Indenture dated as of April 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds due 2008 (incorporated by reference to Exhibit 4.2 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1993) 4.5 -- Second Supplemental Indenture dated as of July 1, 1993 to the First Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds due 2008 (replaces Exhibit 4.1 to Beverly Enterprises, Inc.'s Current Report on Form 8-K dated July 15, 1993) (incorporated by reference to Exhibit 4.15 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 4.6 -- Trust Indenture dated as of December 1, 1994 from Beverly Funding Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical Indenture") (incorporated by reference to Exhibit 10.45 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No.33-57663)) 4.7 -- First Amendment and Restatement, dated as of June 1, 1999, of Trust Indenture, dated as of December 1, 1994, from Beverly Funding Corporation, as Issuer, to The Chase Manhattan Bank, as Trustee (incorporated by reference to Exhibit 10.2 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
74
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 4.8 -- Series Supplement dated as of December 1, 1994 to the Chemical Indenture (incorporated by reference to Exhibit 10.46 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663)) 4.9 -- Series Supplement, dated as of June 1, 1999, by and between Beverly Funding Corporation and The Chase Manhattan Bank ("1999-1 Series Supplement") (incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 4.10 -- First Amendment, dated as of July 14, 1999, to the 1999-1 Series Supplement (incorporated by reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) In accordance with item 601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to Beverly Enterprises, Inc.'s long-term obligations have not been filed; copies thereof will be furnished to the Securities and Exchange Commission upon request. 10.1* -- Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.4 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663)) 10.2* -- New Beverly Holdings, Inc. 1997 Long-Term Incentive Plan (the "1997 LTIP") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Registration Statement on Form S-8 filed on December 8, 1997 (File No. 333-41669)) 10.3* -- Amendment No. 1 to the 1997 LTIP dated as of December 3, 1997 (incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.4* -- New Beverly Holdings, Inc. Non-Employee Directors' Stock Option Plan (the "Directors' Option Plan") (incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s Registration Statement on Form S-8 filed on December 12, 1997 (File No. 333-42131)) 10.5* -- Amendment No. 1 to the Directors' Option Plan dated as of December 3, 1997 (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.6* -- Beverly Enterprises, Inc. Stock Grant Plan 10.7* -- Executive Medical Reimbursement Plan (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987) 10.8* -- Form of the Beverly Enterprises, Inc. Executive Life Insurance Plan Split Dollar Agreement 10.9* -- Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993) 10.10* -- Amended and Restated Deferred Compensation Plan effective July 18, 1991 (incorporated by reference to Exhibit 10.6 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1991) 10.11* -- Amendment No. 1, effective September 29, 1994, to the Deferred Compensation Plan (incorporated by reference to Exhibit 10.13 to Beverly Enterprises, Inc.'s Registration Statement on Form S-4 filed on February 13, 1995 (File No. 33-57663))
75
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.12* -- Executive Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987) 10.13* -- Amendment No. 1, effective as of July 1, 1991, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly Enterprises, Inc.'s 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, Inc.'s 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, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992) 10.16* -- Amendment No. 4, effective as of January 1, 1993, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994) 10.17* -- Amendment No. 5, effective as of September 29, 1994, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994) 10.18* -- Amendment No. 6, effective as of January 1, 1996, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.19* -- Amendment No. 7, effective as of September 1, 1997, to the Executive Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.20* -- Amendment No. 8, dated as of December 11, 1997, to the Executive Retirement Plan, changing its name to the "Executive SavingsPlus Plan" (incorporated by reference to Exhibit 10.20 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.21* -- Beverly Enterprises, Inc. Amended and Restated Supplemental Executive Retirement Plan effective as of April 1, 2000 10.22* -- Beverly Enterprises, Inc. Amended and Restated Executive Deferred Compensation Plan effective July 1, 2000 10.23* -- Beverly Enterprises, Inc. Non-Employee Director Deferred Compensation Plan (the "Directors' Plan") (incorporated by reference to Exhibit 10.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997) 10.24* -- Amendment No. 1, effective as of December 3, 1997, to the Directors' Plan (incorporated by reference to Exhibit 10.26 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997) 10.25* -- Beverly Enterprises, Inc.'s Supplemental Long-Term Disability Plan (incorporated by reference to Exhibit 10.24 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996) 10.26* -- Form of Indemnification Agreement between Beverly Enterprises, Inc. and its officers, directors and certain of its employees (incorporated by reference to Exhibit 19.14 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1987)
76
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.27* -- Form of request by Beverly Enterprises, Inc. to certain of its officers or directors relating to indemnification rights (incorporated by reference to Exhibit 19.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.28* -- Form of request by Beverly Enterprises, Inc. to certain of its officers or employees relating to indemnification rights (incorporated by reference to Exhibit 19.6 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) 10.29* -- Agreement dated December 29, 1986 between Beverly Enterprises, Inc. and Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on January 18, 1990 (File No. 33-33052)) 10.30* -- Employment Contract, made as of August 22, 1997, between New Beverly Holdings, Inc. and David R. Banks (incorporated by reference to Exhibit 10.17 to Amendment No. 2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on September 22, 1997 (File No. 333-28521)) 10.31* -- Employment Contract, made as of April 10, 2000, between Beverly Enterprises, Inc. and William R. Floyd 10.32* -- Form of Employment Contract, made as of August 22, 1997, between New Beverly Holdings, Inc. and certain of its officers (incorporated by reference to Exhibit 10.20 to Amendment No. 2 to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on September 22, 1997 (File No. 333-28521)) 10.33 -- Master Lease Document -- General Terms and Conditions dated December 30, 1985 for Leases between Beverly California Corporation and various subsidiaries thereof as lessees and Beverly Investment Properties, Inc. as lessor (incorporated by reference to Exhibit 10.12 to Beverly California Corporation's Annual Report on Form 10-K for the year ended December 31, 1985) 10.34 -- Agreement dated as of December 29, 1986 among Beverly California Corporation, Beverly Enterprises -- Texas, Inc., Stephens Inc. and Real Properties, Inc. (incor- porated by reference to Exhibit 28 to Beverly California Corporation's Current Report on Form 8-K dated December 30, 1986) and letter agreement dated as of July 31, 1987 among Beverly Enterprises, Inc., Beverly California Corporation, Beverly Enterprises -- Texas, Inc. and Stephens Inc. with reference thereto (incorporated by reference to Exhibit 19.13 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1987)
77
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.35 -- Participation Agreement, dated as of August 28, 1998, among Vantage Healthcare Corporation, Petersen Health Care, Inc., Beverly Savana Cay Manor, Inc., Beverly Enterprises -- Georgia, Inc., Beverly Enterprises -- California, Inc., Beverly Health and Rehabilitation Services, Inc., Beverly Enterprises -- Arkansas, Inc., Beverly Enterprises -- Florida, Inc. and Beverly Enterprises -- Washington, Inc. as Lessees and Structural Guarantors; Beverly Enterprises, Inc. as Representative, Construction Agent and Parent Guarantor; Bank of Montreal Global Capital Solutions, Inc. as Agent Lessor and Lessor; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency, Bank of America National Trust and Savings Association and Bank of Montreal, as Lenders; The Long-Term Credit Bank of Japan, LTD., Los Angeles Agency as Arranger; and Bank of Montreal as Co-Arranger and Syndication Agent and Administrative Agent for the Lenders with respect to the Lease Financing of New Headquarters for Beverly Enterprises, Inc., Assisted Living and Nursing Facilities for Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.37 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998) 10.36 -- Master Amendment No. 1 to Amended and Restated Participation Agreement and Amended and Restated Master Lease and Open-End Mortgage, entered into as of September 30, 1999, among Beverly Enterprises, Inc. as Representative, Construction Agent, Parent Guarantor and Lessee; Bank of Montreal Global Capital Solutions, Inc., as Lessor and Agent Lessor; and Bank of Montreal, as Administrative Agent, Arranger and Syndication Agent (incorporated by reference to Exhibit 10.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 10.37 -- Amendment No. 2 to Amended and Restated Participation Agreement entered into as of April 14, 2000 10.38 -- Amendment to Participation Agreement dated as of December 29, 2000 10.39 -- Amended and Restated Credit Agreement, dated as of April 30, 1998, among Beverly Enterprises, Inc., the Banks listed therein and Morgan Guaranty Trust Company of New York, as Issuing Bank and Agent (the "Credit Agreement") (incorporated by reference to Exhibit 10.38 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998) 10.40 -- Amendment No. 1 to the Credit Agreement, dated as of September 30, 1999 (incorporated by reference to Exhibit 10.1 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 10.41 -- Amendment No. 2 to the Credit Agreement dated as of October 31, 1999 10.42 -- Amendment No. 3 to the Credit Agreement dated as of December 22, 2000 10.43 -- Master Services Agreement, dated as of September 18, 1997, by and between Alltel Information Services, Inc. and Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.41 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.44 -- Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc. Executive Benefits Plan (incorporated by reference to Exhibit 10.55 to Beverly Enterprises, Inc.'s Registration Statement of Form S-4 filed on February 13, 1995 (File No. 33-57663))
78
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.45 -- Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.43 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.46 -- Plea Agreement (incorporated by reference to Exhibit 10.44 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.47 -- Addendum to Plea Agreement (incorporated by reference to Exhibit 10.45 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.48 -- Settlement Agreement between the United States of America, Beverly Enterprises, Inc. and Domenic Todarello (incorporated by reference to Exhibit 10.46 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 10.49 -- Agreement Regarding the Operations of Beverly Enterprises -- California, Inc. (incorporated by reference to Exhibit 10.47 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999) 21.1 -- Subsidiaries of Registrant 23.1 -- Consent of Ernst & Young LLP, Independent Auditors
- --------------- * Exhibits 10.1 through 10.32 are the management contracts, compensatory plans, contracts and arrangements in which any director or named executive officer participates. EX-13.2 9 c63210ex13-2.txt QUARTERLY REPORT ON FORM 10-Q PERIOD END 3/31/01 1 Exhibit 13.2 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 MARCH 31, 2001 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 62-1691861 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE THOUSAND BEVERLY WAY FORT SMITH, ARKANSAS 72919 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 201-2000 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 APRIL 30, 2001 - 103,641,593 2 BEVERLY ENTERPRISES, INC. FORM 10-Q MARCH 31, 2001 TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets ................... 2 Condensed Consolidated Statements of Operations ......... 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 ........................... 11 PART II -- OTHER INFORMATION Item 1. Legal Proceedings ................................................ 17 Item 6. Exhibits and Reports on Form 8-K ................................. 19
1 3 PART I BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31, 2001 2000 ---- ---- (UNAUDITED) (NOTE) ASSETS Current assets: Cash and cash equivalents ................................................... $ 25,861 $ 25,908 Accounts receivable - patient, less allowance for doubtful accounts: 2001 - $86,717; 2000 - $91,636 ........................................... 328,213 323,143 Accounts receivable - nonpatient, less allowance for doubtful accounts: 2001 - $776; 2000 - $1,106 ............................................... 9,356 19,831 Notes receivable, less allowance for doubtful notes: 2001 - $72; 2000 - $72 . 17,781 2,197 Operating supplies .......................................................... 26,681 29,134 Deferred income taxes ....................................................... 69,124 24,379 Assets held for sale ........................................................ 122,079 -- Prepaid expenses and other .................................................. 19,600 18,787 ----------- ----------- Total current assets ................................................. 618,695 443,379 Property and equipment, net of accumulated depreciation and amortization: 2001 - $734,097; 2000 - $805,557 ............................................ 863,939 1,063,247 Other assets: Goodwill, net ............................................................... 201,295 203,742 Deferred income taxes ....................................................... 26,891 27,721 Other, less allowance for doubtful accounts and notes: 2001 - $3,727; 2000 - $3,767 ............................................. 132,779 137,904 ----------- ----------- Total other assets ................................................... 360,965 369,367 ----------- ----------- $ 1,843,599 $ 1,875,993 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ............................................................ $ 89,122 $ 84,420 Accrued wages and related liabilities ....................................... 102,965 106,300 Accrued interest ............................................................ 7,519 15,744 Other accrued liabilities ................................................... 102,008 99,136 Current portion of long-term debt ........................................... 62,568 227,111 ----------- ----------- Total current liabilities ............................................ 364,182 532,711 Long-term debt .................................................................. 703,928 564,247 Other liabilities and deferred items ............................................ 237,942 195,042 Commitments and contingencies Stockholders' equity: Preferred stock, shares authorized: 25,000,000 .............................. -- -- Common stock, shares issued: 2001 - 112,157,746; 2000 - 112,818,798 ........ 11,216 11,282 Additional paid-in capital .................................................. 880,918 876,981 Accumulated deficit ......................................................... (246,205) (193,931) Accumulated other comprehensive income ...................................... 896 718 Treasury stock, at cost: 2001 - 8,515,758 shares; 2000 - 9,061,300 shares .. (109,278) (111,057) ----------- ----------- Total stockholders' equity ........................................... 537,547 583,993 ----------- ----------- $ 1,843,599 $ 1,875,993 =========== ===========
NOTE: The balance sheet at December 31, 2000 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. See accompanying notes. 2 4 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2001 2000 --------- --------- Net operating revenues ............................................. $ 659,468 $ 646,102 Interest income .................................................... 387 825 --------- --------- Total revenues ............................................... 659,855 646,927 Costs and expenses: Operating and administrative: Wages and related .............................................. 397,962 389,716 Provision for insurance and related items ...................... 27,163 20,513 Other .......................................................... 178,512 181,646 Interest .......................................................... 19,110 19,618 Depreciation and amortization ..................................... 24,464 25,336 Asset impairments, workforce reductions and other unusual items ... 107,689 -- --------- --------- Total costs and expenses ..................................... 754,900 636,829 --------- --------- Income (loss) before provision for (benefit from) income taxes ..... (95,045) 10,098 Provision for (benefit from) income taxes .......................... (42,771) 3,837 --------- --------- Net income (loss) .................................................. $ (52,274) $ 6,261 ========= ========= Net income (loss) per share of common stock: Basic and diluted net income (loss) per share of common stock .. $ (0.50) $ 0.06 ========= ========= Shares used to compute basic net income (loss) per share ....... 103,705 102,281 ========= ========= Shares used to compute diluted net income (loss) per share ..... 103,705 102,402 ========= =========
See accompanying notes. 3 5 BEVERLY ENTERPRISES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) (IN THOUSANDS)
2001 2000 --------- --------- Cash flows from operating activities: Net income (loss) ..................................................................... $ (52,274) $ 6,261 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization ...................................................... 24,464 25,336 Provision for reserves on patient, notes and other receivables, net ................ 7,112 5,564 Amortization of deferred financing costs ........................................... 666 624 Asset impairments, workforce reductions and other unusual items .................... 107,689 -- Gains on dispositions of facilities and other assets, net .......................... (1,099) (2,162) Deferred income taxes .............................................................. (44,035) 3,567 Insurance related accounts ......................................................... 28,494 5,660 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable - patient .................................................... (12,584) (36,590) Operating supplies ............................................................... (171) 503 Prepaid expenses and other receivables ........................................... (1,571) (1,973) Accounts payable and other accrued expenses ...................................... (25,267) (42,142) Income taxes payable ............................................................. (621) (23) Other, net ....................................................................... (1,204) (858) --------- --------- Total adjustments ............................................................. 81,873 (42,494) --------- --------- Net cash provided by (used for) operating activities .......................... 29,599 (36,233) Cash flows from investing activities: Capital expenditures ............................................................... (13,941) (19,982) Proceeds from dispositions of facilities and other assets .......................... 4,415 9,926 Payments for acquisitions, net of cash acquired .................................... (74) (1,263) Collections on notes receivable .................................................... 19 294 Other, net ......................................................................... 347 (2,352) --------- --------- Net cash used for investing activities ........................................ (9,234) (13,377) Cash flows from financing activities: Revolver borrowings ................................................................ 369,000 539,000 Repayments of Revolver borrowings .................................................. (351,000) (485,000) Repayments of long-term debt ....................................................... (39,166) (5,649) Purchase of common stock for treasury .............................................. -- (3,289) Proceeds from exercise of stock options ............................................ 698 -- Deferred financing costs paid ...................................................... (356) (38) Proceeds from designated funds, net ................................................ 412 119 --------- --------- Net cash provided by (used for) financing activities .......................... (20,412) 45,143 --------- --------- Net decrease in cash and cash equivalents ................................................ (47) (4,467) Cash and cash equivalents at beginning of period ......................................... 25,908 24,652 --------- --------- Cash and cash equivalents at end of period ............................................... $ 25,861 $ 20,185 ========= ========= Supplemental schedule of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized $ 26,669 $ 23,667 Income tax payments, net 1,885 293
See accompanying notes. 4 6 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) (1) References throughout this document to the Company include Beverly Enterprises, Inc. and its wholly owned subsidiaries. In accordance with the Securities and Exchange Commission's "Plain English" guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words "we", "our", "ours" and "us" refer only to Beverly Enterprises, Inc. and its wholly owned subsidiaries and not to any other person. We have prepared the condensed consolidated financial statements, without audit. In management's opinion, they include all normal recurring adjustments necessary for a fair presentation of the results of operations for the three months ended March 31, 2001 and 2000 in accordance with the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures required by generally accepted accounting principles have been condensed or omitted, we believe 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 along with our 2000 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Our results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results for a full year. Generally accepted accounting principles require management to make estimates and assumptions when preparing financial statements that affect: - the reported amounts of assets and liabilities at the date of the financial statements; and - the reported amounts of revenues and expenses during the reporting period. They also require management to make estimates and assumptions regarding any contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Approximately 77% and 74% of our net operating revenues for the three months ended March 31, 2001 and 2000, respectively, were derived from funds under federal and state medical assistance programs. We accrue for revenues when services are provided at standard charges. These charges are adjusted to amounts that we estimate to receive under governmental programs and other third-party contractual arrangements based on contractual terms and historical experience. These revenues are reported at their estimated net realizable amounts and are subject to audit and retroactive adjustment. Retroactive adjustments are considered in the recognition of revenues on an estimated basis in the period the related services are rendered. Such amounts are adjusted in future periods as adjustments become known or as cost reporting years are no longer subject to audits, reviews or investigations. Due to the complexity of the laws and regulations governing the Medicare and Medicaid programs, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. 5 7 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 (UNAUDITED) The following table sets forth the calculation of basic and diluted earnings per share for the three months ended March 31 (in thousands):
2001 2000 ---- ---- NUMERATOR: Numerator for basic and diluted net income (loss) per share ..... $ (52,274) $ 6,261 ========= ========= DENOMINATOR: Denominator for basic net income (loss) per share - weighted average shares ................................................ 103,705 102,281 Effect of dilutive securities: Employee stock options ......................................... -- 121 --------- --------- Denominator for diluted net income (loss) per share - adjusted weighted average shares and assumed conversions ............... 103,705 102,402 ========= ========= Basic and diluted net income (loss) per share ................... $ (0.50) $ 0.06 ========= =========
Comprehensive income (loss) includes net income (loss), as well as charges and credits to stockholders' equity not included in net income (loss). The components of comprehensive income (loss), net of income taxes, consist of the following for the three months ended March 31 (in thousands):
2001 2000 ---- ---- Net income (loss) .................................................. $(52,274) $ 6,261 Foreign currency translation adjustments, net of income taxes ...... (44) 469 Net unrealized gains (losses) on available-for-sale securities, net of income taxes .................................................. 222 (768) -------- -------- Comprehensive income (loss) ........................................ $(52,096) $ 5,962 ======== ========
The components of accumulated other comprehensive income, net of income taxes, consist of the following (in thousands):
MARCH 31, DECEMBER 31, 2001 2000 ---- ---- Foreign currency translation adjustments .......... $339 $383 Unrealized gains on available-for-sale securities . 557 335 ---- ---- $896 $718 ==== ====
Certain prior year amounts have been reclassified to conform with the 2001 financial statements presentation. 6 8 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 (UNAUDITED) (2) The provision for (benefit from) income taxes for the three months ended March 31, 2001 and 2000 were based on estimated annual effective tax rates of 45% and 38%, respectively. Our estimated annual effective tax rates for 2001 and 2000 were different than the federal statutory rate primarily due to the impact of state income taxes, amortization of nondeductible goodwill and the benefit of certain tax credits. Our estimated annual effective tax rate increased to 45% in 2001 primarily due to the pre-tax charge for asset impairments, workforce reductions and other unusual items of approximately $107,700,000, which reduced our pre-tax income to a level where the impact of permanent tax differences and state income taxes had a significant impact on the effective tax rate. Our net deferred tax assets at March 31, 2001 are expected to be realized through the reversal of temporary taxable differences, future taxable income and the implementation of tax planning strategies, as needed. Therefore, we do not believe that a deferred tax valuation allowance is necessary at March 31, 2001. The provision for (benefit from) income taxes consists of the following for the three months ended March 31 (in thousands):
2001 2000 -------- -------- Federal: Current $ 311 $ 88 Deferred (42,603) 2,949 State: Current 953 182 Deferred (1,432) 618 -------- -------- $(42,771) $ 3,837 ======== ========
(3) During the three months ended March 31, 2001, we acquired a parcel of land and certain other assets for cash of approximately $62,000 and closing and other costs of approximately $65,000. The acquisitions of such assets were accounted for as purchases. Also during such period, we sold, closed or terminated the leases on nine nursing facilities (815 beds) and one outpatient therapy clinic for cash proceeds of approximately $7,000,000 and a note receivable of approximately $300,000. We did not operate two of the nursing facilities (234 beds) which had been leased to another nursing home operator. We recognized net pre-tax gains, which were included in net operating revenues during the first quarter of 2001, of approximately $1,100,000 as a result of these dispositions. The operations of these facilities and certain other assets were immaterial to our consolidated financial position and results of operations. During the three months ended March 31, 2001, we restructured the lease agreement related to 10 nursing facilities in the state of Indiana. In addition, we terminated the lease on one nursing facility (223 beds) leased from the same landlord. We recorded a pre-tax charge of approximately $3,300,000 related to the termination of this lease, including the write-off of the net book value of this property. (4) During the first quarter of 2001, a formal plan was initiated by management to pursue the sale of our nursing home operations in Florida. Such decision was made due to the excessive patient care liability costs that we have been incurring in recent periods in the state of Florida. Accordingly, the property and equipment, identifiable intangibles and operating supplies of our Florida nursing home operations at March 31, 2001 were considered assets to be disposed of, as that term is defined in Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). Management estimated the fair value less selling costs of such assets based upon verbal and non-binding purchase prices from potential buyers and determined that an impairment write-down was necessary as of March 31, 2001. The pre-tax charge related to this write-down was approximately $68,900,000. In addition, we recorded a pre-tax charge of approximately $17,200,000 for certain costs to exit the Florida facilities (as defined below). These costs relate to severance agreements, termination payments on certain contracts and various other items. Such pre-tax charges have been included in the condensed consolidated statement of operations caption "Asset impairments, workforce reductions and other unusual items." At March 31, 2001, the assets held for sale totaled approximately $122,100,000 and are classified as current assets in the condensed consolidated balance sheet, as we expect to close a transaction on the Florida facilities in 2001. 7 9 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 (UNAUDITED) Our Florida nursing home operations include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities") currently being marketed as a group, as well as one additional nursing facility (56 beds) and certain other assets which we plan to sell in separate transactions. All of these assets are included in the total assets of our nursing facilities segment (see Note 7). We are currently negotiating with a potential purchaser of all of the Florida facilities. Other potential purchasers have expressed an interest in purchasing all or portions of the Florida facilities. During the three months ended March 31, 2001, our Florida nursing home operations recorded a pre-tax loss of approximately $1,100,000. Included in this pre-tax loss was depreciation and amortization expense of approximately $2,600,000. In accordance with SFAS No. 121, depreciation and amortization expense will be excluded from our consolidated statement of operations during the period these assets are held for sale, as these assets are now recorded at their estimated net realizable value. (5) In January 2001, we filed a registration statement under Form S-8 with the Securities and Exchange Commission registering 1,174,500 shares of our Common Stock. These shares were previously repurchased by the Company and held in treasury. Such shares are expected to be issued under the Beverly Enterprises, Inc. Stock Grant Plan (the "Stock Grant Plan"). Shares of Common Stock will be issued under the Stock Grant Plan to holders of restricted shares who, by virtue of the terms of their employment contracts, severance agreements or other similar arrangements, have a claim to the immediate vesting of their restricted stock. In conjunction with the reorganization in the first quarter of 2001 (as discussed in Note 7), 545,542 shares of Common Stock under the Stock Grant Plan were issued to various officers who made such claims, and the shares of restricted stock held by such officers were cancelled. During the first quarter of 2001, we incurred a pre-tax charge of approximately $3,700,000 related to the issuance of shares under the Stock Grant Plan, which was included in the workforce reductions and other reorganization costs (as discussed in Note 7). During April 2001, we completed the restructuring of our $375,000,000 credit facility, which was scheduled to mature on December 31, 2001. We entered into a new $150,000,000 revolving credit facility (the "Credit Facility") and issued $200,000,000 of 9 5/8% senior notes due 2009 (the "Senior Notes") through a private placement. The Senior Notes are unsecured obligations, guaranteed by substantially all of our present and future subsidiaries (the "Subsidiary Guarantors") and impose on us certain restrictive covenants. The net proceeds from issuance of the Senior Notes were used to repay borrowings under the $375,000,000 credit facility and for general corporate purposes. The Credit Facility provides for a Revolver/Letter of Credit Facility. Borrowings under the Credit Facility will bear interest according to a pricing schedule based on our financial leverage and will bear an initial interest rate of adjusted LIBOR plus 2.875%, the Base Rate, as defined, plus 1.875% or the adjusted CD rate, as defined, plus 3%, at our option. Such interest rates may be adjusted quarterly based on certain financial ratio calculations. The Credit Facility is secured by mortgages on certain nursing facilities, is guaranteed by the Subsidiary Guarantors and imposes on us certain financial tests and restrictive covenants. (6) There are various lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages that are generally not covered by insurance. We do not believe that the ultimate resolution of such matters will have a material adverse effect on our consolidated financial position or results of operations. (See "Part II, Item 1. Legal Proceedings"). (7) Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" provides disclosure guidelines for segments of a company based on a management approach to defining operating segments. 8 10 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 (UNAUDITED) In January 2001, we implemented a new three-year strategic plan aimed at accomplishing four fundamental strategies: - streamline our nursing home portfolio to strengthen our long-term financial position; - accelerate the growth of our service and knowledge business; - establish a leadership position in eldercare; and - reengineer our organization in order to focus our resources on profitable growth and new opportunities. In order to support the implementation of these strategies, in the first quarter of 2001, we reorganized our business into three primary operating segments: - nursing facilities, which provide long-term healthcare through the operation of nursing homes and assisted living centers; - innovation and services group, which include rehabilitation therapy, hospice, home care and a business strategy and development division; and - Matrix/Theraphysics, which operate outpatient therapy clinics and a managed care network. As a result of this reorganization, we recorded a pre-tax charge of approximately $18,300,000 during the first quarter of 2001. Approximately $17,400,000 related to severance and other employment agreements for 108 associates. Approximately $14,300,000 was paid during the first quarter of 2001, with the remainder expected to be paid throughout 2001. Included in the pre-tax charge were non-cash expenses of approximately $3,700,000 related to the issuance of shares under the Stock Grant Plan and $600,000 related to other long-term incentive agreements. During the fourth quarter of 2000, we incurred a pre-tax charge of approximately $3,500,000 primarily due to severance agreements associated with four executives who were notified prior to December 31, 2000 of the Company's intent to terminate their employment in conjunction with this reorganization. Substantially all of this amount was paid during the first quarter of 2001. 9 11 BEVERLY ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 (UNAUDITED) The following table summarizes certain information for each of our operating segments (in thousands):
INNOVATION NURSING AND SERVICES MATRIX/ FACILITIES GROUP THERAPHYSICS ALL OTHER (1) TOTALS ---------- ----- ------------ ------------- ------ Three months ended March 31, 2001 Revenues from external customers ...... $ 608,057 $ 27,141 $ 23,460 $ 810 $ 659,468 Intercompany revenues ................. -- 42,004 -- 2,829 44,833 Interest income ....................... 57 -- 32 298 387 Interest expense ...................... 6,341 30 12 12,727 19,110 Depreciation and amortization ......... 19,485 1,071 2,444 1,464 24,464 Pre-tax income (loss) ................. 20,579 10,060 (3,248) (122,436) (95,045) Total assets .......................... 1,420,591 109,285 163,659 150,064 1,843,599 Capital expenditures .................. 12,102 990 554 295 13,941 Three months ended March 31, 2000 Revenues from external customers ...... $ 593,363 $ 27,475 $ 23,462 $ 1,802 $ 646,102 Intercompany revenues ................. -- 35,505 -- 2,880 38,385 Interest income ....................... 47 -- 30 748 825 Interest expense ...................... 6,883 53 32 12,650 19,618 Depreciation and amortization ......... 19,897 1,003 2,693 1,743 25,336 Pre-tax income (loss) ................. 22,404 6,271 (2,120) (16,457) 10,098 Total assets .......................... 1,524,956 107,937 217,047 142,855 1,992,795 Capital expenditures .................. 15,196 1,333 850 2,603 19,982
- ---------- (1) Consists of the operations of our corporate headquarters and related overhead, as well as certain non-operating revenues and expenses. Such amounts also include pre-tax charges related to asset impairments, workforce reductions and other unusual items totaling approximately $107,700,000 for 2001. 10 12 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 2001 (UNAUDITED) GENERAL FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q, and other information we provide from time to time, contains certain "forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations or cash flows, our continued performance improvements, our ability to service and refinance our debt obligations, our ability to finance growth opportunities, our ability to control our patient care liability costs, our ability to respond to changes in government regulations, our ability to execute our three-year strategic plan, our ability to execute a transaction with respect to our Florida nursing operations and similar statements including, without limitation, those containing words such as "believes," "anticipates," "expects," "intends," "estimates," "plans," and other similar expressions are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors: - national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials; - the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations; - changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries; - liabilities and other claims asserted against the Company, including patient care liabilities, as well as the resolution of the Class Action and Derivative Lawsuits (see "Part II, Item 1. Legal Proceedings"); - our ability to attract and retain qualified personnel; - the availability and terms of capital to fund acquisitions and capital improvements; - the competitive environment in which we operate; - our ability to maintain and increase census levels; and - demographic changes. Investors should also refer to Item 1. Business in our 2000 Annual Report on Form 10-K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risks inherent in them. Given these risks and uncertainties, we can give no assurances that any forward-looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them. OPERATING RESULTS FIRST QUARTER 2001 COMPARED TO FIRST QUARTER 2000 RESULTS OF OPERATIONS We reported a net loss for the first quarter of 2001 of $52,274,000, compared to net income of $6,261,000 for the same period in 2000. Net loss for 2001 included pre-tax charges totaling approximately $107,700,000, including $68,900,000 for asset impairments, $18,300,000 for workforce reductions and other reorganization costs and $20,500,000 for Florida exit costs and other unusual items. 11 13 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARCH 31, 2001 (UNAUDITED) During the first quarter of 2001, a formal plan was initiated by management to pursue the sale of our nursing home operations in Florida. Such decision was made due to the excessive patient care liability costs that we have been incurring in recent periods in the state of Florida. Accordingly, the property and equipment, identifiable intangibles and operating supplies of our Florida nursing home operations at March 31, 2001 were considered assets to be disposed of, as that term is defined in Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). Management estimated the fair value less selling costs of such assets based upon verbal and non-binding purchase prices from potential buyers and determined that an impairment write-down was necessary as of March 31, 2001. The pre-tax charge related to this write-down was approximately $68,900,000. In addition, we recorded a pre-tax charge of approximately $17,200,000 for certain costs to exit the Florida facilities (as defined below). These costs relate to severance agreements, termination payments on certain contracts and various other items. Such pre-tax charges have been included in the condensed consolidated statement of operations caption "Asset impairments, workforce reductions and other unusual items." At March 31, 2001, the assets held for sale totaled approximately $122,100,000 and are classified as current assets in the condensed consolidated balance sheet, as we expect to close a transaction on the Florida facilities in 2001. Our Florida nursing home operations include 49 nursing facilities (6,129 beds) and four assisted living centers (315 units) (the "Florida facilities") currently being marketed as a group, as well as one additional nursing facility (56 beds) and certain other assets which we plan to sell in separate transactions. All of these assets are included in the total assets of our nursing facilities segment. We are currently negotiating with a potential purchaser of all of the Florida facilities. Other potential purchasers have expressed an interest in purchasing all or portions of the Florida facilities. During the three months ended March 31, 2001, our Florida nursing home operations recorded a pre-tax loss of approximately $1,100,000. Included in this pre-tax loss was depreciation and amortization expense of approximately $2,600,000. In accordance with SFAS No. 121, depreciation and amortization expense will be excluded from our consolidated statement of operations during the period these assets are held for sale, as these assets are now recorded at their estimated net realizable value. In January 2001, we implemented a new three-year strategic plan aimed at accomplishing four fundamental strategies: - streamline our nursing home portfolio to strengthen our long-term financial position; - accelerate the growth of our service and knowledge business; - establish a leadership position in eldercare; and - reengineer our organization in order to focus our resources on profitable growth and new opportunities. In order to support the implementation of these strategies, in the first quarter of 2001, we reorganized our business into three primary operating segments: - nursing facilities, which provide long-term healthcare through the operation of nursing homes and assisted living centers; - service companies, which include rehabilitation therapy, hospice, home care and a research and development division; and - Matrix/Theraphysics, which operate outpatient therapy clinics and a managed care network. 12 14 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARCH 31, 2001 (UNAUDITED) As a result of this reorganization, we recorded a pre-tax charge of approximately $18,300,000 during the first quarter of 2001. Approximately $17,400,000 related to severance and other employment agreements for 108 associates. Approximately $14,300,000 was paid during the first quarter of 2001, with the remainder expected to be paid throughout 2001. Included in the pre-tax charge were non-cash expenses of approximately $3,700,000 related to the issuance of shares under the Stock Grant Plan and $600,000 related to other long-term incentive agreements. During the fourth quarter of 2000, we incurred a pre-tax charge of approximately $3,500,000 primarily due to severance agreements associated with four executives who were notified prior to December 31, 2000 of the Company's intent to terminate their employment in conjunction with this reorganization. Substantially all of this amount was paid during the first quarter of 2001. Also during the first quarter of 2001, we restructured the lease agreement related to 10 nursing facilities in the state of Indiana. In addition, we terminated the lease on one nursing facility (223 beds) leased from the same landlord. We recorded a pre-tax charge of approximately $3,300,000 related to the termination of this lease, including the write-off of the net book value of this property. INCOME TAXES We had estimated annual effective tax rates of 45% and 38% for the quarters ended March 31, 2001 and 2000, respectively. Our estimated annual effective tax rates for 2001 and 2000 were different than the federal statutory rate primarily due to the impact of state income taxes, amortization of nondeductible goodwill and the benefit of certain tax credits. Our estimated annual effective tax rate increased to 45% in 2001 primarily due to the pre-tax charge for asset impairments, workforce reductions and other unusual items of approximately $107,700,000, which reduced our pre-tax income to a level where the impact of permanent tax differences and state income taxes had a significant impact on the effective tax rate. Our net deferred tax assets at March 31, 2001 are expected to be realized through the reversal of temporary taxable differences, future taxable income and the implementation of tax planning strategies, as needed. Therefore, we do not believe that a deferred tax valuation allowance is necessary at March 31, 2001. NET OPERATING REVENUES We reported net operating revenues of $659,468,000 during the first quarter of 2001 compared to $646,102,000 for the same period in 2000. Approximately 92% of our total net operating revenues for the quarters ended March 31, 2001 and 2000 were derived from services provided by our nursing facilities segment. The increase in net operating revenues of approximately $13,400,000 for the first quarter of 2001, as compared to the same period in 2000, consists of the following: - an increase of $36,200,000 due to facilities which we operated during each of the quarters ended March 31, 2001 and 2000 ("same facility operations"); - an increase of $10,200,000 due to acquisitions and openings of newly-constructed facilities; and - a decrease of $33,000,000 due to dispositions. The increase in net operating revenues of $36,200,000 from same facility operations for the first quarter of 2001, as compared to the same period in 2000, was primarily due to an increase in Medicaid, Medicare and private rates totaling $44,900,000. Such increase was partially offset by decreases of: - $5,900,000 due to one less calendar day during the first quarter of 2001, as compared to the same period in 2000; - $5,400,000 due to a decline in same facility occupancy to 87.2% for the first quarter of 2001, as compared to 87.4% for the same period in 2000; and - $1,800,000 due to a shift in our patient mix. 13 15 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARCH 31, 2001 (UNAUDITED) Our Medicare, private and Medicaid census for same facility operations was 10%, 18% and 71%, respectively, for the first quarter of 2001, as compared to 10%, 19% and 70%, respectively, for the same period in 2000. Acquisitions and openings of newly-constructed facilities which occurred during the three months ended March 31, 2001 and the year ended December 31, 2000 caused our net operating revenues to increase $10,200,000 for the first quarter of 2001, as compared to the same period in 2000. During the three months ended March 31, 2001, we acquired a parcel of land and certain other assets. During 2000, we acquired seven nursing facilities (1,210 beds), one previously leased nursing facility (105 beds) and certain other assets. In addition, we opened four newly-constructed nursing facilities (418 beds) during 2000. The acquisitions of the facilities and other assets were accounted for as purchases. The operations of the acquired facilities and other assets, as well as the newly-constructed facilities, were immaterial to our consolidated financial position and results of operations. Dispositions that occurred during the three months ended March 31, 2001 and the year ended December 31, 2000 caused our net operating revenues to decrease $33,000,000 for the first quarter of 2001, as compared to the same period in 2000. During the three months ended March 31, 2001, we sold, closed or terminated the leases on 10 nursing facilities (1,038 beds) and one outpatient therapy clinic. We recognized net pre-tax gains, which were included in net operating revenues during the three months ended March 31, 2001, of approximately $1,100,000 as a result of these dispositions. During 2000, we sold, closed or terminated the leases on 39 nursing facilities (4,263 beds) and certain other assets. We recognized net pre-tax gains, which were included in net operating revenues during the year ended December 31, 2000, of approximately $2,000,000 as a result of these dispositions. The operations of the disposed facilities and other assets were immaterial to our consolidated financial position and results of operations. OPERATING AND ADMINISTRATIVE EXPENSES We reported operating and administrative expenses of $603,637,000 during the first quarter of 2001 compared to $591,875,000 for the same period in 2000. The increase of approximately $11,800,000 consists of the following: - an increase of $29,400,000 due to same facility operations; - an increase of $11,500,000 due to acquisitions and openings of newly-constructed facilities; and - a decrease of $29,100,000 due to dispositions. The increase in operating and administrative expenses of $29,400,000 from same facility operations for the first quarter of 2001, as compared to the same period in 2000, was due primarily to the following: - $20,400,000 of additional wages and related expenses primarily due to an increase in our weighted average wage rate; - $6,600,000 due to an increase in our provision for insurance and related items; and - $1,900,000 due to an increase in other contracted services. 14 16 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARCH 31, 2001 (UNAUDITED) INTEREST EXPENSE, NET Interest income decreased to $387,000 for the first quarter of 2001, as compared to $825,000 for the same period in 2000 primarily due to the payoff of various notes receivable. Interest expense decreased to $19,110,000 for the first quarter of 2001, as compared to $19,618,000 for the same period in 2000 primarily due to the paydown of the A.I. Credit Corp. note in January 2001, as well as various other debt paydowns. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense decreased to $24,464,000 for the first quarter of 2001, as compared to $25,336,000 for the same period in 2000, primarily due to dispositions of, or lease terminations on, certain facilities. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2001, we had approximately $25,900,000 in cash and cash equivalents, approximately $254,500,000 of net working capital and approximately $160,200,000 of unused commitments under our $375,000,000 credit facility. Net cash provided by operating activities for the first quarter of 2001 was approximately $29,600,000. This amount was up approximately $65,800,000 from the first quarter of 2000 primarily due to the following: - the $25,000,000 civil and $5,000,000 criminal settlement payments made during the first quarter of 2000, which negatively impacted the first quarter of 2000 operating cash flows; - proceeds received during the first quarter of 2001 of $28,900,000 related to a refund of certain workers compensation premiums and a settlement on certain insurance policies; and - a reduction in patient accounts receivable during the first quarter of 2001 compared to the first quarter of 2000. Net cash used for investing and financing activities were approximately $9,200,000 and $20,400,000, respectively, for the first quarter of 2001. We received net cash proceeds of approximately $4,400,000 from the dispositions of facilities and other assets. Such net cash proceeds, along with net borrowings under our $375,000,000 credit facility of approximately $18,000,000, cash generated from operations and cash on hand, were used to repay approximately $39,200,000 of long-term debt and to fund capital expenditures totaling approximately $13,900,000. In January 2001, we filed a registration statement under Form S-8 with the Securities and Exchange Commission registering 1,174,500 shares of our Common Stock. These shares were previously repurchased by the Company and held in treasury. Such shares are expected to be issued under the Beverly Enterprises, Inc. Stock Grant Plan (the "Stock Grant Plan"). Shares of Common Stock will be issued under the Stock Grant Plan to holders of restricted shares who, by virtue of the terms of their employment contracts, severance agreements or other similar arrangements, have a claim to the immediate vesting of their restricted stock. In conjunction with the reorganization in the first quarter of 2001 (as discussed above), 545,542 shares of Common Stock under the Stock Grant Plan were issued to various officers who made such claims, and the shares of restricted stock held by such officers were cancelled. We incurred a pre-tax charge of approximately $3,700,000 related to the issuance of shares under the Stock Grant Plan, which was included in the workforce reductions and other reorganization costs (as discussed above). 15 17 BEVERLY ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARCH 31, 2001 (UNAUDITED) At March 31, 2001, we leased 11 nursing facilities (6 of which are in Florida), one assisted living center and our corporate headquarters under an off-balance sheet financing arrangement subject to operating leases with the creditor. We have the option to purchase the facilities at the end of the initial lease terms at fair market value. Such financing arrangement was entered into for the construction of these facilities and had an original commitment of $125,000,000. In April 2000, the agreement covering this financing arrangement was amended whereby availability under the original commitment was reduced to $113,500,000, which equaled the total construction advances made as of the date of the amended agreement. During April 2001, we completed the restructuring of our $375,000,000 credit facility, which was scheduled to mature on December 31, 2001. We entered into a new $150,000,000 revolving credit facility (the "Credit Facility") and issued $200,000,000 of 9 5/8% senior notes due 2009 (the "Senior Notes") through a private placement. The Senior Notes are unsecured obligations, guaranteed by substantially all of our present and future subsidiaries (the "Subsidiary Guarantors") and impose on us certain restrictive covenants. The net proceeds from issuance of the Senior Notes were used to repay borrowings under the $375,000,000 credit facility and for general corporate purposes. The Credit Facility provides for a Revolver/Letter of Credit Facility. Borrowings under the Credit Facility will bear interest according to a pricing schedule based on our financial leverage and will bear an initial interest rate of adjusted LIBOR plus 2.875%, the Base Rate, as defined, plus 1.875% or the adjusted CD rate, as defined, plus 3%, at our option. Such interest rates may be adjusted quarterly based on certain financial ratio calculations. The Credit Facility is secured by mortgages on certain nursing facilities, is guaranteed by the Subsidiary Guarantors and imposes on us certain financial tests and restrictive covenants. We currently anticipate that cash flows from operations and borrowings under our banking arrangements will be adequate to repay our debts due within one year of approximately $62,600,000, to make normal recurring capital additions and improvements of approximately $77,000,000, to make selective acquisitions, including the purchase of previously leased facilities, to construct new facilities, and to meet working capital requirements for the twelve months ending March 31, 2002. If cash flows from operations or availability under our existing banking arrangements fall below expectations, we may be required to delay capital expenditures, dispose of certain assets, issue additional debt securities, or consider other alternatives to improve liquidity. 16 18 PART II BEVERLY ENTERPRISES, INC. OTHER INFORMATION MARCH 31, 2001 (UNAUDITED) ITEM 1. LEGAL PROCEEDINGS On February 3, 2000, we entered into a series of agreements with the U.S. Department of Justice and the Office of Inspector General (the "OIG") of the Department of Health and Human Services. These agreements settled the federal government's investigations of the Company relating to our allocation to the Medicare program of certain nursing labor costs in our skilled nursing facilities from 1990 to 1998 (the "Allocation Investigations"). The agreements consist of: - a Plea Agreement; - a Civil Settlement Agreement; - a Corporate Integrity Agreement; and - an agreement concerning the disposition of 10 nursing facilities. Under the Plea Agreement, one of our subsidiaries pled guilty to one count of mail fraud and 10 counts of making false statements to Medicare and paid a criminal fine of $5,000,000 during the first quarter of 2000. Under the Civil Settlement Agreement, we paid the federal government $25,000,000 during the first quarter of 2000 and are reimbursing the federal government an additional $145,000,000 through withholdings from our biweekly Medicare periodic interim payments in equal installments through the first quarter of 2008. In addition, we agreed to resubmit certain Medicare filings to reflect reduced labor costs allocated to the Medicare program. Under the Corporate Integrity Agreement, we are required to monitor, on an ongoing basis, our compliance with the requirements of the federal healthcare programs. This agreement addresses our obligations to ensure that we comply with the requirements for participation in the federal healthcare programs. It also includes our functional and training obligations, audit and review requirements, recordkeeping and reporting requirements, as well as penalties for breach/noncompliance of the agreement. We believe that we are in substantial compliance with the requirements of the Corporate Integrity Agreement. In accordance with our agreement to dispose of 10 nursing facilities, we disposed of seven of the facilities during 2000 and two of the facilities during the first quarter of 2001. We expect to dispose of the remaining facility during 2001. The carrying value of this facility has been adjusted to our best estimate of its net realizable value. On July 6, 1999, an amended complaint was filed by the plaintiffs in a previously disclosed purported class action lawsuit pending against the Company and certain of our officers in the United States District Court for the Eastern District of Arkansas (the "Class Action"). Plaintiffs filed a second amended complaint on September 9, 1999 which asserted claims under Section 10(b) (including Rule 10b-5 promulgated thereunder) and under Section 20 of the Securities Exchange Act of 1934 arising from practices that were the subject of the Allocation Investigations. The defendants filed a motion to dismiss that complaint on October 8, 1999. Oral agreement on this motion was held on April 6, 2000. Due to the preliminary state of the Class Action and the fact the second amended complaint does not allege damages with any specificity, we are unable at this time to assess the probable outcome of the Class Action or the materiality of the risk of loss. We believe that we acted lawfully with respect to plaintiff investors and will vigorously defend the Class Action. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. 17 19 BEVERLY ENTERPRISES, INC. OTHER INFORMATION (CONTINUED) MARCH 31, 2001 (UNAUDITED) In addition, since July 29, 1999, eight derivative lawsuits have been filed in the federal and state courts of Arkansas, California and Delaware, as well as the federal district court in Arkansas, (collectively, the "Derivative Actions"), including: - Norman M. Lyons v. David R. Banks, et al., Case No. OT99-4041, was filed in the Chancery Court of Pulaski County, Arkansas (4th Division) on or about July 29, 1999, and the parties filed an Agreed Motion to Stay the proceedings on January 17, 2000; - Alfred Badger, Jr. v. David R. Banks, et al., Case No. OT99-4353, was filed in the Chancery Court of Pulaski County, Arkansas (1st Division) on or about August 17, 1999 and voluntarily dismissed on November 30, 1999; - James L. Laurita v. David R. Banks, et al., Case No. 17348NC, was filed in the Delaware Chancery Court on or about August 2, 1999; - Kenneth Abbey v. David R. Banks, et al., Case No. 17352NC, was filed in the Delaware Chancery Court on or about August 4, 1999; - Alan Friedman v. David R. Banks, et al., Case No. 17355NC, was filed in the Delaware Chancery Court on or about August 9, 1999; - Elles Trading Company v. David R. Banks, et al., was filed in the Superior Court for San Francisco County, California on or about August 4, 1999 and removed to federal district court; - Kushner v. David R. Banks, et al., Case No. LR-C-98-646, was filed in the United States District Court for the Eastern District of Arkansas (Western Division) on September 30, 1999; and - Richardson v. David R. Banks, et al., Case No. LR-C-99-826, was filed in the United States District Court for the Eastern District of Arkansas (Western Division) on November 4, 1999. The Laurita, Abbey and Friedman actions were subsequently consolidated by order of the Delaware Chancery Court. On or about October 1, 1999, the defendants moved to dismiss the Laurita, Abbey and Friedman actions. The parties have agreed to stay the consolidated action pending the outcome of the motion to dismiss in the Class Action. The plaintiffs in the Elles Trading Company action filed a notice of voluntary dismissal on February 3, 2000. The Kushner and Richardson actions were ordered to be consolidated as In Re Beverly Enterprises, Inc. Derivative Litigation and by agreed motion, Plaintiffs filed an amended, consolidated complaint on April 21, 2000. Defendants filed a motion to dismiss the consolidated derivative complaint and a motion to strike portions thereof on July 21, 2000. The parties have agreed to stay the consolidated action pending the outcome of the motion to dismiss in the Class Action, but the stipulation has not been entered by the Court. The Derivative Actions each name the Company's directors as defendants, as well as the Company as a nominal defendant. The Badger and Lyons actions also name as defendants certain of the Company's officers. The Derivative Actions each allege breach of fiduciary duties to the Company and its stockholders arising primarily out of the Company's alleged exposure to loss due to the Class Action and the Allocation Investigations. The Lyons, Badger and Richardson actions also assert claims for abuse of control and constructive fraud arising from the same allegations and the Richardson action also claims unjust enrichment. 18 20 BEVERLY ENTERPRISES, INC. OTHER INFORMATION (CONTINUED) MARCH 31, 2001 (UNAUDITED) Due to the preliminary state of the Derivative Actions and the fact the complaints do not allege damages with any specificity, we are unable at this time to assess the probable outcome of the Derivative Actions or the materiality of the risk of loss. We believe that we acted lawfully with respect to the allegations of the Derivative Actions and will vigorously defend the Derivative Actions. However, we can give no assurances of the ultimate impact on our consolidated financial position, results of operations or cash flows as a result of these proceedings. There are various other lawsuits and regulatory actions pending against the Company arising in the normal course of business, some of which seek punitive damages that are generally not covered by insurance. We do not believe that the ultimate resolution of such other matters will have a material adverse effect on our consolidated financial position or results of operations. ITEM 6(a). EXHIBITS
EXHIBIT NUMBER DESCRIPTION 10.1 Form of Employment and Severance Agreement, made as of March 31, 2001, between the Company and Scott M. Tabakin
ITEM 6(b). REPORTS ON FORM 8-K We filed a Current Report on Form 8-K, dated March 30, 2001, which reported under Item 5 that our preliminary operating results for the first quarter of 2001 should equal or slightly exceed the six cents per share earned during the first quarter of 2000. 19 21 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: May 15, 2001 By: /s/ PAMELA H. DANIELS ------------------------------ Pamela H. Daniels Senior Vice President, Controller and Chief Accounting Officer 20 22 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION 10.1 Form of Employment and Severance Agreement, made as of March 31, 2001, between the Company and Scott M. Tabakin
EX-23.1 10 c63210ex23-1.txt CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the captions "Selected Historical Consolidated Financial Data" and "Experts" in the Registration Statement (Form S-4) and related Prospectus of Beverly Enterprises, Inc. for the registration of $200,000,000 of 9 5/8 % Senior Notes due April 15, 2009, and to the incorporation by reference therein of our report dated February 5, 2001, with respect to the consolidated financial statements and schedule of Beverly Enterprises, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Little Rock, Arkansas June 14, 2001 EX-24.2 11 c63210ex24-2.txt POWER OF ATTORNEY OF THE GUARANTORS 1 EXHIBIT 24.2 CERTAIN GUARANTORS Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ David R. Devereaux ----------------------------------- David R. Devereaux /s/ Kevin M. Roberts ----------------------------------- Kevin M. Roberts /s/ Schuyler Hollingsworth, Jr. ----------------------------------- Schuyler Hollingsworth, Jr. 2 EXHIBIT A Guarantors AGI-Camelot, Inc. Beverly - Bella Vista Holding, Inc. Beverly - Branson Holdings, Inc. Beverly - Missouri Valley Holding, Inc. Beverly - Rapid City Holding, Inc. Beverly Enterprises - Arkansas, Inc. Beverly Enterprises - Illinois, Inc. Beverly Enterprises - Indiana, Inc. Beverly Enterprises - Kansas, Inc. Beverly Enterprises - Michigan, Inc. Beverly Enterprises - Minnesota, Inc. Beverly Enterprises - Missouri, Inc. Beverly Enterprises - Nebraska, Inc. Beverly Enterprises - Nevada, Inc. Beverly Enterprises - New Hampshire, Inc. Beverly Enterprises - New Mexico, Inc. Beverly Enterprises - North Dakota, Inc. Beverly Enterprises - Oklahoma, Inc. Beverly Enterprises - Oregon, Inc. Beverly Enterprises - Rhode Island, Inc. Beverly Enterprises - Tennessee, Inc. Beverly Enterprises - Texas, Inc. Beverly Enterprises - Utah, Inc. Beverly Enterprises - Vermont, Inc. Beverly Enterprises - Washington, Inc. Beverly Enterprises - Wisconsin, Inc. Beverly Enterprises - Wyoming, Inc. Beverly Healthcare, LLC Beverly-Indianapolis, LLC Commercial Management, Inc. Nebraska City S-C-H, Inc. South Alabama Nursing Home, Inc. South Dakota - Beverly Enterprises, Inc. Vantage Healthcare Corporation 3 CERTAIN GUARANTORS Power of Attorney of Director Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ David R. Devereaux ----------------------------------- David R. Devereaux /s/ Jerry S. Roles ----------------------------------- Jerry S. Roles /s/ Schuyler Hollingsworth, Jr. ----------------------------------- Schuyler Hollingsworth, Jr. 4 EXHIBIT A Guarantors Beverly Assisted Living, Inc. Beverly - Plant City Holdings, Inc. Beverly - Tamarac Holdings, Inc. Beverly - Tampa Holdings, Inc. Beverly Clinical, Inc. Beverly Enterprises - Alabama, Inc. Beverly Enterprises - Arizona, Inc. Beverly Enterprises - Colorado, Inc. Beverly Enterprises - Connecticut, Inc. Beverly Enterprises - Delaware, Inc. Beverly Enterprises - Distribution Services, Inc. Beverly Enterprises - District of Columbia, Inc. Beverly Enterprises - Florida, Inc. Beverly Enterprises - Garden Terrace, Inc. Beverly Enterprises - Georgia, Inc. Beverly Enterprises - Hawaii, Inc. Beverly Enterprises - Idaho, Inc. Beverly Enterprises - Iowa, Inc. Beverly Enterprises - Kentucky, Inc. Beverly Enterprises - Louisiana, Inc. Beverly Enterprises - Maine, Inc. Beverly Enterprises - Maryland, Inc. Beverly Enterprises - Massachusetts, Inc. Beverly Enterprises - Mississippi, Inc. Beverly Enterprises - Montana, Inc. Beverly Enterprises - New Jersey, Inc. Beverly Enterprises - North Carolina, Inc. Beverly Enterprises - Ohio, Inc. Beverly Enterprises - Pennsylvania, Inc. Beverly Enterprises - South Carolina, Inc. Beverly Enterprises - Virginia, Inc. Beverly Enterprises - West Virginia, Inc. Beverly Healthcare Acquisition, Inc. Beverly Healthcare - California, Inc. Beverly Holdings I, Inc. Beverly Manor Inc. of Hawaii Beverly Real Estate Holdings, Inc. 5 Beverly Savana Cay Manor, Inc. Hallmark Convalescent Homes, Inc. Liberty Nursing Homes, Incorporated Medical Arts Health Facility of Lawrenceville, Inc. Moderncare of Lumberton, Inc. Nursing Home Operators, Inc. Petersen Health Care, Inc. 6 CERTAIN GUARANTORS Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ T. Jerald Moore ------------------------------- T. Jerald Moore /s/ Schuyler Hollingsworth, Jr ------------------------------- Schuyler Hollingsworth, Jr. 7 EXHIBIT A Guarantors Arborland Management Company, Inc. Associated Physical Therapy Practitioners, Inc. Carrollton Physical Therapy Clinic, Inc. Greenville Rehabilitation Services, Inc. Home Health and Rehabilitation Services, Inc. Las Colinas Physical Therapy, Inc. Matrix Occupational Health, Inc. Matrix Rehabilitation - Delaware, Inc. Matrix Rehabilitation - Georgia, Inc. Matrix Rehabilitation - Maryland, Inc. Matrix Rehabilitation - Ohio, Inc. Matrix Rehabilitation - South Carolina, Inc. Matrix Rehabilitation - Texas, Inc. Matrix Rehabilitation - Washington, Inc. Matrix Rehabilitation, Inc. Network For Physical Therapy, Inc. North Dallas Physical Therapy Associates, Inc. PT Net (Colorado), Inc. PT Net, Inc. Rehabilitation Associates of Lafayette, Inc. The Parks Physical Therapy And Work Hardening Center, Inc. Theraphysics Corp. Theraphysics of New York IPA, Inc. Theraphysics Partners of Colorado, Inc. Theraphysics Partners of Louisiana, Inc. Theraphysics Partners of Texas, Inc. Theraphysics Partners of Western Pennsylvania, Inc. 8 CERTAIN GUARANTORS Power of Attorney of Director Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ William A. Mathies ------------------------------------ William A. Mathies /s/ Schuyler Hollingsworth, Jr. ------------------------------------ Schuyler Hollingsworth, Jr. /s/ Glen R. Cavallo ------------------------------------ Glen R. Cavallo 9 EXHIBIT A Guarantors Homecare Preferred Choice, Inc. Compassion and Personal Care Services, Inc. Community Care, Inc. Eastern Home Health Supply & Equipment Co., Inc. Hospice of Eastern Carolina, Inc. Hospice Preferred Choice, Inc. HTHC Holdings, Inc. Tar Heel Infusion Company, Inc. 10 CERTAIN GUARANTORS Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ David R. Banks ---------------------------- David R. Banks /s/ Bobby W. Stephens ---------------------------- Bobby W. Stephens /s/ Pamela H. Daniels ---------------------------- Pamela H. Daniels 11 EXHIBIT A Guarantors Beverly Enterprises International Limited TMD Disposition Company 12 CERTAIN GUARANTORS Power of Attorney of Director Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ William A. Mathies ------------------------------------- William A. Mathies /s/ Schuyler Hollingsworth, Jr. ------------------------------------- Schuyler Hollingsworth, Jr. /s/ T. Jerald Moore ------------------------------------- T. Jerald Moore 13 EXHIBIT A Guarantors Spectra Healthcare Alliance, Inc. 14 CERTAIN GUARANTORS Power of Attorney of Director and/or Officer Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ David R. Devereaux -------------------------------- David R. Devereaux /s/ John E. Williams -------------------------------- John E. Williams /s/ Schuyler Hollingsworth, Jr. -------------------------------- Schuyler Hollingsworth, Jr. 15 EXHIBIT A Guarantors Beverly Health and Rehabilitation Services, Inc. 16 CERTAIN GUARANTORS Power of Attorney of Director Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ William A. Mathies ------------------------------------ William A. Mathies /s/ Mark A. Linam ------------------------------------ Mark A. Linam /s/ Schuyler Hollingsworth, Jr. ------------------------------------ Schuyler Hollingsworth, Jr. 17 EXHIBIT A Guarantors Aegis Therapies, Inc. 18 CERTAIN GUARANTORS Power of Attorney of Director Each of the undersigned directors and/or officers of the guarantors attached hereto as Exhibit A (the "Guarantors") does hereby constitute and appoint Douglas J. Babb and John W. MacKenzie, and each of them, with full power of substitution and full power to act without the other, his true and lawful attorney-in-fact and agents to act for him in his name, place and stead, in any and all capacities, to sign a registration statement on Form S-4 and any or all amendments thereto (including without limitation any post-effective amendments thereto), and any registration statement for the same offering that is to be effective under Rule 462(b) of the Securities Act, and to file each of the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 14th day of June, 2001. /s/ William R. Floyd --------------------------------- William R. Floyd /s/ Pamela H. Daniels --------------------------------- Pamela H. Daniels /s/ Schuyler Hollingsworth, Jr. --------------------------------- Schuyler Hollingsworth, Jr. /s/ Robert E. Fancy --------------------------------- Robert E. Fancy 19 EXHIBIT A Guarantors Beverly Indemnity, Ltd. EX-25.1 12 c63210ex25-1.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ----------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ----------- BEVERLY ENTERPRISES, INC. (Exact name of obligor as specified in its charter) Delaware 62-16191861 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) AEGIS THERAPIES, INC. (F/K/A BEVERLY REHABILITATION, INC.) (Exact name of obligor as specified in its charter) Delaware 71-0811574 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) AGI-CAMELOT, INC. (Exact name of obligor as specified in its charter) Missouri 43-1253376 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2 ARBORLAND MANAGEMENT COMPANY, INC. (Exact name of obligor as specified in its charter) South Carolina 58-2340689 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) ASSOCIATED PHYSICAL THERAPY PRACTITIONERS, INC. (Exact name of obligor as specified in its charter) Pennsylvania 23-2638708 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ASSISTED LIVING, INC. (Exact name of obligor as specified in its charter) Delaware 71-0777901 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY - BELLA VISTA HOLDING, INC. (Exact name of obligor as specified in its charter) Delaware 71-0797481 (State or other jurisdiction of I.R.S. employer incorporation or organization) identification no.) BEVERLY - BRANSON HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0817008 (State or other jurisdiction of I.R.S. employer incorporation or organization) identification no.) BEVERLY - INDIANAPOLIS, LLC (Exact name of obligor as specified in its charter) Indiana 71-0824184 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2 3 BEVERLY - MISSOURI VALLEY HOLDING, INC. (Exact name of obligor as specified in its charter) Delaware 71-0797485 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY - PLANT CITY HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0817010 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY - RAPID CITY HOLDING, INC. (Exact name of obligor as specified in its charter) Delaware 71-0797483 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY - TAMARAC HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0817009 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY - TAMPA HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0817007 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY CLINICAL (Exact name of obligor as specified in its charter) Delaware 71-0796035 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 3 4 BEVERLY ENTERPRISES INTERNATIONAL LIMITED (Exact name of obligor as specified in its charter) California 95-3982125 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - ALABAMA, INC. (Exact name of obligor as specified in its charter) California 95-3742145 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - ARIZONA, INC. (Exact name of obligor as specified in its charter) California 95-3750871 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - ARKANSAS, INC. (Exact name of obligor as specified in its charter) California 95-3751272 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - CALIFORNIA, INC. (Exact name of obligor as specified in its charter) California 95-2499218 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - COLORADO, INC. (Exact name of obligor as specified in its charter) California 95-3750882 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 4 5 BEVERLY ENTERPRISES - CONNECTICUT, INC. (Exact name of obligor as specified in its charter) California 95-3849642 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - DELAWARE, INC. (Exact name of obligor as specified in its charter) California 95-3849628 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - DISTRIBUTION SERVICES, INC. (Exact name of obligor as specified in its charter) California 95-4081567 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - DISTRICT OF COLUMBIA, INC. (Exact name of obligor as specified in its charter) California 95-3750889 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - FLORIDA, INC. (Exact name of obligor as specified in its charter) California 95-3742251 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - GARDEN TERRACE, INC. (Exact name of obligor as specified in its charter) California 95-3849648 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 5 6 BEVERLY ENTERPRISES - GEORGIA, INC. (Exact name of obligor as specified in its charter) California 95-3750880 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - HAWAII, INC. (Exact name of obligor as specified in its charter) California 95-3750890 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - IDAHO, INC. (Exact name of obligor as specified in its charter) California 95-3750886 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - ILLINOIS, INC. (Exact name of obligor as specified in its charter) California 95-3750883 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - INDIANA, INC. (Exact name of obligor as specified in its charter) California 95-3744258 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - IOWA, INC. (Exact name of obligor as specified in its charter) California 95-3751271 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 6 7 BEVERLY ENTERPRISES - KANSAS, INC. (Exact name of obligor as specified in its charter) California 95-3751269 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - KENTUCKY, INC. (Exact name of obligor as specified in its charter) California 95-3750894 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - LOUISANA, INC. (Exact name of obligor as specified in its charter) California 95-3849633 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MAINE, INC. (Exact name of obligor as specified in its charter) California 95-3849627 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MARYLAND, INC. (Exact name of obligor as specified in its charter) California 95-3750892 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MASSACHUSETTS, INC. (Exact name of obligor as specified in its charter) California 95-3750893 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 7 8 BEVERLY ENTERPRISES - MICHIGAN, INC. (Exact name of obligor as specified in its charter) California 95-3898661 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MINNESOTA, INC. (Exact name of obligor as specified in its charter) California 95-3742698 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MISSISSIPPI, INC. (Exact name of obligor as specified in its charter) California 95-3742144 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MISSOURI, INC. (Exact name of obligor as specified in its charter) California 95-3750895 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - MONTANA, INC. (Exact name of obligor as specified in its charter) California 95-3849636 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NEBRASKA, INC. (Exact name of obligor as specified in its charter) California 95-3750873 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 8 9 BEVERLY ENTERPRISES - NEVADA, INC. (Exact name of obligor as specified in its charter) California 95-3750896 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NEW HAMPSHIRE, INC. (Exact name of obligor as specified in its charter) California 95-3849630 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NEW JERSEY, INC. (Exact name of obligor as specified in its charter) California 95-3750884 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NEW MEXICO, INC. (Exact name of obligor as specified in its charter) California 95-3750869 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NORTH CAROLINA, INC. (Exact name of obligor as specified in its charter) California 95-3742257 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - NORTH DAKOTA, INC. (Exact name of obligor as specified in its charter) California 95-3751270 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 9 10 BEVERLY ENTERPRISES - OHIO, INC. (Exact name of obligor as specified in its charter) California 95-3750867 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - OKLAHOMA, INC. (Exact name of obligor as specified in its charter) California 95-3849624 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - OREGON, INC. (Exact name of obligor as specified in its charter) California 95-3750881 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - PENNSYLVANIA, INC. (Exact name of obligor as specified in its charter) California 95-3750870 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - RHODE ISLAND, INC. (Exact name of obligor as specified in its charter) California 95-3849621 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - SOUTH CAROLINA, INC. (Exact name of obligor as specified in its charter) California 95-3750866 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 10 11 BEVERLY ENTERPRISES - TENNESSEE, INC. (Exact name of obligor as specified in its charter) California 95-3742261 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - TEXAS, INC. (Exact name of obligor as specified in its charter) California 95-3744256 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - UTAH, INC. (Exact name of obligor as specified in its charter) California 95-3751089 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - VERMONT, INC. (Exact name of obligor as specified in its charter) California 95-3750885 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - VIRGINIA, INC. (Exact name of obligor as specified in its charter) California 95-3742694 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - WASHINGTON, INC. (Exact name of obligor as specified in its charter) California 95-3750868 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 11 12 BEVERLY ENTERPRISES - WEST VIRGINIA, INC. (Exact name of obligor as specified in its charter) California 95-3750888 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - WISCONSIN, INC. (Exact name of obligor as specified in its charter) California 95-3742696 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY ENTERPRISES - WYOMING, INC. (Exact name of obligor as specified in its charter) California 95-3849638 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY HEALTH AND REHABILITATION SERVICES, INC. (Exact name of obligor as specified in its charter) California 95-2301514 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY HEALTHCARE, LLC (Exact name of obligor as specified in its charter) Indiana 71-0817438 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY HEALTHCARE ACQUISITION, INC. (Exact name of obligor as specified in its charter) Delaware 71-0812407 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 12 13 BEVERLY HEALTHCARE - CALIFORNIA, INC. (Exact name of obligor as specified in its charter) California 95-3750879 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY HOLDINGS I, INC. (Exact name of obligor as specified in its charter) Delaware 71-0768985 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY INDEMNITY, LTD. (Exact name of obligor as specified in its charter) Vermont 71-0712927 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY MANOR INC. OF HAWAII (Exact name of obligor as specified in its charter) California 99-0144750 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY REAL ESTATE HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0768984 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BEVERLY SAVANA CAY MANOR, INC. (Exact name of obligor as specified in its charter) California 95-4217381 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 13 14 CARROLLTON PHYSICAL THERAPY CLINIC, INC. (Exact name of obligor as specified in its charter) Texas 75-2102832 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) COMMERCIAL MANAGEMENT, INC. (Exact name of obligor as specified in its charter) Iowa 42-0891358 (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification no.) COMMUNITY CARE, INC. (Exact name of obligor as specified in its charter) North Carolina 56-1487367 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) COMPASSION AND PERSONAL CARE SERVICES, INC. (Exact name of obligor as specified in its charter) North Carolina 56-1904822 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) EASTERN HOME HEALTH SUPPLY & EQUIPMENT CO., INC. (Exact name of obligor as specified in its charter) North Carolina 56-1581980 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) GREENVILLE REHABILITATION SERVICES, INC. (Exact name of obligor as specified in its charter) Texas 75-2059145 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 14 15 HALLMARK CONVALESCENT HOMES, INC. (Exact name of obligor as specified in its charter) Michigan 41-1413478 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HOMECARE PREFERRED CHOICE, INC. (Exact name of obligor as specified in its charter) Delaware 62-1702864 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HOME HEALTH AND REHABILITATION SERVICES, INC. (Exact name of obligor as specified in its charter) Texas 75-2012280 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HOSPICE OF EASTERN CAROLINA, INC. (Exact name of obligor as specified in its charter) North Carolina 56-1951841 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HOSPICE PREFERRED CHOICE, INC. (Exact name of obligor as specified in its charter) Delaware 71-0761314 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HTHC HOLDINGS, INC. (Exact name of obligor as specified in its charter) Delaware 71-0807323 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 15 16 LAS COLINAS PHYSICAL THERAPY CENTER, INC. (Exact name of obligor as specified in its charter) Texas 75-2402177 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) LIBERTY NURSING HOMES, INCORPORATED (Exact name of obligor as specified in its charter) Virginia 54-0784334 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX OCCUPATIONAL HEALTH, INC. (Exact name of obligor as specified in its charter) Delaware 58-2380955 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION, INC. (Exact name of obligor as specified in its charter) Delaware 71-0783147 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - DELAWARE, INC. (Exact name of obligor as specified in its charter) Delaware 71-0842504 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - GEORGIA, INC. (Exact name of obligor as specified in its charter) Delaware 58-2554073 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 16 17 MATRIX REHABILITATION - MARYLAND, INC. (Exact name of obligor as specified in its charter) Delaware 71-0842503 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - OHIO, INC. (Exact name of obligor as specified in its charter) Delaware 71-0842505 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - SOUTH CAROLINA, INC. (Exact name of obligor as specified in its charter) Delaware 73-1575603 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - TEXAS, INC. (Exact name of obligor as specified in its charter) Delaware 73-1589542 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MATRIX REHABILITATION - WASHINGTON, INC. (Exact name of obligor as specified in its charter) Delaware 58-2554074 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) MEDICAL ARTS HEALTH FACILITY OF LAWRENCEVILLE, INC. (Exact name of obligor as specified in its charter) Georgia 58-1329700 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 17 18 MODERNCARE OF LUMBERTON, INC. (Exact name of obligor as specified in its charter) North Carolina 56-1217025 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) NEBRASKA CITY S-C-H, INC. (Exact name of obligor as specified in its charter) Nebraska 41-1413481 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) NETWORK FOR PHYSICAL THERAPY, INC. (Exact name of obligor as specified in its charter) Texas 74-2453469 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) NORTH DALLAS PHYSICAL THERAPY ASSOCIATES, INC. (Exact name of obligor as specified in its charter) Texas 75-2075331 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) NURSING HOME OPERATORS, INC. (Exact name of obligor as specified in its charter) Ohio 34-0949279 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) PETERSEN HEALTH CARE, INC. (Exact name of obligor as specified in its charter) Florida 59-2043392 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 18 19 PT NET, INC. (Exact name of obligor as specified in its charter) Tennessee 62-1575533 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) PT NET (COLORADO), INC. (Exact name of obligor as specified in its charter) Colorado 84-1277912 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) REHABILITATION ASSOCIATES OF LAFAYETTE, INC. (Exact name of obligor as specified in its charter) Louisana 72-1118473 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) SOUTH ALABAMA NURSING HOME, INC. (Exact name of obligor as specified in its charter) Alabama 95-3809397 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) SOUTH DAKOTA - BEVERLY ENTERPRISES, INC. (Exact name of obligor as specified in its charter) California 95-3750887 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) SPECTRA HEALTHCARE ALLIANCE, INC. (Exact name of obligor as specified in its charter) Delaware 71-0759298 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 19 20 TAR HEEL INFUSION COMPANY, INC. (Exact name of obligor as specified in its charter) North Carolina 56-1767308 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) THE PARKS PHYSICAL THERAPY AND WORK HARDENING CENTER, INC. (Exact name of obligor as specified in its charter) Texas 75-2452926 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) THERAPHYSICS CORP. (Exact name of obligor as specified in its charter) Delaware 13-3643705 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) THERAPHYSICS OF NEW YORK IPA, INC. (Exact name of obligor as specified in its charter) New York 71-0817011 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) THERAPHYSICS PARTNERS OF COLORADO, INC. (Exact name of obligor as specified in its charter) Delaware 51-0372115 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) THERAPHYSICS PARTNERS OF TEXAS, INC. (Exact name of obligor as specified in its charter) Delaware 62-1659976 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 20 21 THERAPHYSICS PARTNERS OF WESTERN PENNSYLVANIA (Exact name of obligor as specified in its charter) Delaware 23-2901884 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) TMD DISPOSITION COMPANY (Exact name of obligor as specified in its charter) Delaware 59-3151568 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) VANTAGE HEALTHCARE CORPORATION (Exact name of obligor as specified in its charter) Delaware 35-1572998 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1400 Corporate Center Way Wellington, Florida 33414 (Address of principal executive offices) (Zip code) ------------- 9-5/8% Senior Notes due April 15, 2009 (Title of the indenture securities) ================================================================================ 21 22 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(D). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. 22 23 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 8th day of June, 2001. THE BANK OF NEW YORK By: /s/ THOMAS E. TABOR --------------------------------- Name: THOMAS E. TABOR Title: ASSISTANT VICE PRESIDENT 23 24 EXHIBIT 7 TO T-1 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2000, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.. $ 3,083,720 Interest-bearing balances........................... 4,949,333 Securities: Held-to-maturity securities......................... 740,315 Available-for-sale securities....................... 5,328,981 Federal funds sold and Securities purchased under agreements to resell................................ 5,695,708 Loans and lease financing receivables: Loans and leases, net of unearned income...............36,590,456 LESS: Allowance for loan and lease losses............598,536 LESS: Allocated transfer risk reserve..................12,575 Loans and leases, net of unearned income, allowance, and reserve............................ 35,979,345 Trading Assets......................................... 11,912,448 Premises and fixed assets (including capitalized leases)............................................. 763,241 Other real estate owned................................ 2,925 Investments in unconsolidated subsidiaries and associated companies................................ 183,836 Customers' liability to this bank on acceptances outstanding......................................... 424,303 Intangible assets...................................... 1,378,477 Other assets........................................... 3,823,797 ----------- Total assets........................................... $74,266,429 =========== 25 LIABILITIES Deposits: In domestic offices................................. $28,328,548 Noninterest-bearing.......................12,637,384 Interest-bearing..........................15,691,164 In foreign offices, Edge and Agreement subsidiaries, and IBFs............................ 27,920,690 Noninterest-bearing..........................470,130 Interest-bearing..........................27,450,560 Federal funds purchased and Securities sold under agreements to repurchase............................ 1,437,916 Demand notes issued to the U.S. Treasury............... 100,000 Trading liabilities.................................... 2,049,818 Other borrowed money: With remaining maturity of one year or less......... 1,279,125 With remaining maturity of more than one year through three years............................... 0 With remaining maturity of more than three years.... 31,080 Bank's liability on acceptances executed and outstanding......................................... 427,110 Subordinated notes and debentures...................... 1,646,000 Other liabilities...................................... 4,604,478 ----------- Total liabilities...................................... $67,824,765 =========== EQUITY CAPITAL Common stock........................................... 1,135,285 Surplus................................................ 1,008,775 Undivided profits and capital reserves................. 4,308,492 Net unrealized holding gains (losses) on available-for-sale securities....................... 27,768 Accumulated net gains (losses) on cash flow hedges 0 Cumulative foreign currency translation adjustments.... (38,656) ----------- Total equity capital................................... 6,441,664 ----------- Total liabilities and equity capital................... $74,266,429 =========== 26 I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi | Alan R. Griffith | Directors Gerald L. Hassell | - -------------------------------------------------------------------------------- EX-99.1 13 c63210ex99-1.txt FORM OF TRANSMITTAL LETTER 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL BEVERLY ENTERPRISES, INC. OFFER TO EXCHANGE ITS $200,000,000 8 5/8% SENIOR NOTES DUE 2009 FOR ANY AND ALL UNREGISTERED 8 5/8% SENIOR NOTES DUE 2009 PURSUANT TO THE PROSPECTUS DATED JUNE __, 2001 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. - -------------------------------------------------------------------------------- The Exchange Agent is: THE BANK OF NEW YORK Deliver to: By Registered or Certified Mail: By Hand or Overnight Delivery: The Bank of New York The Bank of New York 101 Barclay Street, 7 East 101 Barclay Street New York, New York 10286 Corporate Trust Services Window Attention: Reorganization Section Ground Level New York, New York 10286 Attention: Reorganization Section By Facsimile: (212) 815-6339 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT. The instructions set forth in this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. The undersigned acknowledges that he or she has received and reviewed the prospectus (the "Prospectus") dated _____, 2001, of Beverly Enterprises, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's offer (the "Exchange Offer") to exchange $200,000,000 principal amount of its 8 5/8% Senior Notes due 2009 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for $200,000,000 principal amount of its outstanding 8 5/8% Senior Notes due 2009 (the "Private Notes"). Recipients of the Prospectus should read the requirements described in the Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW. This Letter of Transmittal is to be used by a holder of Private Notes (i) if certificates representing tendered Private Notes are to be forwarded herewith, (ii) if a tender is made pursuant to the guaranteed delivery procedures in the section of the Prospectus entitled "The Exchange Offer, Procedures for Tendering." Holders that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through DTC's Automated Tender Offer Program for which the Exchange Offer will be eligible. DTC 1 2 participants that are accepting the Exchange Offer must transmit their acceptance to DTC which will verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send an agent's message forming part of a book-entry transfer in which the participant agrees to be bound by the terms of the Letter of Transmittal (an "Agent's Message") to the Exchange Agent for its acceptance. Transmission of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. In order to properly complete this Letter of Transmittal, a holder of Private Notes must (i) complete the box entitled, "Description of Private Notes Tendered," (ii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance Instructions and Special Delivery Instructions, (iii) sign the Letter of Transmittal by completing the box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder of Private Notes should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Private Notes who desire to tender their Private Notes for exchange and whose Private Notes are not immediately available or who cannot deliver their Private Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent or complete the procedures for book-entry transfer on or prior to the Expiration Date, must tender the Private Notes pursuant to the guaranteed delivery procedures set forth in the section of Prospectus entitled "The Exchange Offer, Procedures for Tendering." See Instruction 2. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. In order to ensure participation in the Exchange Offer, Private Notes must be properly tendered prior to the Expiration Date. Holders of Private Notes who wish to tender their Private Notes for exchange must complete columns (1) through (3) in box below entitled "Description of Private Notes Tendered," and sign the box below entitled "Sign Here." If only those columns are completed, such holder of Private Notes will have tendered for exchange all Private Notes listed in column (3) below. If the holder of Private Notes wishes to tender for exchange less than all of such Private Notes, column (4) must be completed in full. In such case, such holder of Private Notes should refer to Instruction 5. The Exchange Offer may be extended, terminated or amended, as provided in the Prospectus. During any such extension of the Exchange Offer, all Private Notes previously tendered and not withdrawn pursuant to the Exchange Offer will remain subject to such Exchange Offer. The Exchange Offer is scheduled to expire at 5:00 p.m., New York City time, on ______, 2001, unless extended by the Company. The undersigned hereby tenders for exchange the Private Notes described in the box entitled "Description of Private Notes Tendered" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal.
- -------------------------------------------------------------------------------------- DESCRIPTION OF PRIVATE NOTES TENDERED - -------------------------------------------------------------------------------------- (1) (2) (3) (4) AGGREGATE NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL AMOUNT REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY TENDERED FOR (PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S)(A) EXCHANGE (B) - -------------------------------------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- - -------------------------------------------------------------------------------------- Total Principal Amount Tendered - --------------------------------------------------------------------------------------
(A) Unless otherwise indicated in this column, any tendering holder will be deemed to have tendered the entire principal amount represented by the Private Notes indicated in the column labeled "Aggregate Principal Amount Represented by Certificate(s)." See Instruction 5. (B) The minimum permitted tender is $1,000 in principal amount of Private Notes. All other tenders must be integral multiples of $1,000. - -------------------------------------------------------------------------------- 2 3 |_| CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH. |_| CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered Holder(s) -------------------------------------------- Window Ticket Number (if any) ---------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ------------------------- Name of Institution that guaranteed delivery ------------------------------- Only registered holders are entitled to tender their Private Notes for exchange in the Exchange Offer. Any financial institution that is a participant in DTC's system and whose name appears on a security position listing as the record owner of the Private Notes and who wishes to make book-entry delivery of Private Notes as described above must complete and execute a participant's letter (which will be distributed to participants by DTC) instructing DTC's nominee to tender such Private Notes for exchange. Persons who are beneficial owners of Private Notes but are not registered holders and who seek to tender Private Notes should (i) contact the registered holder of such Private Notes and instruct such registered holder to tender on his or her behalf, (ii) obtain and include with this Letter of Transmittal, Private Notes properly endorsed for transfer by the registered holder or accompanied by a properly completed bond power from the registered holder, with signatures on the endorsement or bond power guaranteed by a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., a commercial bank or trading company having an office in the United States or certain other eligible guarantors (each, an "Eligible Institution"), or (iii) effect a record transfer of such Private Notes from the registered holder to such beneficial owner and comply with the requirements applicable to registered holders for tendering Private Notes prior to the Expiration Date. See "The Exchange Offer, Procedures for Tendering." SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 3 4 Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company for exchange the Private Notes indicated above. Subject to, and effective upon, acceptance for purchase of the Private Notes tendered herewith, the undersigned hereby sells, assigns, transfers and exchanges to the Company all right, title and interest in and to all such Private Notes tendered for exchange hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as agent of the Company) with respect to such Private Notes, with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver certificates representing such Private Notes, or transfer ownership of such Private Notes on the account books maintained by DTC, together, in each such case, with all accompanying evidences of transfer and authenticity to the Company, (b) present and deliver such Private Notes for transfer on the books of the Company, and (c) receive all benefits or otherwise exercise all rights and incidents of beneficial ownership of such Private Notes, all in accordance with the terms of the Exchange Offer. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Private Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Private Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Private Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Private Notes or transfer ownership of such Private Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Private Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement. By tendering, each holder of Private Notes represents that the Exchange Notes acquired in the exchange will be obtained in the ordinary course of such holder's business, that such holder has no arrangement with any person to participate in the distribution of such Exchange Notes, that such holder is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that such holder is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. Any holder of Private Notes who is an affiliate of the Company or who tenders Private Notes in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") enunciated in its series of interpretive "no-action" letters with respect to exchange offers and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer holding Private Notes that were acquired for its own account as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Private Notes pursuant to the Exchange Offer, however, by so acknowledging and by delivering a prospectus in connection with the exchange of Private Notes, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy, and personal and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Private Notes properly tendered may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. The Exchange Offer is subject to certain conditions, each of which may be waived or modified by the Company, in whole or in part, at any time and from time to time, as described in the Prospectus under the caption "The Exchange Offer, Conditions." The undersigned recognizes that as a result of such conditions the Company may not be required to accept for exchange, or to issue Exchange Notes in exchange for, any of the Private Notes properly tendered hereby. In such event, the tendered Private Notes not accepted for exchange will be returned to the undersigned without cost to the undersigned at the address shown below the undersigned's signature(s) unless otherwise indicated under "Special Issuance Instructions" below. 4 5 Unless otherwise indicated under "Special Issuance Instructions" below, please return any certificates representing Private Notes not tendered or not accepted for exchange in the name(s) of the holder(s) appearing under "Description of Private Notes Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail any certificates representing Private Notes not tendered or not accepted for exchange (and accompanying document, as appropriate) to the address(es) of the holder(s) appearing under "Description of Private Notes Tendered." In the event that both the "Special Issuance Instructions" and the "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Private Notes accepted for exchange in the name(s) of, and return any Private Notes not tendered or not accepted for exchange to, the person or persons so indicated. Unless otherwise indicated under "Special Issuance Instructions," in the case of a book-entry delivery of Private Notes, please credit the account maintained at DTC with any Private Notes not tendered or not accepted for exchange. The undersigned recognizes that the Company does not have any obligation pursuant to the Special Issuance Instructions, to transfer any Private Notes from the name of the holder thereof if the Company does not accept for exchange any of the Private Notes so tendered or if such transfer would not be in compliance with any transfer restrictions applicable to such Private Notes.
- ----------------------------------------------------- -------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the (i) Exchange To be completed ONLY if the Exchange Notes Notes issued for Private Notes, certificates for issued for Private Notes, certificates for Private Private Notes in a principal amount not exchanged Notes in a principal amount not exchanged for Exchange for Exchange Notes, or Private Notes (if any) not Notes, or Private Notes (if any) not tendered for tendered for exchange are to be issued in the name exchange are to be sent to someone other than the of someone other than the undersigned, or (ii) undersigned or to the undersigned at an address other Private Notes tendered by book-entry transfer which than that shown above. are not exchanged are to be returned by credit to an account maintained at DTC other than the account Mail to: indicated above. Name: Issue to: -------------------------------------------------- (PLEASE PRINT) Name: --------------------------------------------- Address: (PLEASE PRINT) ----------------------------------------------- Address: ------------------------------------------- ------------------------------------------------------- - --------------------------------------------------- ------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------- (INCLUDE ZIP CODE) ------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) - -------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) Credit Private Notes not exchanged and delivered by book-entry transfer to the DTC account set forth below: - --------------------------------------------------- (ACCOUNT NUMBER) - ----------------------------------------------------- --------------------------------------------------------
5 6 SIGN HERE TO TENDER YOUR PRIVATE NOTES IN THE EXCHANGE OFFER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) OF PRIVATE NOTES Dated: -------------------------------------------------------------------------- (Must be signed by the registered holder(s) of Private Notes exactly as name(s) appear(s) on certificate(s) representing the Private Notes or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 6.) Capacity (Full Title) ---------------------------------------------------------- Name(s) ----------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Address ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------ Tax Identification or Social Security No. ------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 6) Authorized Signature ----------------------------------------------------------- Name --------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Title -------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address ------------------------------------------------------------------------ - ------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------- Dated: ------------------------------------------------------------------------ IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF TRANSMITTAL 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal need not be guaranteed if the Private Notes tendered hereby are tendered (a) by the registered holder(s) of Private Notes thereof, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (b) or the account of a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office in the United States (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by in Eligible Institution. Persons who are beneficial owners of Private Notes but are not the registered holder(s) and who seek to tender Private Notes for exchange should (i) contact the registered holder(s) of such Private Notes and instruct such registered holder(s) to tender on such beneficial owner's behalf, (ii) obtain and include with this Letter of Transmittal, Private Notes properly endorsed for transfer by the registered holder(s) or accompanied by a properly completed bond power from the registered holder(s) with signatures on the endorsement or bond power guaranteed by an Eligible Institution, or (iii) effect a record transfer of such Private Notes from the registered holder(s) to such beneficial owner and comply with the requirements applicable to registered holder(s) for tendering Private Notes for exchange prior to the Expiration Date. See Instruction 6. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR PRIVATE NOTES OR BOOK-ENTRY CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by registered holder(s) if certificates representing Private Notes are to be forwarded herewith. All physically delivered Private Notes, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents, must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date or the tendering holder must comply with the guaranteed delivery procedures set forth below. Delivery of the documents to DTC does not constitute delivery to the Exchange Agent. The method of delivery of this Letter of Transmittal, Private Notes and all other required documents to the Exchange Agent is at the election and risk of the holder thereof. If such delivery is by mail, it is suggested that holders use properly insured registered mail, return receipt requested, and that the mailing be sufficiently in advance of the Expiration Date, to permit delivery to the Exchange Agent prior to such date. Except as otherwise provided below, the delivery will be deemed made when actually received or confirmed by the Exchange Agent. This Letter of Transmittal and Private Notes tendered for exchange should be sent only to the Exchange Agent, not to the Company. A holder who desires to tender Private Notes for exchange and who cannot comply with the procedures set forth herein for tender on a timely basis or whose Private Notes are not immediately available must comply with the guaranteed delivery procedures described below. If holders desire to tender Private Notes for exchange pursuant to the Exchange Offer and (i) certificates representing such Private Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing Private Notes or other required documents to reach the Exchange Agent prior to the Expiration Date, or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such holder may effect a tender of Private Notes for exchange in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering." Pursuant to the guaranteed delivery procedures: (a) such tender must be made by or through an Eligible Institution (defined as an institution that is a recognized member in good standing of a Medallion Signature Guarantee Program recognized by the Exchange Agent, i.e., the Securities Transfer Agent's Medallion Program, the Stock Exchange's Medallion Program and the New York Stock Exchange's Medallion Signature Program); (b) prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution, at one of the addresses of the Exchange Agent set forth herein, a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile, mail or hand delivery) substantially in the form provided by the Company setting forth the name(s) and address(es) of the registered holder(s) of such Private Notes, the certificate number(s) and the principal amount of Private Notes being tendered for exchange and stating that the tender is being made thereby and guaranteeing that, within three (3) New York Stock Exchange trading days after the Expiration Date, a properly completed and duly executed Letter of 7 8 Transmittal, or a facsimile thereof, together with certificates representing the Private Notes (or confirmation of book-entry transfer of such Private Notes into the Exchange Agent's account with DTC and an Agent's Message) and any other documents required by this Letter of Transmittal and the instructions hereto, will be deposited by such Eligible Institution with the Exchange Agent; and (c) this Letter of Transmittal or a facsimile thereof, properly completed together with duly executed certificates for all physically delivered Private Notes in proper form for transfer (or confirmation of book-entry transfer of such Private Notes into the Exchange Agent's account with DTC as described above) and all other required documents must be received by the Exchange Agent within three (3) New York Stock Exchange trading days after the date of the Notice of Guaranteed Delivery. All tendering holders, by execution of this Letter of Transmittal, waive any right to receive any notice of the acceptance of their Private Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Private Notes Tendered" above is adequate, the certificate numbers and principal amounts of Private Notes tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWAL OF TENDERS. A tender of Private Notes may be withdrawn at any time prior to the Expiration Date by delivery of written or facsimile (receipt confirmed by telephone) notice of withdrawal to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal. To be effective, a notice of withdrawal must (i) specify the name of the person having tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes), (iii) specify the principal amount of Private Notes to be withdrawn, (iv) include a statement that such holder is withdrawing his election to have such Private Notes exchanged, (v) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered or as otherwise described above (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee under the Indenture register the transfer of such Private Notes into the name of the person withdrawing the tender, and (vi) specify the name in which any such Private Notes are to be registered, if different from that of the Depositor. The Exchange Agent will return the properly withdrawn Private Notes promptly following receipt of notice of withdrawal. If Private Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility. All questions as to the validity of notices of withdrawals, including, time of receipt, will be determined by the Company and such determination will be final and binding on all parties. Any Private Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Private Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Private Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Private Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Private Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF PRIVATE NOTES WHO TENDER BY BOOK-ENTRY TRANSFER). Tenders of Private Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Private Notes, fill in the principal amount of Private Notes which are tendered for exchange in column (4) of the box entitled "Description of Private Notes Tendered," as more fully described in the footnotes thereto. In the case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Private Notes, will be sent to the holders of Private Notes unless otherwise indicated in the boxes entitled "Special Issuance Instructions" or "Special Delivery Instructions" above, as soon as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the holder(s) of the Private Notes tendered for exchange hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. 8 9 If any of the Private Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Private Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are names in which certificates are held. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Company of its authority so to act must be submitted, unless waived by the Company. If this Letter of Transmittal is signed by the holder(s) of the Private Notes listed and transmitted hereby, no endorsements of certificates or separate bond powers are required unless certificates for Private Notes not tendered or not accepted for exchange are to be issued or returned in the name of a person other than for the holder(s) thereof. Signatures on such certificates must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Private Notes, the certificates representing such Private Notes must be properly endorsed for transfer by the registered holder or be accompanied by a properly completed bond power from the registered holder, in either case signed by such registered holder(s) exactly as the name(s) of the registered holder(s) the Private Notes appear(s) on the certificates. Signatures on the endorsement or bond power must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay or cause to be paid any transfer taxes applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Private Notes pursuant to the Exchange Offer, then the amount of any transfer taxes (whether imposed on the registered holder(s) or any other persons) will be payable by the tendering holder. If satisfactory evidence of the payment of such taxes or exemptions therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued or if any Private Notes not tendered or not accepted for exchange are to be issued or sent to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not accepted for exchange be credited to such account maintained at DTC as such holder may designate. 9. IRREGULARITIES. All questions as to the forms of all documents and the validity of (including time of receipt) and acceptance of the tenders and withdrawals of Private Notes will be determined by the Company, in its sole discretion, which determination shall be final and binding. Alternative, conditional or contingent tenders will not be considered valid. The Company reserves the absolute right to reject any or all tenders of Private Notes that are not in proper form or the acceptance of which would, in the Company's opinion, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretations of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding. Any defect or irregularity in connection with tenders of Private Notes must be cured within such time as the Company determines, unless waived by the Company. Tenders of Private Notes shall not be deemed to have been made until all defects or irregularities have been waived by the Company or cured. Neither the Company, the Exchange Agent, nor any other person will be under any duty to give notice of any defects or irregularities in tenders of Private Notes, or will incur any liability to registered holders of Private Notes for failure to give such notice. 10. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the Company reserves the right to waive any and all conditions to the Exchange Offer as described under "The Exchange Offer--Conditions of the Exchange Offer" in the Prospectus, and accept for exchange any Private Notes tendered. 11. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law generally requires that a holder of Private Notes whose tendered Private Notes are accepted for exchange or such holder's assignee (in either case, the "Payee"), provide the Exchange Agent (the "Payor") with such Payee's correct Taxpayer Identification Number ("TIN"), which, in the case of a Payee who is an individual, is such Payee's social security number. If the 9 10 Payor is not provided with the correct TIN or an adequate basis for an exemption, such Payee may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding in an amount equal to 31% of the gross proceeds received pursuant to the Exchange Offer. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each Payee must provide such Payee's correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the Payee is exempt from backup withholding, (ii) the Payee has not been notified by the Internal Revenue Service that such Payee is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the Payee that such Payee is no longer subject to backup withholding. If the Payee does not have a TIN, such Payee should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the Payee does not provide such Payee's TIN to the Payor within 60 days, backup withholding will begin and continue until such Payee furnishes such Payee's TIN to the Payor. Note: Writing "Applied For" on the form means that the Payee has already applied for a TIN or that such Payee intends to apply for one in the near future. If Private Notes are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. Exempt Payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt Payee must enter its correct TIN in Part I of the Substitute Form W-9, write "Exempt" in Part 2 of such form and sign and date the form. See the W-9 Guidelines for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8, "Certificate of Foreign Status," signed under penalty of perjury attesting to such exempt status. Such form may be obtained from the Payor. 12. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any holder of Private Notes whose Private Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal for further instructions. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Exchange Agent at its address set forth on the cover of this Letter of Transmittal. IMPORTANT- THIS LETTER OF TRANSMITTAL, TOGETHER WITH CERTIFICATES FOR TENDERED PRIVATE NOTES AND ALL OTHER REQUIRED DOCUMENTS, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 10 11 PAYOR'S NAME: THE BANK OF NEW YORK
- ---------------------------------------------------------------------------------------------------------- Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND TIN____________________ SUBSTITUTE CERTIFY BY SIGNING AND (Social Security Number FORM W-9 DATING BELOW or Employer Identification Number) ------------------------------------------------------------------------- Part 2 - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS)________________________________________ Department of Part 3 - CERTIFICATION UNDER PENALTIES OF PERJURY, I the Treasury CERTIFY THAT (1) The number shown on this form is my Internal correct TIN (or I am waiting for a number to be issued Revenue Service to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or Payor's Request for dividends or (c) the IRS has notified me that I am Taxpayer Identification no longer subject to backup withholding. Number ("TIN") and Certification THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACK-UP WITHHOLDING SIGNATURE___________________ DATE_________________ - -------------------------------- -------------------------------------------------------------------------
You must cross out item (2) of Part 3 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND THAT I MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATIVE OFFICE (OR I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE). I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYOR WITHIN 60 DAYS, THE PAYOR IS REQUIRED TO WITHHOLD 31 PERCENT OF ALL CASH PAYMENTS MADE TO ME THEREAFTER UNTIL I PROVIDE A NUMBER. Signature___________________________________ Date____________________ - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 EX-99.2 14 c63210ex99-2.txt FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO TENDER OF ANY AND ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2009 IN EXCHANGE FOR 9 5/8% SENIOR NOTES DUE 2009 OF BEVERLY ENTERPRISES, INC. PURSUANT TO THE PROSPECTUS DATED _______, 2001 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. - -------------------------------------------------------------------------------- The Exchange Agent is: THE BANK OF NEW YORK Deliver to: By Registered or Certified Mail: By Hand or Overnight Delivery: The Bank of New York The Bank of New York 101 Barclay Street, 7 East 101 Barclay Street New York, New York 10286 Corporate Trust Services Window Attention: Reorganization Section Ground Level New York, New York 10286 Attention: Reorganization Section By Facsimile: (212) 815-6339 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth in the prospectus (the "Prospectus") dated , 2001 of Beverly Enterprises, Inc. (the "Company") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent thereto must be used to accept the Company's offer (the "Exchange Offer") to exchange new 9 5/8% Senior Notes due 2009 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for all of its outstanding 9 5/8% Senior Notes due 2009 (the "Private Notes") if the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or Private Notes cannot be delivered or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered by an Eligible Institution (as defined in the Prospectus) by mail or hand delivery or transmitted via facsimile to the Exchange Agent as set forth above. Capitalized terms used but not defined herein shall have the meaning given to them in the Prospectus. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. 1 2 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Private Notes specified below pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer--Guaranteed Delivery Procedures." By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering holder of Private Notes set forth in the Letter of Transmittal. The undersigned understands that tenders of Private Notes may be withdrawn if the Exchange Agent receives at one of its addresses specified on the cover of this Notice of Guaranteed Delivery, prior to the Expiration Date, a facsimile transmission or letter which specifies the name of the person who deposited the Private Notes to be withdrawn and the aggregate principal amount of Private Notes delivered for exchange, including the certificate number(s) (if any) of the Private Notes, and which is signed in the same manner as the original signature on the Letter of Transmittal by which the Private Notes were tendered, including any signature guarantees, all in accordance with the procedures set forth in the Prospectus. All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. 2 3 The undersigned hereby tenders the Private Notes listed below: PLEASE SIGN AND COMPLETE ================================================================================ CERTIFICATE NUMBERS OF PRIVATE NOTES (IF AVAILABLE) PRINCIPAL AMOUNT OF PRIVATE NOTES TENDERED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ IF PRIVATE NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, CHECK THE TRUST COMPANY BELOW: - ------------------------------------ SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY [ ] THE DEPOSITORY TRUST COMPANY - ------------------------------------ NAME(S) (PLEASE TYPE OR PRINT) DEPOSITORY ACCOUNT NO.: --------------- - ------------------------------------ TITLE - ------------------------------------ - ------------------------------------ - ------------------------------------ ADDRESS - ------------------------------------ AREA CODE AND TELEPHONE NO. - ------------------------------------ DATE ================================================================================ 3 4 ================================================================================ GUARANTEE (Not to be used for signature guarantee) The undersigned, a participant in a recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Private Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). SIGN HERE Name of Firm: ------------------------------------------------------------------- Authorized Signature: ----------------------------------------------------------- Name (please type or print): ---------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone No.: ---------------------------------------------------- Date: --------------------------------------------------------------------------- ================================================================================ DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 4 5 INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the holder use properly insured, registered mail with return receipt requested. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the holder(s) referred to herein, then the signature must correspond with the name(s) as written on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the holder(s) listed, this Notice of Guaranteed Delivery must be accompanied by a properly completed bond power signed as the name of the holder(s) appear(s) on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. 5 EX-99.3 15 c63210ex99-3.txt FORM OF LETTER TO DTC PARTICIPANTS 1 EXHIBIT 99.3 LETTER TO DTC PARTICIPANTS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2009 FOR 9 5/8% SENIOR NOTES DUE 2009 OF BEVERLY ENTERPRISES, INC. PURSUANT TO THE PROSPECTUS DATED ________, 2001 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. - -------------------------------------------------------------------------------- _________, 2001 To Securities Dealers, Commercial Banks Trust Companies and Other Nominees: Enclosed for you consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Beverly Enterprises, Inc., a Delaware corporation (the "Company"), to exchange up to $200,000,000 in principal amount of its 9 5/8% Senior Notes due 2009 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 9 5/8% Senior Notes due 2009, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. We are asking you to contact your clients for whom you hold Private Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Private Notes registered in their own name. Enclosed are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal for your use in connection with the tender of Private Notes and for the information of your clients; 3. The Notice of Guaranteed Delivery to be used to accept the Exchange Offer if the Private Notes and all other required documents cannot be delivered to the Exchange Agent prior to the Expiration Date; 4. A form of letter that may be sent to your clients for whose accounts you hold Private Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. 1 2 DTC participants will be able to execute tenders through the DTC Automated Tender Offer Program. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 2001, UNLESS EXTENDED BY THE COMPANY. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. You will be reimbursed by the Company for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Additional copies of the enclosed material may be obtained form the Exchange Agent, at the address and telephone numbers set forth below. Very truly yours, THE BANK OF NEW YORK The Bank of New York 101 Barclay Street, 7 East New York, New York 10286 Facsimile: (212) 815-6339 ------------------ NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 2 EX-99.4 16 c63210ex99-4.txt FORM OF LETTER TO BENEFICIAL HOLDERS 1 EXHIBIT 99.4 LETTER TO BENEFICIAL HOLDERS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2009 FOR 9 5/8% SENIOR NOTES DUE 2009 OF BEVERLY ENTERPRISES, INC. PURSUANT TO THE PROSPECTUS DATED _____________, 2001 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. - -------------------------------------------------------------------------------- __________, 2001 To Our Clients: Enclosed for you consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Beverly Enterprises, Inc., a Delaware corporation (the "Company"), to exchange up to $200,000,000 in principal amount of its 9 5/8% Senior Notes due 2009 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 9 5/8% Senior Notes due 2009, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. These materials are being forwarded to you as the beneficial owner of Private Notes carried by us for your account or benefit but not registered in your name. A tender of any Private Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Private Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Private Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all of your Private Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Private Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Private Notes on your behalf in accordance with the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 2001. Private Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. If you wish to have us tender any or all of your Private Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Private Notes held by us and registered in our name for your account or benefit. 1 2 INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 9 5/8% SENIOR NOTES DUE 2009 OF BEVERLY ENTERPRISES, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed materials referred to therein relating to the Exchange Offer of the Company. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you to tender the principal amount of Private Notes indicated below held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. The aggregate face amount of the Private Notes held by you for the account of the undersigned is (fill in amount): $___________ of the Private Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Private Notes held by you for the account of the undersigned (insert principal amount of Private Notes to be tendered, if any): $___________ of the Private Notes. [ ] NOT to TENDER any Private Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Private Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Private Notes, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) _____________, (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned has no arrangement or understanding with any person to participate in the distribution of Exchange Notes, (iv) the undersigned acknowledges that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of Section 10 of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in certain no action letters (See the section of the Prospectus entitled "The Exchange Offer -- Effect of the Exchange Offer"), (v) the undersigned understands that a secondary resale transaction described in clause (iv) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of Section 10 of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering such prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; 2 3 and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Private Notes. The purchaser status of the undersigned is (check the box that applies): [ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) [ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) [ ] A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Private Notes outside the United States in accordance with Rule 904 of the Securities Act [ ] Other (describe) ----------------------------------------------------------- SIGN HERE Name of Beneficial Owner(s): ---------------------------------------------------- Signature(s): ------------------------------------------------------------------- Name(s) (please print): --------------------------------------------------------- Address: ------------------------------------------------------------------------ Principal place of business (if different from address listed above): Telephone Number(s): ------------------------------------------------------------ Taxpayer Identification or Social Security Number(s): --------------------------- Date: --------------------------------------------------------------------------- 3 EX-99.5 17 c63210ex99-5.txt FORM OF LETTER TO CLIENTS 1 EXHIBIT 99.5 LETTER TO CLIENTS REGARDING THE OFFER TO EXCHANGE $200,000,000 PRINCIPAL AMOUNT OF 9 5/8% SENIOR NOTES DUE 2009 FOR ANY AND ALL OUTSTANDING $200,000,000 PRINCIPAL AMOUNT OF 9 5/8% SENIOR NOTES DUE 2009 OF BEVERLY ENTERPRISES, INC. To Our Clients: We are enclosing herewith a Prospectus, dated , 2001, of Beverly Enterprises, Inc. (the "Company") and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by the Company to exchange its new 9 5/8% Senior Notes due 2009 (the "Exchange Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 9 5/8% Senior Notes due 2009 (the "Private Notes") upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 2001, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Private Notes being tendered. We are the Registered Holder or DTC participant through which you hold an interest in the Private Notes. A tender of such Private Notes can be made only by us pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender your beneficial ownership of Private Notes held by us for your account. We request instructions as to whether you wish to tender any or all of your Private Notes held by us for your account pursuant to the terms and subject to the conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal that are to be made with respect to you as beneficial owner. Pursuant to the Letter of Transmittal, each holder of Private Notes must make certain representations and warranties that are set forth in the Letter of Transmittal and in the attached form that we have provided to you for your instructions regarding what action we should take in the Exchange Offer with respect to your interest in the Private Notes. 1 EX-99.6 18 c63210ex99-6.txt FORM OF GUIDELINES FOR CERTIFICATION 1 EXHIBIT 99.6 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER-- Social Security Numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the type of number to give the payer.
GIVE THE GIVE THE FOR THIS TYPE OF SOCIAL SECURITY FOR THIS TYPE OF EMPLOYER IDENTIFICATION NUMBER ACCOUNT: NUMBER OF-- ACCOUNT: OF -- - ------------------------------------ ------------------------ -------------------------- ------------------------------- 1. An individual's account The individual 8. Sole proprietorship The owner (4) account 2. Two or more individuals (joint The actual owner of the 9. A valid trust, estate The legal entity (Do not furnish account) account or, if combined or pension trust the identifying number of the funds, any one of the personal representative or individuals (1) trustee unless the legal entity itself is not designated in the account title) (5) 3. Husband and wife (joint account) The actual owner of the 10. Corporate account The corporation account or, if joint funds, either person (1) 4. Custodian account of a minor The minor (2) 11. Religious, The organization (Uniform Gift to Minors Act) charitable, or educational organization account 5. Adult and minor (joint account) The adult or, if the 12. Partnership account The partnership minor is the only held in the name of contributor, the minor the business (1) 6. Account in the name of guardian The ward, minor, or 13. Association, club, or The organization or committee for a designated incompetent person (3) other tax-exempt ward, minor, or incompetent organization person 7.a. The usual revocable saving The grantor-trustee (1) 14. A broker or The broker or nominee trust account (grantor is registered nominee also trustee) b. So-called trust account that The actual owner (1) 15. Account with the The public entity is not a legal or valid trust Department of under State law Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- --------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business" name. You may use either your Social Security Number or Employer Identification Number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 1 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees specifically exempted from backup withholding on ALL payments by brokers include the following: - A corporation. - A financial institution. - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(2). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign corporations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, which GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 3 are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.7 19 c63210ex99-7.txt EXCHANGE AGENT AGREEMENT DATED 6/14/2001 1 EXHIBIT 99.7 June 14, 2001 EXCHANGE AGENT AGREEMENT The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Trustee Administration Ladies and Gentlemen: Beverly Enterprises, Inc., a Delaware corporation (the "Company") proposes to make an offer (the "Exchange Offer") to exchange all of its unregistered outstanding 9 5/8% Senior Notes due 2009 (the "Old Securities") for its registered 9 5/8% Senior Notes due 2009 (the "New Securities"). The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated ___________ (the "Prospectus"), proposed to be distributed to all record holders of the Old Securities. The Old Securities and the New Securities are collectively referred to herein as the "Securities." The Company hereby appoints The Bank of New York to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to The Bank of New York. The Exchange Offer is expected to be commenced by the Company on or about _____________. The Letter of Transmittal accompanying the Prospectus (or in the case of book-entry securities, the Automated Tender Offer Program ("ATOP") of the Book-Entry Transfer Facility (as defined below)) is to be used by the holders of the Old Securities to accept the Exchange Offer and contains instructions with respect to the delivery of certificates for Old Securities tendered in connection therewith. The Exchange Offer shall expire at 5:00 p.m., New York City time, on _________ or on such subsequent date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (promptly confirmed in writing) or written notice to you before 9:00 a.m., New York City time, on the business day following the previously scheduled Expiration Date. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Securities not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange 2 Offer specified in the Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange Offer." The Company will give oral (promptly confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "The Exchange Offer" or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith be discharged by the foregoing. 2. You will establish a book-entry account with respect to the Old Securities at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of the Old Securities by causing the Book-Entry Transfer Facility to transfer such Old Securities into your account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates for Old Securities (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of the Old Securities to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with instructions set forth therein; and (ii) the Old Securities have otherwise been properly tendered. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Old Securities are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be reasonably necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the President, any Senior Vice President, any Executive Vice President, or any Vice President of the Company (such approval, if given orally, to be promptly confirmed in writing) or any other party designated in writing, by such an officer, you are authorized to waive any irregularities in connection with any tender of Old Securities pursuant to the Exchange Offer. 5. Tenders of Old Securities may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer - -- Procedures for Tendering", and Old Securities shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. -2- 3 Notwithstanding the provisions of this Section 5, Old Securities which the President, any Senior Vice President, any Executive Vice President, or any Vice President of the Company shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be promptly confirmed in writing). 6. You shall advise the Company with respect to any Old Securities received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Securities. 7. You shall accept tenders: (a) in cases where the Old Securities are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Securities, provided that customary transfer requirements, including payment of any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Old Securities where so indicated and as permitted in the Letter of Transmittal and retain certificates for Old Securities for split-up and return any untendered Old Securities to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, to be promptly confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Securities properly tendered and you, on behalf of the Company, will exchange such Old Securities for New Securities and cause such Old Securities to be cancelled. Delivery of New Securities will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Securities for each $1,000 principal amount of the corresponding series of Old Securities tendered promptly after notice (such notice if given orally, to be promptly confirmed in writing) of acceptance of said Old Securities by the Company; provided, however, that in all cases, Old Securities tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Securities (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees and any other required documents. You shall issue New Securities only in denominations of $1,000 or any integral multiple thereof. -3- 4 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. 10. The Company shall not be required to exchange any Old Securities tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Old Securities tendered shall be given (if given orally, to be promptly confirmed in writing) by the Company to you. 11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Securities tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange Offer" or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Old Securities (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. 12. All certificates for reissued Old Securities, unaccepted Old Securities or for New Securities shall be forwarded by first-class mail. 13. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders. 14. As Exchange Agent hereunder you: (a) shall not be liable for any action or omission to act unless the same constitutes your own gross negligence, willful misconduct or bad faith, and in no event shall you be liable to a securityholder, the Company or any third party for special, indirect or consequential damages, or lost profits, arising in connection with this Agreement. (b) shall have no duties or obligations other than those specifically set forth herein or as may be subsequently agreed to in writing between you and the Company; (c) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Old Securities represented thereby deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; -4- 5 (d) shall not be obligated to take any legal action hereunder which might in your judgment involve any expense or liability, unless you shall have been furnished with indemnity satisfactory to you; (e) may conclusively rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and believed by you to be genuine and to have been signed or presented by the proper person or persons; (f) may act upon any tender, statement, request, document, agreement, certificate or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or presented by the proper person or persons; (g) may conclusively rely on and shall be protected in acting upon written or oral instructions from any authorized officer of the Company; (h) may consult with counsel of your selection with respect to any questions relating to your duties and responsibilities and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the advice or opinion of such counsel; and (i) shall not advise any person tendering Old Securities pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Old Securities. 15. You shall take such action as may from time to time be requested by the Company (and such other action as you may deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents on your request. All other requests for information relating to the Exchange Offer shall be directed to the Company, Attention: Corporate Secretary. 16. You shall advise by facsimile transmission the Corporate Secretary of the Company (at the facsimile number (501) 201-4801), and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date if requested) up to and including the Expiration Date, as to the number of Old Securities which have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement, separately -5- 6 reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons upon oral request made from time to time prior to the Expiration Date of such other information as they may reasonably request. Such cooperation shall include, without limitation, the granting by you to the Company and such person as the Company may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Old Securities tendered, the aggregate principal amount of Old Securities accepted and deliver said list to the Company. 17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped by you as to the date and, after the expiration of the Exchange Offer, the time, of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company. 18. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on Schedule I attached hereto. The provisions of this section shall survive the termination of this Agreement. 19. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to your duties, liabilities and indemnification as Exchange Agent. 20. The Company covenants and agrees to fully indemnify and hold you harmless against any and all loss, liability, cost or expense, including attorneys' fees and expenses, incurred without gross negligence or willful misconduct on your part, arising out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Securities believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Securities. In each case, the Company shall be notified by you, by letter or facsimile transmission, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or shall have been served with a summons in connection therewith. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action and, if the Company so elects, the Company -6- 7 shall assume the defense of any suit brought to enforce any such claim. In the event that the Company shall assume the defense of any such suit, the Company shall not be liable for the fees and expenses of any additional counsel thereafter retained by you, so long as the Company shall retain counsel satisfactory to you to defend such suit, and so long as you have not determined, in your reasonable judgment, that a conflict of interest exists between you and the Company. The provisions of this section shall survive the termination of this Agreement. 21. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. 22. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Securities, the Company's check in the amount of all transfer taxes so payable; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 23. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 24. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. 25. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 26. This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 27. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: -7- 8 If to the Company: Beverly Enterprises, Inc. One Thousand Beverly Way Fort Smith, Arkansas 72919 Facsimile: (501) 201-4801 Attention: Corporate Secretary If to the Exchange Agent: The Bank of New York 101 Barclay Street Floor 21 West New York, New York 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Trustee Administration 28. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Sections 18 and 20 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for Securities, funds or property then held by you as Exchange Agent under this Agreement. 29. This Agreement shall be binding and effective as of the date hereof. -8- 9 Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. BEVERLY ENTERPRISES, INC. By: /s/ Douglas J. Babb ------------------------------------ Name: Douglas J. Babb Title: Executive Vice President - Law and Government Relations and Secretary Accepted as of the date first above written: THE BANK OF NEW YORK, as Exchange Agent By: /s/ Robert Massimillo --------------------------------- Name: Robert Massimillo Title: Assistant Vice President -9- 10 SCHEDULE I COMPENSATION OF EXCHANGE AGENT: $5,000 PLUS $500 PER EXTENSION OF OFFER PLUS OUT-OF POCKET EXPENSES, INCLUDING, WITHOUT LIMITATION, LEGAL FEES AND EXPENSES. -----END PRIVACY-ENHANCED MESSAGE-----