exv10w1



 






Exhibit 10.1




AMENDMENT NUMBER 1 TO THE

BEVERLY ENTERPRISES, INC.

ANNUAL INCENTIVE PLAN




      The Beverly Enterprises, Inc. Annual Incentive Plan is hereby amended as follows, effective as
of January 1, 2005:




	1.  	A new Section 2.1(r) is added to read as follows:






      “(r) “Disability” means (i) the mental or physical disability, either
occupational or non-occupational in origin, of the Participant defined as “Total
Disability” in the Disability Plan of the Company currently in effect and as amended
from time to time; or (ii) a determination by the Committee of “Total Disability”
based on medical evidence that precludes the Participant from engaging in any
occupation or employment for wage or profit for at least twelve months and appears
to be permanent.”




	2.  	A new Section 2.1(s) is added to read as follows:






      “(s) “Retired” means retirement of a Participant from employment at or
after age 65 or, if so approved by the Committee, at some earlier date at or after
age 55, but prior to age 65.”




	3.  	Section 5.2(b) is amended to read as follows:






	 	   	“(b) He must have Retired, incurred a Disability or died
during the Plan Year if he is not employed as an Employee on the day
referred to in (a) above; or”






	4.  	The caption of Article VII is amended to read as follows:





“Article VII. Merger; Amendment; Termination; Change in Control”





	5.  	A new Section 7.4 is added to read as follows:






      7.4 Occurrence of Change in Control. Anything in this Article VII or
elsewhere in the Plan to the contrary notwithstanding, this Section 7.4 shall be
applicable with respect to Plan Year 2005:




      (a) Awards for 2005 shall be calculated in accordance with the manner
customarily applied pursuant to Article V, except that the determination as to
achievement of the 2005 financial and quality performance targets of the Company
shall be made as of the applicable Target Date, as follows:




	 	(1)  	actual financial and quality performances as of the
Target Date (i.e., for the period from the first day of the Plan Year
through the Target Date) shall be determined;





 








 






	 	(2)  	if such finanical and quality performance information
does not cover the entire 2005 Plan Year, such actual financial and
quality performances shall be annualized for the Plan Year by dividing
the performance results as of the Target Date by the number of months
that have elapsed in the applicable Plan Year through the Target Date
and then multiplying such quotients by 12; and
	 
	 	(3)  	the AIP Award Guidelines in effect for 2005 then shall
be applied to the actual or annualized results, as applicable, on the
basis that these results were the results for a full Plan Year, and
Awards will be calculated on that basis.






      (b) The annual Award amounts, as determined in accordance with the preceding
Section 7.4(a), shall be paid on the earlier of (i) the date of the Change in
Control or (ii) January 31, 2006, to those Participants who are Employees as of such
date.




      (c) Notwithstanding anything to the contrary in the preceding parts of the
Section 7.4, a Participant who has Retired, is Disabled, or dies, or whose
employment with the Company is terminated without Cause by the Employer during the
30-day period immediately preceding the date of the Change in Control shall receive
the full amount of his or her annual Award, in accordance with the preceding Section
7.4(b).




      (d) A Participant who does not meet the requirements set forth above shall not
be eligible to receive payment of an AIP Award for such Plan Year.




      (e) After a Change in Control, all legal fees and related expenses incurred by
an Employee or his Beneficiary to enforce rights to payments of Awards pursuant to
this Section 7.4 shall be paid by the Company.




      (f) No amendment, modification or termination of the Plan shall be made within
30 days before a Change in Control that would adversely affect Awards to be paid
pursuant to this Amendment without the prior written consent of affected
Participants.




      (h) For purposes of this Section 7.4, the following terms have the following
meanings:




	 	(1)  	“Cause” shall mean (i) negligence or misconduct in the
performance of Employee’s duties for the Company; (ii) unexplained or
unjustified absence from the Company; (iii) violation of the Company’s
prohibitions on harassment and discrimination or other violation of any
federal or state law; (iv) commission of any act of fraud with respect
to the Company; (v) conviction of a felony or a crime causing material
harm to the standing and reputation of the Company; (vi) failure to
comply with applicable Company policies and practices; or (vii) failure
to





 








 






	 	   	continue to perform at the level expected for the position the
Employee holds, to continue to meet budgetary and performance goals,
or to otherwise comply with the standards of Employee’s position as
determined by the Company.
	 
	 	(2)  	“Change in Control” shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied:






	 	(I)  	Any person, corporation or other entity
or group, including any “group” as defined in Section 13(d)(3)
of the Exchange Act, becomes the beneficial owner of Shares
having 30% or more of the total number of votes that may be
cast for the election of directors of the Company; or
	 
	 	(II)  	As the result of, or in connection
with, any tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing (a “Transaction”), the persons who
were directors of the Company before the Transaction shall
cease to constitute a majority of the Board of Directors of the
Company or any successor to the Company or its assets; or
	 
	 	(III)  	If at any time (i) the Company shall
consolidate with, or merge with, any other Person and the
Company shall not be the continuing or surviving corporation,
(ii) any Person shall consolidate with, or merge with, the
Company, and the Company shall be the continuing or surviving
corporation and in connection therewith, all or part of the
outstanding stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other
property, (iii) the Company shall be a party to a statutory
share exchange with any other Person after which the Company is
a Subsidiary of any other Person, or (iv) the Company shall
sell or otherwise transfer 50% or more of the assets or
earnings power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons; provided, however, that
notwithstanding anything to the contrary set forth in such
plan, a Change in Control shall not include either (a) the
Distribution or Merger, or (b) any transfer to a consolidated
subsidiary, reorganization, spin-off, split-up, distribution,
or other similar or related transaction(s) or any combination
of the foregoing in which the core business and assets of the
Company and its subsidiaries (taken as a whole) are transferred
to another entity (“Controlled”) with respect to which (1) the
majority of the Board of Directors of the Company (as
constituted





 








 






	 	   	immediately prior to such transaction(s)) also serve as
directors of Controlled and immediately after such
transaction(s) constitute a majority of Controlled’s board of
directors, and (2) more than 70% of the shareholders of the
Company (immediately prior to such transaction(s)) become
shareholders or other owners of Controlled and immediately
after the transactions) control more than 70% of the
ownership and voting rights of Controlled.






	 	(3)  	“Target Date” means the last day of the calendar
month that most recently precedes the date a Change in Control is to
occur and for which the Company has complete and final financial and
quality performance information so that the AIP Awards can be
calculated and paid on the date for payment specified above.






	6.  	Except as specifically amended herein, the Plan remains in full force and effect.