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EXHIBIT 4.1
NEW BEVERLY HOLDINGS, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I.
ESTABLISHMENT AND PURPOSE
1.1 Establishment of the Plan. New Beverly Holdings, Inc., a
Delaware corporation ("Company") hereby establishes a stock option plan as set
forth in this document, which plan as amended from time to time shall be known
as the "New Beverly Non-Employee Directors' Stock Option Plan" ("Plan").
1.2 Purpose. The purpose of the Plan is to build a proprietary
interest among the Company's Non-Employee Directors and thereby secure for the
Company's shareholders the benefits associated with common stock ownership by
those who will oversee the Company's future growth and success.
1.3 Applicability of the Plan. The provisions of this Plan are
applicable only to individuals who are Non-Employee Directors as of the
Effective Time of the Distribution of the Common Stock of the Company to the
stockholders of Beverly Enterprises, Inc. ("BEI"), pursuant to the Agreement
and Plan of Distribution by and between BEI, Capstone Pharmacy Services, Inc.
("Capstone") and the Company dated as of April 15, 1997 (the "Distribution
Date"), or becomes a Non-Employee Director thereafter.
1.4 Effective Date. This Plan shall be effective as of the
Distribution Date, subject to the approval of this Plan by the Board of
Directors and the Company's shareholders, as provided in this Section 1.4. To
become effective, this Plan must be approved by the Board of Directors and by
the affirmative vote of the holders of a majority of shares of Common Stock
present, or represented, and entitled to vote at a meeting of the Company's
stockholders called for such purpose. Absent such approvals prior to June 1,
1998, this Plan shall terminate and cease to be of any further force or effect
and all grants of Options hereunder shall be null and void.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used as a capitalized term in the Plan,
the following terms shall have the respective meanings set forth below, unless
otherwise expressly provided:
(a) "Affiliate" means "affiliate" as defined in Rule 12b-2
under the Exchange Act.
(b) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act.
(c) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(d) "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:
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(1) Any Person, corporation or other entity or group
becomes the Beneficial Owner of shares of the Company having 30 percent
or more of the total number of votes that may be cast for the election
of members of the Board; or
(2) 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 members of the Board 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
(3) If at any time (A) the Company shall consolidate
with, or merge with, any other Person and the Company shall not be the
continuing or surviving corporation, (B) any Person shall consolidate
with, or merge with, the Company, and the Company shall be the
continuing or surviving corporation and in connection therewith, all or
part of the outstanding Common Stock shall be changed into or exchanged
for stock or other securities of any other Person or cash or any other
property, (C) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is a Subsidiary of any
other Person, or (D) the Company shall sell or otherwise transfer 50
percent or more of the assets or earning 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 transaction(s) control more than 70% of the
ownership and voting rights of Controlled.
(e) "Code" means the Internal Revenue Code of 1986, as
amended, and the regulations issued thereunder, as the same may be amended from
time to time.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means New Beverly Holdings, Inc., or any
successor thereto.
(h) "Effective Date" means the Distribution Date, subject to
the approvals as described in Section 1.4.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(j) "Fair Market Value" means, on any given date, the closing
price of Common Stock as reported on the New York Stock Exchange composite tape
on such day or, if no shares of Common Stock were traded on such Exchange, all
as reported by such source as the Board may select. As to Options granted to
Participants in connection with the assumption of Options previously granted by
Beverly Enterprises, Inc. (BEI) pursuant to the Employee Benefit Matters
Agreement dated April 15, 1997 among BEI, the Company and Capstone, Fair Market
Value shall have the definition contained therein.
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(k) "Grant Date" means June 1 of each calendar year during the
period this Plan remains in effect. The first "Grant Date" under the Plan is
June 1, 1998.
(l) "Non-Employee Director" means an individual who is a
member of the Board and who is not an employee of the Company or any Subsidiary
or Affiliate thereof.
(m) "Option" means an option granted under this Plan to
purchase a share or shares of Common Stock.
(n) "Participant" means a Non-Employee Director to whom an
Option has been granted under this Plan.
(o) "Person" means "person" as deemed in Section 3(a)(9) of
the Exchange Act and as used in 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d)(3) of the Exchange Act.
(p) "Plan" means the "New Beverly Holdings, Inc. Non-Employee
Directors' Stock Option Plan" as set forth in this document, and as the same
may be amended from time to time.
(q) "Subsidiary" means a corporation at least 50 percent of
the combined voting power of all classes of stock of which is owned by the
Company, either directly or through one or more of its Subsidiaries.
(r) "Vesting Date" means, with respect to any Options granted
as of a particular Grant Date, the next June 1 following such Grant Date. The
first Vesting Date under the Plan is June 1, 1999.
2.2 Gender and Number; Headings. Except when otherwise indicated by
the context, any masculine terminology when used in this Plan shall also
include the feminine gender, and the definition of any term in the singular
shall also include the plural, Headings of Articles and Sections herein are
included solely for convenience, and if there is any conflict between such
headings and the text of the Plan, the text shall control.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility; Participation. Each Non-Employee Director shall be
eligible to participate under this Plan and to receive a grant of an Option in
accordance with the provisions of this Plan.
3.2 Grant of Stock Options. Each Non-Employee Director as of the
first Grant Date shall automatically be granted an Option to Purchase 3,375
shares of Common Stock, and shall automatically be granted an Option to
purchase an additional 3,375 shares of Common Stock as of each Grant Date
subsequent to the initial Grant Date applicable to such Non-Employee Director
and during the term of this Plan, with each such subsequent grant being
effective as of the applicable Grant Date. To be eligible to receive such an
Option grant with respect to any such Grant Date, the Non-Employee Director
must be a Non-Employee Director on such Grant Date. All Options granted under
this Section 3.2 shall be subject to the Common Stock availability provisions
of Section 4.1. Each individual who first becomes a Non-Employee Director
after the Effective Date shall automatically be granted an Option to purchase
3,375 shares of Common
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Stock, effective as of the Grant Date which is coincident with or next
following the date on which such individual becomes a Non-Employee Director.
ARTICLE IV
COMMON STOCK AVAILABLE
4.1 In General. Subject to adjustment as provided in Section 4.2, an
aggregate of 300,000 shares of Common Stock shall be available for grant and
issuance pursuant to the provisions of this Plan. Such shares may be
authorized and unissued shares or may be shares issued and thereafter acquired
by the Company. If an Option shall expire or terminate for any reason without
having been exercised in whole or in part, the unpurchased shares of Common
Stock subject to such Option shall again be available for subsequent Option
grants under the Plan.
4.2 Adjustment in Event of Changes in Capitalization. In the event
of a stock dividend, stock split, or combination of shares, recapitalization or
other change in the Company's capitalization, or other distribution with
respect to holders of the Company's Common Stock other than normal cash
dividends, an automatic adjustment shall be made in the number and kind of
shares as to which outstanding Options or portions thereof then unexercised
shall be exercisable and in the available shares set forth in Section 4.1, to
the end that the proportionate interest of the Participant or eligible Non-
Employee Director shall be maintained as before the occurrence of such event.
Such adjustment in outstanding Options shall be made without change in the
total price applicable to the unexercised portion of such Options and with a
corresponding adjustment in the Option price per share. Automatic adjustment
shall also be made in the number and kind of shares subject to Options
subsequently granted under Article III of the Plan.
ARTICLE V.
TERMS AND CONDITIONS OF STOCK OPTIONS
5.1 Exercise of Stock Options.
(a) Option Exercisability. Each Option granted as of a
particular Grant Date shall be exercisable on or after the Vesting Date with
respect to such Grant Date, subject to the provisions of Section 5.1(b) and
(c).
(b) Immediate Vesting for Death, Disability, and Change of
Control. Notwithstanding the provisions of Section 5.1(a), an Option granted
to any Participant shall become immediately exercisable in full upon the first
to occur of --
(1) The death of the Participant, in which case the
Option may be exercised by the Participant's executor or administrator,
or if not so exercised, by the legatees or distributees of his or her
estate or by such other person or persons to whom the Participant's
rights under the Option shall pass by will or by the applicable laws of
descent and distribution;
(2) Such time as the Participant ceases to be a member
of the Board by reason of his or her disability; and
(3) Change in Control.
(c) Termination Other than Death or Disability. In the event
the Participant ceases to be a Non-Employee Director of the Company for any
reason other than death or
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disability when no Change of Control has occurred, and such termination occurs
prior to the time an Option granted to such Participant has become exercisable,
such Option shall terminate with respect to the shares as to which the Option
is not then exercisable and all rights of the Participant to such shares shall
terminate without further obligation on the part of the Company. As regards
any Option which is exercisable by the Participant at such time, such
Participant must exercise such Option within 90 days following the date the
Participant so ceased to be a Non-Employee Director, and, any such Option
remaining unexercised as of the close of such period shall expire.
5.2 Exercise Price. The exercise price of an Option for a share of
Common Stock shall be 100 percent of the Fair Market Value of such Common Stock
on the Grant Date relating to such Option. However, Options granted on the
assumption of, or in substitution for, options of another company with which
the Company participates in an acquisition, separation or similar corporate
transaction may be issued at an exercise price less than 100% of Fair Market
Value.
5.3 Expiration of Options.
(a) In General. An Option shall expire ten years from the
Grant Date relating to such Option, unless terminated earlier in accordance
with the Plan.
(b) Death or Disability of Participant. In the event a
Participant ceases to be a Non-Employee Director of the Company by reason of
death or disability, including without limitation in the event that a
Participant dies after ceasing to be a member of the Board by reason of
disability, any Option granted to such Participant hereunder that has not been
fully exercised at the time of the Participant's death may be exercised at any
time within the greater of
(1) one year after the date of death or disability, or--
(2) in the event any Option is exercised by the
executors, administrators, legatees, or distributees of the estate of a
deceased Participant, the Company shall be under no obligation to issue
Common Stock thereunder unless and until the Company is satisfied that
the person or persons exercising the Option are the duly appointed legal
representatives of the deceased optionee's estate or the proper legatees
or distributees thereof.
5.4 Exercise and Payment of Exercise Price.
(a) Number of Shares. Subject to the terms and conditions of
the Plan, an Option shall, to the extent then exercisable, be exercisable in
whole or in part by giving written notice to the Company stating the number of
shares with respect to which the Option is being exercised, accompanied by
payment in full for such shares; provided, however, that there shall he no such
exercise at any one to as time fewer than 100 shares or all or the remaining
shares then purchasable by the person or persons exercising the Option, if
fewer than 100 shares.
(b) Payment Methods. An Option way be paid for by --
(1) delivery of cash or a check payable to the order of
the Company in an amount equal to the exercise price of such Option, or
(2) by delivery to the Company of shares of Common
Stock of the Company already owned by the Participant for more than six
months and having a Fair Market Value equal in amount to the exercise
price of the Option being exercised, provided that such method is
consistent with applicable tax and securities laws and is not contrary
to any restriction on the Company's purchase of its own shares, or
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(3) by any combination of such methods of payment.
5.5 Rights as a Shareholder. Except as specifically provided by the
Plan, the grant of an Option shall not give a Participant rights as a
shareholder; and the Participant will obtain such rights only upon actual
receipt of Common Stock.
5.6 Documentation of Option Grants. Option grants shall be evidenced
by written instruments prescribed by the Board from time to time. The
instruments may be in the form of agreements to be executed by both the
Participant and the Company or certificates, letters or similar instruments,
which need not be executed by the Participant, but acceptance of which will
evidence agreement to the terms of the grant.
5.7 Nontransferability of Options. No Option granted under the Plan
shall be assignable or transferable by the Participant to whom it is granted,
either voluntarily or by operation of law, except by will or the laws of
descent and distribution or pursuant to a "qualified domestic relations order"
("QDRO") as defined under Section 414(p) of the Code. Any such attempted
assignment or transfer in violation of this Section 5.7 shall be null and void.
During the life of the Participant, the Option shall be exercisable only by
such person or an alternate payee under a QDRO, or, in the event of incapacity,
by the person or person properly appointed to act on his or her behalf.
ARTICLE VI.
REGULATORY COMPLIANCE
6.1 Issuance or Delivery of Shares. The issuance or delivery of any
shares of Common Stock subject to exercisable Options may be postponed by the
Board for such period as may be required to comply with any applicable
requirements under the Federal or applicable state securities laws, any
applicable listing requirements of any national securities exchange, or any
requirements under any law or regulation applicable to the issuance or delivery
of such shares. The Company shall not be obligated to issue or deliver any
such shares if, in the opinion of Company's counsel, the issuance or delivery
thereof would constitute a violation of any provision of any law or of any
regulation of any governmental authority or any national securities exchange.
ARTICLE VII.
ADMINISTRATION
7.1 Plan Administration. The Plan shall be administered by the
Board. The Board shall have all the powers vested in it by the terms of the
Plan, such powers to include authority within the limitations described herein
to prescribe the form of the agreement embodying grants of Options. The Board
shall have the power to construe the Plan, to determine all questions arising
thereunder, and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decisions of the
Board in the administration of the Plan, as described herein, shall be final
and conclusive. The Board may from time to time delegate certain of its
administrative responsibilities under the Plan to Company personnel or to a
committee. The Board may act only by a majority of its members in office,
except that the members thereof may authorize any one or more of their number
or any officer of the Company to execute and deliver documents on behalf of the
Board. No member of the Board shall be liable for anything done or omitted to
he done other than by such member's own willful misconduct or as expressly
provided by statute.
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7.2 Indemnification and Exculpation. The members of the Board, its
agents, and officers and employees of the Company shall be indemnified and held
harmless by the Company against and from any and all loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by them in connection
with or resulting from any claim, action, suit, or proceeding to which they may
be a party or in which they may be involved by reason of any action taken or
failure to act under this Plan and against and from any and all amounts paid by
them in settlement (with the Company's written approval) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding. The
foregoing provision shall not be applicable to any person if the loss, cost,
liability, or expense is due to such person's gross negligence or willful
misconduct
ARTICLE VIII.
AMENDMENT AND TERMINATION
8.1 Amendment. Except as provided in Section 6.2, the Board shall
have the right to amend or modify the Plan in full or in part at any time and
from time to time; provided, however, that unless required by law, no such
amendment or modification shall --
(a) affect any right or obligation with respect to any Option
grant theretofore made,
(b) in any manner affect the restrictions set forth in Section
6.2, or
(c) unless previously approved by the shareholders of the
Company, where such approval is necessary to satisfy then applicable
requirements of Federal securities laws, the Code, or rules of any stock
exchange on which the Company's Common Stock is listed -
(1) in any manner materially affect the eligibility
requirements set forth in Sections 3.1 and 3.2,
(2) materially increase the number of shares of Common
Stock available for or subject to Options, or
(3) materially increase the benefits to Participants
under the Plan.
8.2 Termination.
(a) In General. The Board shall have the right to terminate
the Plan at any time; provided, however, that Options which are granted on or
before the termination date shall remain exercisable in accordance with their
respective terms after the termination of the Plan.
(b) Termination Date. Unless terminated earlier by the Board,
the Plan shall terminate on December 31, 2007; provided, however, that Options
which are granted on or before such date shall remain exercisable in accordance
with their respective terms after the termination of the Plan.
ARTICLE IX.
MISCELLANEOUS
9.1 Shareholder Approval. The effectiveness of the Plan and of the
grant of all Options under the Plan are subject to shareholder approval as
provided in Section 1.4. The
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Company's obligation to issue and deliver shares of Common Stock under the Plan
is subject to the approval of any governmental authority required in connection
with the authorization, issuance, or delivery of Common Stock.
9.2 No Right to Reelection. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any Non-Employee
Director for reelection by the Company's shareholders, nor confer upon any Non-
Employee Director the right to remain a member of the Board for any period of
time, or at any particular rate of compensation.
9.3 Severability. In the event any provision of this Plan shall be
held invalid or illegal for any reason, any illegality or invalidity shall not
affect the remaining parts of this Plan, but this Plan shall be construed and
enforced as if the illegal or invalid provision had never been inserted, and
the Company shall have the privilege and opportunity to correct and remedy such
questions of illegality or invalidity by amendment as provided in this Plan.
9.4 Status Under ERISA. This Plan is not maintained as and is not
intended to be an "employee benefit plan" under the Employee Retirement Income
Security Act of 1974, as amended.
9.5 Applicable Law. The Plan shall be governed by, construed, and
administered in accordance with the laws of the State of Delaware, except to
the extent such laws are preempted by the laws of the United States.
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