-----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, KftU3nchXtUF1FGKYuJriY24suph1DLFaPnwa81gXDZrnwl28vtQWtknU4CGYNI5 xNaidiuvyfFx6KLOIAWOUw== 0000950123-05-015021.txt : 20051221 0000950123-05-015021.hdr.sgml : 20051221 20051221115332 ACCESSION NUMBER: 0000950123-05-015021 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051220 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051221 DATE AS OF CHANGE: 20051221 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09550-2B FILM NUMBER: 051277515 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 8-K 1 y31423e8vk.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) December 20, 2005 BEVERLY ENTERPRISES, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) Delaware 1-9550 62-1691861 - ------------------------------- -------------- -------------------- (STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) One Thousand Beverly Way Fort Smith, Arkansas 72919 - ------------------------------------------ -------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (479) 201-2000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [X] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On December 20, 2005, Beverly Enterprises, Inc. (the "Company") entered into a Fourth Amendment to Agreement and Plan of Merger (the "Fourth Amendment") with Pearl Senior Care, Inc. ("PSC"), PSC Sub, Inc., a wholly-owned subsidiary of PSC ("PSC Sub"), and Geary Property Holdings, LLC ("GPH", and together with PSC and PSC Sub, the "Parent Group")). The Fourth Amendment, among other things, (i) accelerates to 2005 certain employee compensation payments to be made in connection with the merger; (ii) requires Fillmore Capital Partners to provide a $10 million letter of credit to be used towards funding a portion of these compensation payments in the event the merger agreement is terminated by the Company under certain circumstances and certain other conditions are met; and (iii) extends the date by which the merger must be completed from March 1, 2006 to March 31, 2006. The parties' obligations are subject to other conditions of closing, each as set forth in the Merger Agreement. The foregoing description of the Fourth Amendment is qualified in its entirety by reference to the Fourth Amendment, a copy of which is included as Exhibit 2.1 hereto and is incorporated by reference herein. ITEM 8.01 OTHER EVENTS On December 20, 2005, in connection with the execution of the Fourth Amendment, the Company received a Letter of Credit from Morgan Stanley Asset Funding Inc. (the "Letter of Credit"). The Letter of Credit is attached hereto as Exhibit 99.1 and incorporated herein by reference. On December 21, 2005, the Company issued a press release announcing the execution of the Fourth Amendment, a copy of which is attached hereto as Exhibit 99.2 and incorporated herein by reference. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Exhibits Exhibit No. Exhibit 2.1 Fourth Amendment to Agreement and Plan of Merger, dated as of December 20, 2005, by and among Beverly Enterprises, Inc., Pearl Senior Care, Inc., PSC Sub, Inc. and Geary Property Holdings, LLC 99.1 Letter of Credit, dated December 20, 2005, from Morgan Stanley Asset Funding, Inc. 99.2 Press release, dated December 21, 2005 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: December 21, 2005 BEVERLY ENTERPRISES, INC. By: /s/ Pamela H. Daniels ------------------------------------- Name: Pamela H. Daniels Title: Senior Vice President, Controller and Chief Accounting Officer EXHIBIT INDEX Exhibit No. Exhibit 2.1 Fourth Amendment to Agreement and Plan of Merger, dated as of December 20, 2005, by and among Beverly Enterprises, Inc., Pearl Senior Care, Inc., PSC Sub Inc. and Geary Property Holdings, LLC 99.1 Letter of Credit, dated December 20, 2005, from Morgan Stanley Asset Funding, Inc. 99.2 Press release, dated December 21, 2005 EX-2.1 2 y31423exv2w1.txt EX-2.1: 4TH AMENDMENT TO AGREEMENT AND PLAN OF MERGER FOURTH AMENDMENT FOURTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of December 20, 2005 ("Fourth Amendment"), by and among Pearl Senior Care, Inc., a Delaware corporation ("PSC"), PSC Sub, Inc., a Delaware corporation and wholly-owned direct Subsidiary of PSC ("PSC Sub"), Beverly Enterprises, Inc., a Delaware corporation (the "Company") and, solely for purposes of Article 9 of the Merger Agreement (as hereinafter defined) and Article 4 of this Fourth Amendment, Geary Property Holdings LLC, a Delaware limited liability company ("GPH"). WHEREAS, PSC, PSC Sub, the Company and GPH are parties to an Agreement and Plan of Merger dated as of August 16, 2005, as amended by the First Amendment thereto, dated as of August 23, 2005, the Second Amendment thereto, dated as of September 22, 2005, and the Third Amendment, dated as of November 20, 2005 (as so amended, the "Merger Agreement") (capitalized terms used but not defined herein shall have the definitions given to them in the Merger Agreement); WHEREAS, the parties to the Merger Agreement desire to amend the Merger Agreement, as set forth herein; WHEREAS, the respective Boards of Directors of PSC, PSC Sub and the Company have approved and declared advisable the Merger upon the terms and subject to the conditions of the Merger Agreement as amended hereby and in accordance with the DGCL; WHEREAS, the parties to the Merger Agreement have agreed that under Section 280G of the Code and published guidance issued thereunder, liability under Sections 280G and 4999 of the Code may be reduced or eliminated by accelerating payment of amounts otherwise due upon or after the Closing to a date during the calendar year before the calendar year in which the Closing occurs; and WHEREAS, the respective Boards of Directors of PSC, PSC Sub and the Company have determined that the Merger as so amended (as amended, the "Merger") is in furtherance of, and consistent with, their respective business strategies and is in the best interest of their respective stockholders. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Fourth Amendment and intending to be legally bound hereby, the Parties agree as follows: ARTICLE 1 REPRESENTATIONS AND WARRANTIES Section 1.1 The Company represents and warrants to PSC and PSC Sub as follows: (a) the Company has all necessary corporate power and authority to execute and deliver this Fourth Amendment, to perform its obligations hereunder and to consummate the transactions contemplated by the Merger Agreement as amended by this Fourth Amendment; (b) the execution and delivery of this Fourth Amendment by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company and no stockholder votes are necessary to authorize this Fourth Amendment or to consummate the transactions contemplated hereby other than, with respect to the Merger, the Stockholder Approval; and (c) this Fourth Amendment has been duly authorized and validly executed and delivered by the Company and, assuming this Fourth Amendment and the Merger Agreement are valid and binding obligations of PSC and PSC Sub, the Merger Agreement as amended by this Fourth Amendment constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Bankruptcy and Equity Exception. Section 1.2 (a) PSC and PSC Sub jointly and severally represent and warrant to the Company as follows: (i) each of PSC and PSC Sub has all necessary corporate power and authority to execute and deliver this Fourth Amendment, to perform its obligations hereunder and to consummate the transactions contemplated by the Merger Agreement as amended by this Fourth Amendment; (ii) the execution and delivery of this Fourth Amendment by PSC and PSC Sub and the consummation by PSC and PSC Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of PSC and PSC Sub and no stockholder votes are necessary to authorize this Fourth Amendment or to consummate the transactions contemplated hereby; and (b) this Fourth Amendment has been duly authorized and validly executed and delivered by the PSC and PSC Sub and, assuming this Fourth Amendment and the Merger Agreement are valid and binding obligations of the Company, the Merger Agreement as amended by this Fourth Amendment constitutes a legal, valid and binding obligation of PSC and PSC Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity Exception. ARTICLE 2 AMENDMENTS TO MERGER AGREEMENT Section 2.1 Section 6.8.5 of the Merger Agreement is replaced in its entirety with the following: At least fifteen (15) days prior to the Company Stockholders' Meeting, Parent shall expressly identify to the Company in writing any employee of the Company or any Company Subsidiary at the level of pay band "B" or above as to whom Parent currently intends as of the Closing or within twelve (12) months following the Effective Time to either (i) not retain by reason of the consummation of the Merger or (ii)(a) materially reduce or diminish the duties, responsibilities or authority of such employee subsequent to the Merger, (b) reduce the employee's compensation or benefits, or (c) require as a condition to continued employment with the Surviving Corporation that the employee's employment be based at a location other than its location at the Effective Time. At least five (5) days prior to the Company Stockholders' Meeting, the Company shall use its commercially reasonable efforts to cause any employee who is party to any change in control, severance, retention and/or employment agreements with the Company and who is legally entitled (as determined in the reasonable judgment of the board of directors of the Company after receiving written advice of its outside legal counsel and consultation with the Purchaser) pursuant to the terms of such individual agreement to terminate his or her employment for "Good Reason" (as defined in an applicable individual agreement) immediately following the consummation of the Merger, pursuant to a right to so terminate expressly set forth in such agreement, to notify the Company of the employee's intention to so terminate his or her employment in writing. Any employee who is: (A) identified in (i) above as being not intended by Parent to be retained as of the Closing, or (B) who notifies the Company as set forth above that the employee intends to terminate his or her employment for "Good Reason" immediately following the consummation of this Merger (and who has, by reason of the consummation of the Merger and/or the restructuring transactions undertaken concurrent with the closing thereof, the valid right to do so as consequence of the consummation of the Merger and/or such restructuring transactions, as determined in the reasonable judgment of the board of directors of the Company after receiving written advice of its outside legal counsel and consultation with the Purchaser), shall receive, at the Effective Time, all payments to which such employee is entitled pursuant to the terms of any written change of control, severance, retention and/or employment agreements or arrangements with the Company or any Company Subsidiary and which are set forth in Section 6.8.5 of the Company Disclosure Schedule. Notwithstanding the foregoing, from and after the Effective Time, Parent shall cause Surviving Corporation and its Subsidiaries to honor, in accordance with their terms, all change in control, severance, retention and employment agreements or arrangements (including an employee's right to terminate employment for "Good Reason"), in each case with the current and former employees of the Company and the Company Subsidiaries as set forth in Section 6.8.5 of the Company Disclosure Schedule. On or before December 31, 2005, the Company shall pay each Disqualified Individual in cash or stock, as may be applicable under the Company's existing benefit plans and agreements (or shall be deemed to have paid by reason of the removal of vesting requirements or other restrictions) ("Accelerated Compensation"), an amount of Accelerated Compensation equal to the Minimum Required Amount. Each Disqualified Individual's Accelerated Compensation may include, without limitation, (i) 2003 Cash Bonus Awards under the 2003 Long-Term Program and vesting of restricted stock awarded under such program; (ii) 1997 LTIP Performance Awards payable in cash and in stock in or on account of 2004 and 2005; (iii) the vesting of restricted stock awarded under the 1997 Long-Term Incentive Plan in or on account of 2004 and 2005; (iv) benefits under the Enhanced Supplemental Executive Retirement Plan; (v) benefits under the Supplemental Executive Retirement Plan; (vi) benefits under the Executive Deferred Compensation Plan (including the Retirement Enhancement Program); and (vii) advance benefits under change in control, severance or employment agreements notwithstanding that a severance event has not occurred. Upon request, PSC and PSC Sub shall be entitled to review all calculations and copies of all work papers related thereto regarding Accelerated Compensation and shall be provided with reasonably satisfactory evidence that the Minimum Required Amount was paid. In consideration of the foregoing, PSC and PSC Sub have provided the Company with a letter of credit in the form attached as Annex A hereto (the "Additional LC") entitling the Company to make draws thereunder as specified therein only in the event that the Company has paid the Minimum Required Amount and (a) the Company terminates this Agreement pursuant to Section 8.1(b)(ii), and on the date of such termination the conditions set forth in Sections 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or, in the case of any such conditions required to be satisfied on the Closing Date or as of the Effective Time, would be reasonably capable of being satisfied on the date of such termination; or (b) the Company terminates this Agreement pursuant to Section 8.1(c)(i), and on the date of such termination the conditions set forth in Sections, 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or, in the case of any such conditions required to be satisfied on the Closing Date or as of the Effective Time, would be reasonably capable of being satisfied on the date of termination. In the event the Additional LC or any substitute therefor is scheduled to terminate within ten (10) Business Days and Parent has not provided the Company with a substitute Additional LC with a term of at least 90 additional days, the Company shall have the right to draw the full amount of the Additional LC and hold such funds in escrow until such time as a substitute Additional LC is delivered or the Merger Agreement has been terminated under circumstances in which the Company is not entitled to draw upon the Additional LC, at which time such funds shall be returned to Parent, and if the Merger Agreement is terminated under circumstances in which the Company is entitled to draw upon the Additional LC, the Company shall be entitled to retain such funds in lieu of drawing upon the Additional LC. As used in this Section 6.8.5 and in Section 8.1(d)(i): "Compensation Plan" means any agreement between such Disqualified Individual and the Company or under any plan or policy of the Company pursuant to which compensation for services rendered, including deferred compensation, insurance, relocation benefits and severance, is payable. "Disqualified Individual" has the meaning set forth in Section 280G(c) of the Code and United States Department of the Treasury Regulations ("Treasury Reg.") promulgated under Section 280G of the Code. "Minimum Required Amount" means such amount, but not in excess of the total compensation payable to any Disqualified Individual under the Compensation Plans, so that the Three-Times-Base-Amount Test under Treasury Reg. Section 1.280G-1, Q&A 30, calculated with respect to each Disqualified Individual following such payment is greater than the amount of such person's aggregate Potential Parachute Payment. For this purpose, Minimum Required Amount shall be calculated based on the assumption that, for purposes of calculating liability under Section 280G of the Code, a Disqualified Individual's "base amount" (within the meaning of Section 280G of the Code) includes the Accelerated Compensation (including, but not limited to, the accelerated severance payments). "Potential Parachute Payment" means the aggregate amount of compensation payable or deemed payable to each Disqualified Individual, under any Compensation Plans in cash, stock or other form, including without limitation any amounts payable upon the termination of the Disqualified Individual's employment or any amount deemed paid for federal income tax purposes as a result of the removal of any vesting requirements or other transfer restrictions imposed on shares of Company stock already issued to such person, which could be treated as a parachute payment within the meaning of Treasury Reg. Section 1.280G-1, Q&A-2. Section 2.2 Section 6.8 of the Merger Agreement is amended by adding the following at the end thereof: Section 6.8.6 Delegation. Without by implication limiting the other provisions of this Agreement, where a provision of Section 6.8 of this Agreement requires the Parent, the Surviving Corporation or a Subsidiary to take an action or provide a benefit (including ones required to be provided under Surviving Corporation Benefit Plans), to the extent that a third party (or its benefit plan) takes such action or provides such benefit, the obligations under Section 6.8 shall be deemed fulfilled. Section 2.3 The reference in Section 8.1(b)(ii) of the Merger Agreement to "March 1, 2006" shall be changed to "March 31, 2006". Section 2.4 Section 8.1(d)(i) of the Merger Agreement is amended in its entirety to read as follows: (x) if the Company shall have breached any of the covenants or agreements contained in the provisions in Section 6.8.5 starting with "On or before December 31, 2005" until the end of Section 6.8.5 and such breach results, or would be reasonably likely to result, in liability (including without limitation any liability resulting from any gross-up payments due to any Disqualified Individuals and/or any compensation to Disqualified Individuals that is non-deductible as a result of Section 280G of the Code) to PSC, PSC Sub and/or the Surviving Corporation in excess of $5,000,000, (y) if the Company shall have breached any of the covenants or agreements contained in this Agreement to be complied with by the Company (other than those in Section 6.8.5 starting with "On or before December 31, 2005" until the end of Section 6.8.5) such that the closing condition set forth in Section 7.2.2 would not be satisfied or (z) there exists a breach of any representation or warranty of the Company contained in this Agreement such that the closing condition set forth in Section 7.2.1 would not be satisfied, and, in the case of either (y) or (z), such breach is incapable of being cured by the Termination Date or is not cured by the Company within twenty (20) Business Days after the Company receives written notice of such breach from Parent or Merger Sub; Section 2.5 Section 8.2 of the Merger Agreement is amended by (i) deleting the reference to "as contemplated by Section 9.11 hereof" therein and (ii) replacing the phrase "the Business Interruption Fee shall be the exclusive remedy of the Company under circumstances where the Business Interruption Fee is payable by Parent" with the phrase "the Business Interruption and the Company's drawing on the Additional LC shall be the exclusive remedy of the Company under circumstances where the Business Interruption Fee is payable by Parent and/or the Additional LC may be drawn upon by the Company". Section 2.6 The references in the first and fifth sentences of Section 8.4.1 of the Merger Agreement to "$30,000,000" shall be changed to "$20,000,000". Section 2.7 The first sentence of Section 9.6 of the Merger Agreement is amended in its entirety to read as follows: This Agreement, as amended by that certain First Amendment dated as of August 23, 2005 by and among Parent, Merger Sub, the Company and, solely for purposes of Article 3 thereof, SBEV (the "First Amendment"), that certain Second Amendment dated as of September 22, 2005 by and among Parent, Merger Sub, the Company and, solely for purposes of Article 3 thereof, SBEV (the "Second Amendment"), that certain Third Amendment dated as of November 20, 2005 by and among Parent, Merger Sub, the Company, North American Senior Care, Inc., a Delaware corporation, NASC Acquisition Corp., a Delaware corporation, and solely for purposes of Articles 1, 4 and 5 thereof, SBEV Property Holdings LLC, and GPH (the "Third Amendment"), and that certain Fourth Amendment dated as of December 16, 2005 by and among Parent, Merger Sub, the Company, and, solely for purposes of Article 4 thereof, GPH (the "Fourth Amendment" and together with the First Amendment, the Second Amendment, and the Third Amendment, the "Amendments") (together with the Exhibits, Parent Disclosure Schedule, Company Disclosure Schedule and the other documents delivered pursuant hereto), the Commitments and the Confidentiality Agreement constitute the entire agreement of the Parties and supersede all prior agreements and undertakings, both written and oral, between the Parties, or any of them, with respect to the subject matter hereof and thereof and, except as otherwise expressly provided herein, are not (other than in the case of Sections 3.5, 6.8, 6.9 and 6.13) intended to confer upon any other Person any rights or remedies hereunder. Section 2.8 The reference in Section 9.6 of the Merger Agreement to "6.8," is deleted, and there is inserted in lieu thereof the following references "6.8.1, 6.8.2, 6.8.3, 6.8.4". ARTICLE 3 OTHER AGREEMENTS Each of PSC , PSC Sub and GPH and their affiliates and successors, and each of their officers, directors, employees, managers, shareholders, members, representatives and agents (collectively, the "PSC Releasing Parties") hereby releases and discharges the Company and its affiliates and successors, and each of its officers, directors, employees, managers, shareholders, members, representatives and agents (collectively, the "Seller Releasing Parties") from any and all claims, demands, proceedings, causes of action and liabilities whatsoever, whether known or unknown, which any of the PSC Releasing Parties has or may have against the Seller Releasing Parties arising out of matters occurring prior to the date hereof and relating to the Company's compliance with the last two sentences of Section 6.8.5 of the Merger Agreement as in effect prior to this Fourth Amendment or the accuracy or completeness of the information provided by the Seller Releasing Parties with respect to the compensatory payments used to calculate potential liabilities under Section 280G of the Code (other than any such information included in the Merger Agreement or the Disclosure Schedule). ARTICLE 4 GENERAL PROVISIONS Section 4.1 Except as expressly amended hereby, the Merger Agreement shall remain in full force and effect. Section 4.2 The provisions of Article 9 of the Merger Agreement shall apply to this Fourth Amendment as if set forth herein in their entirety. IN WITNESS WHEREOF, the undersigned have caused this Fourth Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. PEARL SENIOR CARE, INC. By: /s/ Ronald E. Silva ----------------------------------- Name: Ronald E. Silva Title: Authorized Signatory PSC SUB, INC. By: /s/ Ronald E. Silva -------------------------------------------- Name: Ronald E. Silva Title: Authorized Signatory GEARY PROPERTY HOLDINGS LLC By: /s/ Milton B. Patipa -------------------------------------------- Name: Milton B. Patipa Title: Authorized Signatory BEVERLY ENTERPRISES, INC. By: /s/ William R. Floyd -------------------------------------------- Name: William R. Floyd Title: Chairman, President and Chief Executive Officer EX-99.1 3 y31423exv99w1.txt EX-99.1: LETTER OF CREDIT LETTER OF CREDIT MORGAN STANLEY ASSET FUNDING INC. 1221 Avenue of the Americas, 27th Floor New York, New York 10020 Date: December 20, 2005
IRREVOCABLE STANDBY OUR NO. 2A LETTER OF CREDIT - ----------------------------------------------------------- -------------------------------------------------------- ADVISING BANK ACCOUNT PARTY Fillmore Strategic Investors, L.L.C. 140 Pacific Avenue San Francisco, California 94111 - ----------------------------------------------------------- -------------------------------------------------------- BENEFICIARY STATED AMOUNT Beverly Enterprises, Inc. $10,000,000 One Thousand Beverly Way Ft. Smith, AR 72919 - ----------------------------------------------------------- -------------------------------------------------------- EXPIRY DATE April 18, 2006 - ----------------------------------------------------------- --------------------------------------------------------
Sir or Madam: Morgan Stanley Asset Funding Inc., a Delaware corporation ("ISSUER") hereby issue, at the request and for the account of the Account Party, in your favor, our Irrevocable Standby Letter of Credit No. 2A in an amount not to exceed in the aggregate TEN MILLION DOLLARS ($10,000,000) (the "STATED AMOUNT"), effective immediately and expiring at our office at 1221 Avenue of the America, 27th Floor, New York, New York 10020 or at any other office in the city and state of New York which may be designated by us by written notice delivered to you, with our close of business, New York time, April 18, 2006 (the "EXPIRY DATE"), unless earlier terminated by Beneficiary in accordance with the terms below. This Letter of Credit is being issued pursuant to that certain Revolving Credit Agreement dated November 18, 2005, as amended on or about the date hereof and as the same may be further amended, restated or modified from time to time (the "CREDIT AGREEMENT"), by and among Account Party, Morgan Stanley Asset Funding Inc., a Delaware corporation, as agent for Issuer and each of the other lending institutions thereto (in such capacity, "AGENT"). Purpose and Confirmation: This Letter of Credit shall be used as security for the benefit of the Beneficiary pursuant to Section 6.8.5 of the Agreement and Plan of Merger by and among SBEV Property Holdings LLC, Beneficiary, and the other parties thereto dated as of August 16, 2005, as amended by that certain First Amendment thereto dated as of August 23, 2005, and as further amended by that certain Second Amendment thereto dated as of September 22, 2005, and as further amended by that certain Third Amendment thereto dated as of November 20, 2005 and as further amended by that certain Fourth Amendment thereto dated on or about the date hereof (as amended and restated and as the same may be further amended, restated or modified from time to time, the "MERGER AGREEMENT"); and by Beneficiary's acceptance of this Letter of Credit, Beneficiary hereby confirms that this Letter of Credit satisfies the delivery of letter credit requirement in Section 6.8.5 of the Merger Agreement or hereby waives any variation from such requirements. Stated Amount: The Stated Amount shall be automatically reduced by the amount of any drawing hereunder. Drawings: An amount up to the Stated Amount under this Letter of Credit is available to the Beneficiary from time to time upon the following conditions: 1. Presentation of this Letter of Credit (in case of a drawing of the entire Stated Amount) and a dated drawing request ("DRAWING REQUEST"), in the form of EXHIBIT A, drawn on us bearing the number of this Letter of Credit duly executed and delivered by the Beneficiary, accompanied by a statement of the Beneficiary setting forth the following: "We hereby certify and confirm to you that we are permitted to draw upon Morgan Stanley Asset Funding Inc. Irrevocable Letter of Credit No. 2A dated December 20, 2005, issued by Morgan Stanley Asset Funding Inc. in favor of Beverly Enterprises, Inc., as Beneficiary, pursuant to the terms and conditions of the Agreement and Plan of Merger by and among SBEV Property Holdings LLC, Beneficiary, and other parties thereto dated on or about August 16, 2005, as amended by that certain First Amendment thereto dated as of August 23, 2005, and as further amended by that certain Second Amendment thereto dated as of September 22, 2005, and as further amended by that certain Third Amendment thereto dated as of November 20, 2005 and as further amended by that certain Fourth Amendment thereto dated on or about the date hereof (the "MERGER AGREEMENT")." 2. Issuer shall not have any obligation to honor any Drawing Request under this Letter of Credit, unless, prior to the date of initial drawing, Agent shall have received, in form and substance acceptable to Agent, in its sole and absolute discretion, a Drawing Request duly executed by Beneficiary. Partial and/or multiple drawings are permitted. This Letter of Credit is not assignable or transferable in whole or in part. The above drawing request and all communications with respect to this Letter of Credit shall be in writing, addressed to us at 1221 Avenue of the Americas, 27th Floor, New York, New York 10020, fax no. 212-507-4950, Attention: Peter Woroniecki, referencing this Letter of Credit No. 2A and presented to us by delivery in person or facsimile transmission at such address, and the original of the above drawing request or such communications, as the case may be, shall be sent to us at such address by overnight courier for receipt by us within one (1) Business Day of the date of any such facsimile transmission. If the drawing request and any accompanied documents are presented in compliance with the terms of this Letter of Credit to us at such address by 11:00 a.m. New York City time on any Business Day on or prior to the Expiry Date, payment will be made not later than the close of business, New York City time, on the 2 third Business Day following the presentment date, and if such drawing request and any accompanied documents are so presented to us after 11:00 a.m. New York City time on any Business Day on or prior to the Expiry Date, payment will be made on the fourth Business Day following the presentment date. Payment under this Letter of Credit shall be made in immediately available funds by wire transfer to such account as may be designated by the Beneficiary in the applicable drawing request. Only the Beneficiary may make drawings under this Letter of Credit. The aggregate amount of all drawings made in respect of payments hereunder honored by us shall not exceed the Stated Amount and each drawing honored by us hereunder shall automatically, without notice to applicable Beneficiary, reduce the amount available under this Letter of Credit by the amount so drawn. Upon the payment to the Beneficiary specified in a drawing request hereunder, we shall be fully discharged of our obligation under this Letter of Credit as to such drawing request, and we shall not thereafter be obligated to make further payments under this Letter of Credit in respect of such drawing request. As used in this Letter of Credit, "BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to be closed. Early Termination of Expiration Date: At the option of Beneficiary, the Beneficiary may notify the Account Party and Issuer in writing, in the form of EXHIBIT B, that it elects to early terminate this Letter of Credit, with this Letter of Credit, marked "Terminated" attached thereto to Morgan Stanley Asset Funding Inc. at 1221 Avenue of the Americas, 27th Floor, New York, New York 10020 (fax no. 212-507-4950), Attention: Peter Woroniecki. Miscellaneous: Any and all banking charges associated with this Letter of Credit are for the account of the Account Party. By paying you an amount demanded in accordance with this Letter of Credit, we make no representation as to the correctness of the amount demanded or your representations on the certificates required of you by this Letter of Credit. This Letter of Credit sets forth in full the terms of our undertaking. Such undertaking shall not in any way be modified, amended or amplified by reference to any document or instrument preferred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit relates, except only defined terms used herein and the drawing requests and accompanied documents referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such defined terms, drawing requests and accompanied documents. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500 ("UNIFORM CUSTOMS"), which is incorporated into the text of this Letter of Credit by this reference. This Letter of Credit shall be deemed to be a contract made under the laws of the state of New York and shall, as to matters not governed by and to the extent not inconsistent with the Uniform Customs, be governed by and construed in accordance with the law of such state, including Article 5 of the Uniform Commercial Code as in effect in such state. We irrevocably agree with you that any legal action or proceeding with respect to this Letter of Credit shall be brought in the courts of the state of New York in the county of New York or of the United States of America in the Southern District of New York. By signing this Letter of Credit, we irrevocably submit to the jurisdiction of such courts solely for the purposes of this Letter of Credit. We hereby waive, to the 3 fullest extent permitted by law, any objection we may now or hereafter have to the laying of venue in any such action or proceeding in any such court. All notices to the Account Party shall be sent to the address listed above, Attn: Milton Patipa, fax number: (415) 834.1475. All notices shall be sent to such address or by overnight courier for receipt within one (1) Business Day of the date of any such facsimile transmission. No amendment, extension, supplement or other modification to this Letter of Credit shall be enforceable against any person unless such amendment, extension, supplement or other modification has been accepted in writing by such person. We hereby engage with the holder hereof that claims presented hereunder in accordance with the terms and conditions of this Letter of Credit will be duly honored upon receipt on or before the Expiry Date. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE FOLLOWS. 4 Very truly yours, MORGAN STANLEY ASSET FUNDING INC. By: /s/ Barbara Isaacman ------------------------ Name: Barbara Isaacman Title: Vice President EXHIBIT A TO THE LETTER OF CREDIT [FORM OF] DRAWING REQUEST [Date] Morgan Stanley Asset Funding Inc. 1221 Avenue of the Americas, 27th Floor New York, New York 10020 Attention: Peter Woroniecki Re: Morgan Stanley Asset Funding Inc. Irrevocable Letter of Credit No. 2A Ladies and Gentlemen: The undersigned hereby draws on Morgan Stanley Asset Funding Inc. Irrevocable Letter of Credit No. 2A dated December 20, 2005 (as amended, supplemented or otherwise modified from time to time, the "LETTER OF CREDIT"), issued by Morgan Stanley Asset Funding Inc. in favor of Beverly Enterprises, Inc., as Beneficiary. Unless otherwise defined herein, all capitalized terms used herein shall have the respective meaning set forth in the Letter of Credit. In connection with this drawing, we hereby certify and confirm to you that (a) this Drawing in the amount of US$_______________ is being made pursuant to Morgan Stanley Asset Funding Inc. Irrevocable Letter of Credit No. 2A, dated December 20, 2005, issued to Beverly Enterprises, Inc., as Beneficiary; and (b) we are permitted to draw upon the Letter of Credit pursuant to the terms and conditions of the Agreement and Plan of Merger by and among SBEV Property Holdings LLC, Beneficiary, and other parties thereto dated on or about August 16, 2005, as amended by that certain First Amendment thereto dated as of August 23, 2005, and as further amended by that certain Second Amendment thereto dated as of September 22, 2005, and as further amended by that certain Third Amendment thereto dated as of November 20, 2005 and as further amended by that certain Fourth Amendment thereto dated on or about the date hereof (the "MERGER AGREEMENT"). IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Drawing Request as of the date hereof. BEVERLY ENTERPRISES, INC. By: ___________________________ Name: Title: EXHIBIT B TO THE LETTER OF CREDIT [FORM OF] NOTICE OF TERMINATION OF LETTER OF CREDIT [Date] Morgan Stanley Asset Funding Inc. 1221 Avenue of the Americas, 27th Floor New York, New York 10020 Attention: Peter Woroneicki Fillmore Strategic Investors, L.L.C. 140 Pacific Avenue San Francisco, California 94111 Attention: Ron Silva Ladies and Gentlemen: Reference is made to Morgan Stanley Asset Funding Inc. Irrevocable Letter of Credit No. 2A dated December 20, 2005, issued by Morgan Stanley Asset Funding Inc. (as the same may amended, supplemented or otherwise modified from time to time, the "LETTER OF CREDIT") in favor of Beverly Enterprises, Inc., as Beneficiary. This Notice of Termination constitutes our notice to you pursuant to the Letter of Credit that we hereby elect to early terminate the Letter of Credit; and hereby attached is the Letter of Credit, marked "Terminated". Very truly yours, BEVERLY ENTERPRISES, INC. By: ________________________ Name: Title: EX-99.2 4 y31423exv99w2.txt EX-99.2: PRESS RELEASE MEWS RELEASE [BEVERLY ENTREPRISES, INC LOGO] Investor James M. Griffith News Media Blair C. Jackson Contact: Senior Vice President Contact: Vice President Investor Relations Corporate Communications (479) 201-5514 (479) 201-5263 BEVERLY ENTERPRISES ANNOUNCES AMENDMENT TO MERGER AGREEMENT FORT SMITH, ARK., DECEMBER 21, 2005 -- Beverly Enterprises, Inc. ("BEI") (NYSE: BEV) today announced that the company has entered into an amendment to its merger agreement with affiliates of Fillmore Capital Partners. The parties entered into the amendment for the purpose of accelerating into 2005, in connection with the merger, certain employee compensation payments. A Current Report on Form 8-K containing the amendment in its entirety is being filed with the Securities and Exchange Commission. As part of the amendment, Fillmore has provided the company with a letter of credit for an additional $10 million, to be used towards funding a portion of these compensation payments in the event the merger agreement is terminated by the company under certain circumstances and certain other conditions are met. Additionally, under the terms of the amended merger agreement, the date by which the transaction must be completed has been extended from March 1, 2006 to March 31, 2006. IMPORTANT INFORMATION On December 13, 2005, BEI filed a preliminary proxy statement relating to BEI's solicitation of proxies with respect to its special meeting of stockholders to be held in 2006. Prior to the special meeting, BEI will furnish a definitive proxy statement to its stockholders. BEI URGES INVESTORS AND SECURITY HOLDERS TO READ THE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. BEI and its officers and directors may be deemed to be participants in the solicitation of proxies with respect to any proposed transaction. Information regarding such individuals is included in the Company's proxy statements and Annual Reports on Form 10-K previously filed with the Securities and Exchange Commission and will be included in the definitive proxy statement relating to the proposed transaction when it becomes available. You may obtain BEI's proxy statement, when it becomes available, any amendments or supplements to the proxy statement and other relevant documents free of charge at www.sec.gov. You may also obtain a free copy of BEI's definitive proxy statement, when it becomes available, any amendments and supplements to the definitive proxy statement and other relevant documents by writing to BEI at 1000 Beverly Way, Fort Smith, Arkansas 72919, Attn: Investor Relations or at www.beverlycorp.com under the tab "Investor Information" and then under the heading "SEC Filings." FORWARD LOOKING STATEMENTS The statements in this document relating to matters that are not historical facts are forward-looking statements based on management's beliefs and assumptions using currently available information and expectations as of the date hereof. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, including the risks and uncertainties detailed from time to time in BEI's filings with the Securities and Exchange Commission. In particular, statements regarding the consummation of the merger with Pearl Senior Care are subject to risks that the conditions to the transaction will not be satisfied, including the risk that regulatory approvals will not be obtained. In addition, BEI's results of operations, financial condition and cash flows may be adversely impacted by the auction process and the pendency of the proposed transaction with Pearl Senior Care, which may impact our ability to attract and retain customers, management and employees. BEI has incurred and will continue to incur significant advisory fees and other expenses relating to the auction process and the proposed transaction. Although BEI believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. BEI assumes no duty to publicly update or revise such statements, whether as a result of new information, future events or otherwise. # # # -----END PRIVACY-ENHANCED MESSAGE-----