exv10w1



 






EXHIBIT 10.1




EXECUTION COPY




SETTLEMENT AGREEMENT




     SETTLEMENT AGREEMENT, dated this 11th day of April, 2005 (the “Agreement”),
between Beverly Enterprises, Inc., a Delaware corporation (the “Company”), Arnold M.
Whitman (“Mr. Whitman”), Appaloosa Management L.P., Formation Capital LLC, Franklin Mutual
Advisers, LLC and Northbrook NBV, LLC (collectively, the “Consortium Members” and each,
individually, a “Consortium Member”). Terms used and not otherwise defined herein shall
have the meaning attributed to such terms in the Confidentiality Agreement (as defined below).



RECITALS




     WHEREAS, the Company has scheduled its 2005 Annual Meeting of Stockholders (the “2005
Annual Meeting”) for April 21, 2005;



     WHEREAS, Mr. Whitman filed with the Securities and Exchange Commission (the “SEC”) a
definitive proxy statement on March 14, 2005, for the election at the 2005 Annual Meeting of a
slate of nominees to the Company’s Board of Directors (the “Board”) and certain other
proposals;



     WHEREAS, the Company, Mr. Whitman and the Consortium Members have determined that the
interests of the Company and its stockholders would best be served (i) by the Consortium Members
not engaging in a solicitation of proxies for the purpose of electing Mr. Whitman’s nominees to the
Board at the 2005 Annual Meeting, (ii) by Mr. Whitman not nominating any individuals for election
as directors at the 2005 Annual Meeting and (iii) by the parties’ entering into the arrangements
set forth herein; and



     WHEREAS, the Company and the Consortium Members have signed, in conjunction with this
Agreement, a confidentiality agreement, dated April 11, 2005 (the “Confidentiality
Agreement”), in contemplation of a Possible Transaction (as defined in the Confidentiality
Agreement).



AGREEMENT




     NOW THEREFORE, and in consideration of the foregoing premises and the mutual covenants,
representations and warranties contained herein, the Company, Mr. Whitman and the Consortium
Members agree as follows:


1. Company Agreement to Amend Rights Plan.




     The Company agrees that, promptly, but in any event within five (5) business days, after the
execution and delivery of this Agreement, it will cause its Rights Agreement, dated as of January
26, 2005 (as amended, the “Rights Agreement”), to be amended substantially as set forth on
Exhibit A. Within two (2) business days after such amendment becomes effective, the
Company shall file a copy of such amendment with the Securities and Exchange Commission (the “SEC”)
as an amendment to the Registration Statements on Form 8-A previously filed by



 









 




the Company with respect to the Rights Agreement. Prior to October 21, 2005, the Company
shall not adopt any amendment to the Rights Agreement (or adopt any replacement rights plan)
containing provisions inconsistent with, or that would have the effect of repealing, the provisions
in the amendment set forth on Exhibit A.




     The Company represents and warrants that its Board has duly and validly adopted the
resolutions dated March 21, 2005, filed as Exhibit 99.1 to the Current Report on Form 8-K filed by
the Company with the SEC on March 23, 2005 (the “March 21, 2005 Resolutions”), and the
resolutions effective as of March 25, 2005, filed as Exhibit 99.1 to the Current Report on Form 8-K
filed by the Company with the SEC on April 7, 2005 (the “March 25, 2005 Resolutions” and,
together with the March 21, 2005 Resolutions, the “Board Resolutions”). The Company agrees
that it will fully comply with the provisions of, and take all actions contemplated by, the Board
Resolutions, including taking all actions necessary to convene the Special Meeting (as defined in
the Board Resolutions) as contemplated by the Board Resolutions if the requisite notifications are
received as contemplated thereby. The Company represents and warrants that each of the directors
of the Company shall resign as a director of the Company effective immediately prior to the
tabulation of the votes for new directors at the Special Meeting, if held; provided that, in the
event of any dispute with respect to the results of the election, the then current directors shall
remain in office until the final tabulation has been completed and all disputes resolved.



     Except as set forth herein, the Company shall not at any time on or prior to the Special
Meeting adopt, amend, modify or revoke the Board Resolutions or any bylaw of the Company or take
any other action so as to alter in any way any of the voting requirements or provisions applicable
to the Special Meeting Demands (as defined in the March 25, 2005 Resolutions), the Special Meeting
Notice (as defined in the March 21, 2005 Resolutions) or the Special Meeting.



     The Company and its Board hereby agree and acknowledge that it shall not be necessary for any
stockholder of the Company to comply with the advance notice bylaws of the Company (including the
provisions contained Article II, Sections 15 and 16 of the Company’s Bylaws) in order to nominate
candidates for election at the Special Meeting, compliance with such Bylaws having been duly and
validly waived by the Company and its Board. The Board shall not expand its size to be greater
than eight (8) at any time prior to October 22, 2005.


2. Request for Section 220 Information.




     The Company shall provide to Mr. Whitman or the Consortium Members, as promptly as reasonably
practicable after the receipt by the Company from any of them of a request therefor, copies of all
of the records and other information in the possession of the Company or its Representatives (as
defined in the Confidentiality Agreement) contemplated by Section 220 of the Delaware General
Corporation Law in the same manner and to the same extent similar information was provided in
connection with the 2005 Annual Meeting.



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3. Termination of the Proxy Contest.




     Mr. Whitman and each Consortium Member agree that, promptly after the execution and delivery
of this Agreement, it will take all actions necessary to discontinue the solicitation of proxies in
connection with the 2005 Annual Meeting (the “Annual Meeting Proxy Solicitation”). Mr.
Whitman further agrees not to nominate any individuals for election as directors at the 2005 Annual
Meeting. Within five (5) business days following receipt of the documentation thereof, the Company
shall reimburse the Consortium Members for all out-of-pocket fees and expenses incurred by them and
Mr. Whitman in connection with the Annual Meeting Proxy Solicitation and the negotiation and
execution of this Agreement and all related activities, provided that such reimbursement shall not
exceed $600,000, in the aggregate.


4. Postponement of the Special Meeting.




     In the event that Mr. Whitman or any of the Consortium Members (i) files a preliminary proxy
statement in respect of the election of directors at the Special Meeting no later than September 9,
2005, (ii) provides to the Secretary of the Company by September 9, 2005, a Nomination Notice (as
defined in the March 25 Resolutions) signed by or on behalf of the beneficial owners of not less
than 5% of the issued and outstanding shares of Company common stock and (iii) thereafter uses its
reasonable best efforts to cause such proxy statement to become definitive but is unable to cause
the proxy statement to become definitive by September 26, 2005, the Company and its Board of
Directors shall take all action necessary to postpone the date of the Special Meeting to a date
reasonably requested by any of the Consortium Members; provided that the Company need not hold the
Special Meeting unless the Secretary of the Company receives a Special Meeting Notice or one or
more Special Meeting Demands from beneficial owners of at least 20% of the Company’s issued and
outstanding common stock; provided further, that, in any event, the Company need not postpone the
date of the Special Meeting to a date that is more than (i) thirty (30) days after the date Mr.
Whitman or any Consortium Member files with the SEC a definitive proxy statement with respect to
the Special Meeting or (ii) 90 days following the filing by Mr. Whitman or the Consortium Members
of the first preliminary proxy statement with respect to the Special Meeting. It is understood and
agreed that the Company shall not be required to postpone the Special Meeting on more than one
occasion.


5. Public Statements.




     The parties shall consult with each other before issuing any press release or making any
public statement with respect to this Agreement, the Confidentiality Agreement and the negotiations
related hereto or thereto and, subject to the provisions of Section 2(c) of the Confidentiality
Agreement, shall not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be unreasonably withheld or delayed, except as
may be required by applicable law or any listing agreement with any national securities exchange.
The provisions contained in this Section 5 shall terminate upon the earlier of (x) the delivery to
the Company of Special Meeting Demands, a Special Meeting Notice or a Nomination Notice or (y) the
filing with the SEC of a preliminary proxy statement by the Company, Mr. Whitman or any of the
Consortium Members with respect to the solicitation of Special Meeting Demands or the Special
Meeting; provided, that in no event shall the provisions of this paragraph terminate before August
21, 2005.



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6. No Waiver of Rights.




     It is understood and agreed that no failure or delay by any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.


7. Remedies.




     It is understood and agreed that money damages would not be a sufficient remedy for any breach
of this Agreement by any party hereto and that each party hereto shall be entitled to equitable
relief, including, without limitation, injunction and specific performance, as a remedy for any
such breach any other party. Such remedies shall not be deemed to be the exclusive remedies for a
breach by a party of this Agreement but shall be in addition to all other remedies available at law
or equity to the other parties hereto. Each of the parties hereto further agrees not to raise as a
defense or objection to the request or granting of such relief that any breach of this Agreement is
or would be compensable by an award of money damages, and each party hereto agrees to waive any
requirements for the securing or posting of any bond or other security in connection with such
remedy.


8. Governing Law.




     This Agreement is for the benefit of the parties hereto, and shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to agreements made and to
be performed entirely within the State of Delaware, without regard to the conflict of law
provisions thereof. Each party hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the Chancery Court of the State of Delaware for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions contemplated hereby
(and each party hereto agrees not to commence any action, suit or proceeding relating thereto
except in such courts, and further agrees that service of any process, summons, notice or document
by U.S. registered mail to its address set forth above shall be effective service of process for
any action, suit or proceeding brought against you in any such court). Each party hereto hereby
irrevocably and unconditionally waives any objection which it may now or hereafter have to the
laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the Chancery Court of the State of Delaware, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient forum.


9. Entire Agreement.




     This Agreement and the Confidentiality Agreement contain the entire agreement between Mr.
Whitman, the Consortium Members and the Company regarding their subject matter and supersede all
prior agreements, understandings, arrangements and discussions between the Consortium Members and
the Company regarding such subject matter.



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10. No Modification.




     No provision in this Agreement can be waived, modified or amended except by written consent of
Mr. Whitman, the Consortium Members and the Company, which consent shall specifically refer to the
provision to be waived, modified or amended and shall explicitly make such waiver, modification or
amendment.


11. Counterparts.




     This Agreement may be signed by facsimile and in one or more counterparts, each of which shall
be deemed an original but all of which shall be deemed to constitute a single instrument.


12. Severability.




     If any provision of this Agreement is found to violate any statute, regulation, rule, order or
decree of any governmental authority, court, agency or exchange, such invalidity shall not be
deemed to affect any other provision hereof or the validity of the remainder of this Agreement, and
such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure
such violation.


13. Successors.




     This Agreement shall inure to the benefit of, and be enforceable by, the Company and each of
Mr. Whitman and the Consortium Members and their respective successors and assigns.


14. No Third Party Beneficiaries.




     The parties hereto each agree and acknowledge that nothing herein expressed or implied is
intended to confer upon or give any rights or remedies to persons not party to this Agreement under
or by reason of this Agreement.



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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
first set forth above.



BEVERLY ENTERPRISES, INC.



By: /s/ Douglas J. Babb

      Name: Douglas J. Babb

      Title: Executive Vice President and Chief

      Administrator and Legal Officer and Secretary



CONFIRMED AND AGREED

as of the date written above:



APPALOOSA MANAGEMENT L.P.



By: /s/ Kenneth Maiman

     Name: Kenneth Maiman

     Title: Principal



FORMATION CAPITAL LLC



By: /s/ Arnold M. Whitman

     Name: Arnold M. Whitman

     Title: Chief Executive Officer and Co-Chairman



FRANKLIN MUTUAL ADVISERS, LLC



By: /s/ Bradley Takahashi

     Name: Bradley Takahashi

     Title: Vice President



NORTHBROOK NBV, LLC



By: /s/ Robert Hartman

     Name: Robert Hartman

     Title: Manager



ARNOLD M. WHITMAN



/s/ Arnold M. Whitman








 









 











Exhibit A




Amendment No. 1 to Rights Agreement