<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1/A
(Amendment No. 6)
Tender Offer Statement
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
and
SCHEDULE 13D/A
(Amendment No. 6)
Under the Securities Exchange Act of 1934
REGENCY HEALTH SERVICES, INC.
(Name of Subject Company)
SUNREG ACQUISITION CORP.
SUN HEALTHCARE GROUP, INC.
(Bidders)
Common Stock, $.01 par value
(Title of Class of Securities)
758934-10-3
(CUSIP Number of Class of Securities)
Robert Murphy, Esq.
Sun Healthcare Group, Inc.
101 Sun Lane NE
Albuquerque, New Mexico 87109
Telephone: (505) 821-3355
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
Copy to:
Michael Kennedy, Esq.
Steve Camahort, Esq.
Brobeck, Phleger & Harrison LLP
One Market - Spear Street Tower
San Francisco, California 94105
Telephone: (415) 442-0900
Page 1 of 8 Pages
<PAGE>
CUSIP NO. 758934-10-3
<TABLE>
<C> <S>
NAME OF REPORTING PERSONS:
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Sunreg Acquisition Corp.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[_]
(b)[_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF and BK
- -------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
5 2(e) OR 2(f) [_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
- -------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,074,913
- -------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_]
- -------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.6% (based on 15,935,300 shares outstanding)
- -------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
</TABLE>
Page 2 of 8 Pages
<PAGE>
CUSIP NO. 758934-10-3
<TABLE>
<C> <S>
NAME OF REPORTING PERSONS:
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Sun Healthcare Group, Inc.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[_]
(b)[_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF and BK
- -------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
5 2(e) OR 2(f) [_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
- -------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,074,913
- -------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_]
- -------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.6% (based on 15,935,300 shares outstanding)
- -------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
HC
- -------------------------------------------------------------------------------
</TABLE>
Page 3 of 8 Pages
<PAGE>
Amendment No. 6 to the Tender Offer Statement on Schedule 14D-1 (the
"Statement") and Amendment No. 6 to Schedule 13D relating to the offer by Sunreg
Acquisition Corp., a corporation organized and existing under the laws of the
State of Delaware ("Purchaser") and a wholly owned subsidiary of Sun Healthcare
Group, Inc., a Delaware corporation ("Parent"), to purchase all outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of Regency
Health Services, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), at a price of $22.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase dated August 1, 1997 (the "Offer to Purchase") and
in the related Letter of Transmittal (which together constitute the "Offer"),
copies of which were attached to the Statement as Exhibits (a)(1) and (a)(2),
respectively.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4(a)-(c) is hereby amended and supplemented by adding thereto the
following in connection with NationsBank delivering a revised bank commitment
letter effective September 19th, 1997.
Purchaser estimates that the total funds required to purchase all Shares
validly tendered pursuant to the Offer, consummate the Merger, refinance certain
existing indebtedness of Parent and the Company, pay the costs and expenses
related to the Offer and the Merger and to provide for ongoing general corporate
purposes after completion of the Offer and the Merger will be approximately
$1,000,000,000. Parent and Purchaser intend to obtain such funds by means of
proceeds from borrowings from the Senior Tender Facilities (the "Senior Tender
Facilities"). The terms of the Senior Tender Facilities have not yet been
finalized and are still being negotiated. Moreover, the documentation evidencing
the Senior Tender Facilities has not yet been finalized. Accordingly, the
description below of the Senior Tender Facilities is preliminary and necessarily
incomplete. In addition, the terms and provisions of the Senior Tender
Facilities, to the extent described, are subject to change if the terms of the
Offer and Merger change. In any event, the ultimate financing instruments might
contain certain terms that are more or less onerous than those currently
contemplated.
NationsBank has delivered a bank commitment letter (the "Bank Commitment
Letter"), pursuant to which NationsBank has committed to provide the Senior
Tender Facilities upon the terms and subject to the conditions set forth in the
Bank Commitment Letter, and Nations Banc Capital Markets, Inc. ("NCMI") has
committed to form a syndicate of financial institutions reasonably acceptable to
Parent (the "Lenders") for the Senior Tender Facilities, upon the terms and
subject to the conditions of the Bank Commitment Letter.
The Bank Commitment Letter provides that the commitments of NationsBank and
NCMI will terminate unless a Credit Agreement (as defined) is closed on or
prior to October 7, 1997.
Page 4 of 8 Pages
<PAGE>
Parent has agreed to pay certain fees to NationsBank and NCMI for their own
account and for the account of the Lenders payable with respect to the Senior
Tender Facilities as follows: (i) Letter of Credit Fees, due and payable
quarterly in arrears and calculated on the aggregate stated amount for each
letter of credit for the stated duration thereof, equal to the applicable margin
of .250% on a per annum basis, to be paid to the administrative agent for the
prorata account of the Lenders, plus a fronting fee of .125% per annum to be
paid to NationsBank, as fronting bank for its own account and (ii) a Commitment
Fee of 1/2% per annum calculated on the unused portion of the Senior Tender
Facilities accruing upon execution of the Credit Agreement and payable
thereafter quarterly in arrears.
The Senior Tender Facilities will be provided pursuant to the terms and
conditions of a Credit Agreement to be entered into by Parent and NationsBank
and NCMI (the "Credit Agreement").
Pursuant to the Bank Commitment Letter, the Senior Tender Facilities are
expected to consist of an aggregate principal amount of up to 1,200,000 as
follows: (i) a $500 million revolving credit facility (the "Revolving Credit
Facility") which will include a $75 million sublimit for the issuance of standby
and commercial letters of credit and (ii) a $700 million term loan facility (the
"Term Loan Facility") comprised of the following term loan tranches: (x) $200
million tranche A term loan (the "Tranche A Term Loan"), (y) $250 million
tranche B term loan (the "Tranche B Term Loan") and (z) $250 million tranche C
term loan (the "Tranche C Term Loan").
Concurrently with the consummation of the Offer and the Merger, NationsBank
(on behalf of the Lenders) shall receive a first priority perfected security
interest in (a) all of the capital stock of each of the domestic subsidiaries
(whether direct or indirect and whether now existing or hereafter created,
acquired or arising) of Parent, (b) 66% of the capital stock of each foreign
subsidiary which is a direct subsidiary of Parent or any of its domestic
subsidiaries, which capital stock shall not be subject to any other lien or
encumbrance and (c) 100% of the debt securities of the Company purchased by
Parent or Purchaser as a result of the Debt Tender Offer. Additionally, 100% of
the capital stock of the Company acquired by Parent, Purchaser or any other
subsidiary of Parent as a result of the Offer or otherwise shall be subject to a
negative pledge. The foregoing security shall ratably secure the Senior Tender
Facilities and any interest rate swap/foreign currency swap or similar
arrangements with a Lender under the Senior Tender Facilities.
The Senior Tender Facilities shall be prepaid by an amount equal to (a)
100% of the net cash proceeds of all asset sales by Parent or any domestic
subsidiary of Parent (including stock of subsidiaries), subject to certain
conditions and net of selling expenses and taxes to the extent such taxes are
paid; (b) 100% of the net cash proceeds from the issuance of any debt (excluding
certain permitted debt but including the Senior Merger Facilities (as defined in
the Bank Commitment Letter) by Parent or any domestic subsidiary; and (c) 100%
of the net cash proceeds from the issuance of equity (excluding certain proceeds
such as proceeds from the exercise of options) by Parent or any domestic
subsidiary. Prepayments shall be applied pro rata to reduce the Tranche A Term
Loan, the Tranche B Term Loan and the Tranche C Term Loan within each tranche
pro rata with respect to each remaining installment of principal. In the event
the Term Loan Facilities shall have been completely prepaid, the mandatory
payments described above shall be applied to permanently reduce the amount
available under the Revolving Credit Facility.
The Senior Tender Facilities may be prepaid in whole or in part at any time
without penalty, subject to reimbursement of the Lenders' breakage and
re-deployment costs in the case of prepayment of LIBOR borrowings.
Page 5 of 8 Pages
<PAGE>
The Senior Tender Facilities shall bear interest, at the option of Parent,
at a rate per annum equal to either (i) the LIBOR interbank rate, adjusted for
reserves or (ii) the Base Rate (defined as the higher of (a) the NationsBank
prime rate and (b) the Federal Funds rate plus 1/2%), in each case plus the
following Applicable Margins:
<TABLE>
<CAPTION>
LIBOR + BASE RATE +
------- -----------
<S> <C> <C>
Revolving Credit Loans......... 2.50% 1.00%
Tranche A Term Loans........... 2.50% 1.00%
Tranche B Term Loans........... 2.75% 1.25%
Tranche C Term Loans........... 3.00% 1.50%
</TABLE>
Parent may select interest periods of 7 or 30 days for LIBOR loans, subject
to availability. A penalty rate shall apply on all loans in the event of default
at a rate per annum of 2% above the applicable interest rate.
The Senior Tender Facilities shall terminate and all amounts outstanding
thereunder shall be due and payable in full on the earliest to occur of (i) the
closing and funding of the Senior Merger Facilities, (ii) the abandonment by
Parent or Purchaser of the contemplated merger of the Company with and into
Parent or Purchaser or (iii) December 31, 1997.
The Senior Tender Facilities will contain certain representations and
warranties, certain negative and affirmative financial covenants, certain
conditions and events of default which are customarily required for similar
financings. Such covenants will include restrictions and limitations
on dividends and stock redemptions and the redemption and/or prepayment of other
debt, capital expenditures, leases, incurrence of debt, liens, investments,
transactions with affiliates, acquisitions, mergers, consolidations and asset
sales. Furthermore, Parent will be required to maintain compliance with certain
financial covenants such as a maximum total debt/total capitalization ratio.
ITEM 10. ADDITIONAL INFORMATION.
Item 10(f) is hereby amended and supplemented by adding thereto the
following:
On September 29, 1997, Parent issued a press release announcing that, as of
5 p.m., Eastern Standard Time, on September 26, 1997, Purchaser had received
duly executed and unrevoked consents to amend the indentures pursuant to which
the Securities were issued from holders of approximately 83% and 79% of the
aggregate outstanding principal amount (excluding any Securities owned by the
Company or any affiliate of the Company and excluding the receipt of notices of
guaranteed delivery) of the Senior Securities and the Junior Securities,
respectively. The full text of the press release is set forth in Exhibit (a)(12)
and is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended by adding the following exhibit:
(a)(12) Press Release issued by Sun Healthcare Group, Inc. on
September 29, 1997.
(b)(2) Commitment Letter, effective as of September 19, 1997 from
NationsBank of Texas, N.A.
Page 6 of 8 Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
September 30, 1997 SUNREG ACQUISITION CORP.
By: /s/ Robert D. Woltil
-----------------------
Name: Robert D. Woltil
Title: Vice President
SUN HEALTHCARE GROUP, INC.
By: /s/ Robert D. Woltil
-----------------------
Name: Robert D. Woltil
Title: Senior Vice President for
Financial Services & Chief
Financial Officer
Page 7 of 8 Pages
<PAGE>
EXHIBIT INDEX
Exhibit
No. Item
--- ----
(a)(12) Press Release issued by Sun Healthcare Group, Inc. on September
29, 1997.
(b)(2) Commitment Letter effective as of September 19, 1997 from
NationsBank of Texas, N.A.
Page 8 of 8 Pages
<PAGE>
EXHIBIT (a)(12)
Contact: Phyllis Goodman (media)
Marjorie Goldstein (investors)
505-821-3355
SUN HEALTHCARE GROUP RECEIVES REQUISITE CONSENTS
IN REGENCY CONSENT SOLICITATIONS
Albuquerque, N.M., Sept. 29, 1997 -- Sun Healthcare Group, Inc. (NYSE:SHG)
has announced that Sunreg Acquisition Corp., a wholly owned subsidiary of Sun
Healthcare Group, Inc., in connection with its solicitation (the "Consent
Solicitation") for consents to amend the indentures pursuant to which Regency's
(i) $110 million principal amount of 9-7/8% Senior Subordinated Notes due 2002
(the "Senior Securities") and (ii) $50 million principal amount of 12-1/4%
Subordinated Notes due 2003 (the "Junior Securities," and, together with the
Senior Securities, the "Securities") were issued, as of 5 p.m., Eastern Standard
Time, on Sept. 26, 1997, had received duly executed and unrevoked consents to
amend the indentures pursuant to which the Securities were issued from holders
of approximately 83% and 79% of the aggregate outstanding principal amount
(excluding any Securities owned by Regency or any affiliate of Regency and
excluding the receipt of notices of guaranteed delivery) of the Senior
Securities and the Junior Securities, respectively.
Headquartered in Albuquerque, N.M., Sun Healthcare Group, Inc., is a
diversified international long-term care provider. Sun companies operate
long-term care facilities and pharmacy services across the United States and in
the United Kingdom. Sun subsidiaries provide therapy services in the United
States, fulfill the medical supply needs of nursing homes, and offer a
comprehensive array of ancillary services for the healthcare industry.
Except for historical information, all other matters in this press release
are forward-looking statements that involve risks and uncertainties including,
but not limited to, those detailed from time to time in the company's SEC
filings, which include Sun's annual report on Form 10-K for the fiscal year
ended Dec. 31, 1996.
###
<PAGE>
Exhibit (B)(2)
September 19, 1997
Robert D. Woltil
Chief Financial Officer
Sun Healthcare Group, Inc.
101 Sun Lane, N.C.
Albuquerque, New Mexico 87109
RE: Acquisition Financing
---------------------
Ladies and Gentlemen:
You have advised us that Sun Healthcare Group, Inc. (the "Borrower") intends to
make a tender offer (the "Offer") to acquire the capital stock of Regency Health
Services (the "Acquired Company") (hereinafter the acquisition of Acquired
Company may be referred to as the "Acquisition") for approximately $390,000,000.
The Acquisition will be structured as an equity purchase. You have advised us
that approximately $1,000,000,000 in senior debt financing will be required in
order to effect the Acquisition, to refinance approximately $550,000,000 of
existing indebtedness of the Borrower and the Acquired Company, to pay the costs
and expenses related to the Acquisition and to provide for ongoing general
corporate purposes after completion of the Acquisition. You have further
advised us that any other external financing (including sale and leaseback
transactions) utilized in connection with the Acquisition will be used to reduce
NationsBank's commitments hereunder.
In connection with the foregoing, NationsBank of Texas, N.A. ("NationsBank" or
the "Agent") is pleased to advise you of its commitment (this letter agreement
being the "Commitment Letter") to provide the full principal amount of the
Senior Credit Facilities described in the Summary of Indicative Terms and
Conditions attached to this Commitment Letters as Exhibit A (the "Term Sheet").
NationsBanc Capital Markets, Inc. ("NCMI") is pleased to advise you of its
commitment, as Arranger and Syndication Agent for the Senior Credit Facilities,
to form a syndicate of financial institutions (the "Lenders") reasonably
acceptable to you for the Senior Credit Facilities. All capitalized terms used
and not otherwise defined herein shall have the meanings set forth in the Term
Sheet, and this letter agreement.
<PAGE>
Mr. Robert Woltil
September 19, 1997
Page 2
The commitments of NationsBank and CMI hereunder are subject to the satisfaction
of each of the following conditions precedent in a manner acceptable to
NationsBank and NCMI in their sole discretion:
(a) each of the terms and conditions set forth herein
(b) each of the terms and conditions set forth in the Term Sheet;
(c) execution by the Borrower, the Acquired Company and/or other
appropriate parties of the definitive Purchase Agreement and other
related documentation relating to the Acquisition, in form and
substance satisfactory to NationsBank and NCMI;
(d) there not having occurred and being continuing since the date hereof a
material adverse change in the market for syndicated bank credit
facilities or a material disruption of, or a material adverse change
in, financial, banking or capital market conditions, in each case as
determined by NationsBank and NCMI in their reasonable discretion.
NationsBank will act as Agent for the Senior Credit Facilities and NCMI will act
as Arranger and Syndication Agent for the Senior Credit Facilities. No
additional agents will be appointed without the prior approval of NationsBank
and NCMI.
Furthermore, the commitments of NationsBank and NCMI hereunder are based upon
the financial and other information regarding the Borrower, the Acquired Company
and their respective subsidiaries previously provided to NationsBank and NCMI
and are subject to the condition, among others, that there shall not have
occurred after the date of such information, in the opinion of NationsBank and
NCMI, any material adverse change in the business, assets, liabilities (actual
or contingent), operations, condition (financial or otherwise) or prospects of
the Borrower, the Acquired Company and their subsidiaries taken as a whole. If
the continuing review by NationsBank and NCMI of the Borrower and the Acquired
Company discloses information relating to conditions or events not previously
disclosed to NationsBank and NCMI or relating to new information or additional
developments concerning conditions or events previously disclosed to NationsBank
and NCMI which NationsBank and NCMI in their sole discretion believe may have a
material adverse effect on the condition (financial or otherwise), assets,
properties, business, operations or prospects of the Borrower, the Acquired
Company, and their subsidiaries taken as a whole, NationsBank and NCMI may, in
their sole discretion, suggest alternative financing amounts or structures that
ensure adequate protection for the Lenders or decline to participate in the
proposed financing.
<PAGE>
Mr. Robert Woltil
September 19, 1997
Page 3
In addition to the forgoing conditions, as you know, neither we nor you know at
this time the precise terms of any additional financing which may be utilized in
connection with the Acquisition. Our commitment to provide the Senior Credit
Facilities is subject to the requirement that the terms of any such financial be
satisfactory to the Agent and the Lenders.
You agree to actively assist NationsBank and NCMI in achieving a syndication of
the Senior Credit Facilities that is satisfactory to NationsBank, NCMI and you.
In the event that such syndication cannot be achieved in a manner satisfactory
to NationsBank and NCMI under the structure outlined in the Term Sheet you agree
to cooperate with NationsBank and NCMI in developing an alternative structure
that will permit a satisfactory syndication of the Senior Credit Facilities.
Syndication of the Senior Credit Facilities will be accomplished by a variety of
means, including direct contact during the syndication between senior management
and advisors of the Borrower and the Acquired Company, and the proposed Lenders.
To assist NationsBank and NCMI in the syndication efforts, you hereby agree to
(a) provide and cause your advisors to provide NationsBank and NCMI and the
other Lenders upon request with all information reasonably deemed necessary by
NationsBank and NCMI to complete syndication, including but not limited to
information and evaluations prepared by the Borrower and the Acquired Company
and their advisors, or on their behalf, relating to the Acquisition, (b) assist
NationsBank and NCMI upon their reasonable request in the preparation of an
Information Memorandum to be used in connection with the syndication of the
Senior Credit Facilities and (c) otherwise assist NationsBank and NCMI in their
syndication efforts, including efforts, including making available officers and
advisors of the Borrower and the Acquired Company and their subsidiaries from
time to time to attend and make presentations regarding the business and
prospects of the Borrower and the Acquired Company and their subsidiaries, as
appropriate, at a meeting or meetings of prospective Lenders. You further agree
to refrain from engaging in any additional financings for the Acquired Company
during such syndication process unless otherwise agreed to by NationsBank and
NCMI.
It is understood and agreed that NationsBank and NCMI, after consultation with
you, will manage and control all aspects of the syndication, including decisions
as to the selection of proposed Lenders and any titles offered to proposed
Lenders, when commitments will be accepted and the final allocations of the
Commitments among the Lenders. It is understood that no Lender participating in
the Senior Credit Facilities will receive compensation from you outside the
terms contained herein and in the Term Sheet in order to obtain its commitment.
It is also understood and agreed that the amount and distribution of the fees
among the Lenders will be at the sole discretion of NationsBank and NCMI and
that any syndication prior to execution of definitive documentation will reduce
the commitment of NationsBank.
You hereby represent, warrant and covenant that (a) all information, other than
Projections (as defined below), which has been or is hereafter made available to
NationsBank and NCMI or the
<PAGE>
Mr. Robert Woltil
September 19, 1997
Page 4
Lenders by you or any of your representatives in connection with the
transactions contemplated hereby ("Information") is and will be complete and
correct in all material respects and does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein not misleading, and (b) all financial
projections concerning the Borrower and the Acquired Company that have been or
are hereafter made available to NationsBank and NCMI or the Lenders by you or
any of your representatives (the "Projections") have been or will be prepared in
good faith based upon reasonable assumptions. You agree to furnish us with such
Information and Projections as we may reasonably request and to supplement the
Information and the Projections from time to time until the closing date for the
Senior Credit Facilities so that the representation and warranty in the
preceding sentence is correct on the such date. In arranging and syndicating
the Senior Credit Facilities, NationsBank and NCMI will be using and relying on
the Information and the Projections without independent verification thereof.
By executing this Commitment Letter, you agree to pay the fees set forth in the
Term Sheet and Exhibit B attached to this Commitment Letter.
By executing this Commitment Letter you also agree to reimburse NationsBank and
NCMI from time to time on demand for all reasonable out-of-pocket fees and
expenses (including, but not limited to, the reasonable fees, disbursements and
other charges of legal counsel to NationsBank) incurred in connection with the
Senior Credit Facilities and the preparation of the definitive documentation for
the Senior Credit Facilities and the other transactions contemplated hereby.
IN THE EVENT THAT NATIONSBANK OR NCMI BECOMES INVOLVED IN ANY CAPACITY IN ANY
ACTION, PROCEEDING OR INVESTIGATION IN CONNECTION WITH ANY MATTER CONTEMPLATED
BY THIS LETTER, THE COMPANY WILL REIMBURSE NATIONSBANK AND NCMI FOR THEIR LEGAL
AND OTHER EXPENSES (INCLUDING THE COST OF ANY INVESTIGATION AND PREPARATION) AS
THEY ARE INCURRED BY NATIONSBANK OR NCMI. THE COMPANY ALSO AGREES TO INDEMNIFY
AND HOLD HARMLESS NATIONSBANK, NCMI AND THEIR AFFILIATES AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (THE "INDEMNIFIED PARTIES") FROM AND
AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES AND LIABILITIES, JOINT OR SEVERAL
RELATED TO OR ARISING OUT OF ANY MATTERS CONTEMPLATED BY THIS LETTER (INCLUDING
ANY ARISING OUT OF THE NEGLIGENCE OF ANY INDEMNIFIED PARTY), UNLESS AND ONLY TO
THE EXTENT THAT IT SHALL BE FINALLY JUDICIALLY DETERMINED THAT SUCH LOSSES,
CLAIMS, DAMAGES OR LIABILITIES RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF NATIONSBANK OR NCMI.
<PAGE>
Mr. Robert Woltil
September 19, 1997
Page 5
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NCMI hereunder, provided,
however, that the Borrower shall be deemed released of its obligations under the
immediately preceding two paragraphs upon the execution of definitive financing
documentation.
As described herein and in the Term Sheet, NCMI will act as Arranger and
Syndication Agent for the Senior Credit Facilities. NationsBank reserves the
right to allocate, in whole or in part, to NCMI certain fees payable to
NationsBank in such manner as NationsBank and NCMI agree to their sole
discretion. You acknowledge and agree that NationsBank may share with any of
its affiliates (including specifically NCMI) any information relating to the
Senior Credit Facilities, the Borrower, the Acquired Company and their
subsidiaries and affiliates.
This Commitment Letter may not be assigned by the Borrower without the prior
written consent of NationsBank and NCMI.
If you are in agreement with the foregoing please execute and return the
enclosed copy of this Commitment Letter no later than the close of business on
July 28, 1997. Our commitments shall terminate if not so accepted by you prior
to that time. Following acceptance by you, our commitments will terminate on
December 31, 1997, unless the Senior Credit Facilities are closed by such time.
Except as required by applicable law, this Commitment Letter (including the Term
Sheet and Exhibit B) and the contents hereof shall not be disclosed by you to
any third party without the prior consent of NationsBank and NCMI, other than to
you attorneys, financial advisors and accountants, in each case to the extent
necessary in your reasonable judgment; provided, however, it is understood and
agreed that following your acceptance of this Commitment Letter you may disclose
the terms of this Commitment Letter (excluding Exhibit B) to the Acquired
--------------------
Company and its attorneys and financial advisors in connection with the Offer.
Without limiting the foregoing, in the event that you disclose the contents of
this letter in contravention of the preceding sentence, you shall be deemed to
have accepted the terms of this Commitment Letter (including attached Exhibits A
and B).
THIS COMMITMENT LETTER (INCLUDING THE TERM SHEET AND EXHIBIT B) REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS COVERED HEREIN
AND THEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
Mr. Robert Woltil
September 19, 1997
Page 6
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
This letter may be executed in counterparts which, taken together, shall
constitute an original.
Very truly yours,
NATIONSBANK OF TEXAS, N.A.
/s/ Steve Day
_____________________________________________
By: Steve Day
Title: Senior Vice President
NATIONSBANC CAPITAL MARKETS, INC.
/s/ Gary Kahn
_____________________________________________
By: Gary Kahn
Title: Senior Vice President and Director
ACCEPTED AND AGREED TO:
SUN HEALTHCARE GROUP, INC.
/s/ Robert D. Woltil
_______________________________
By: Robert D. Woltil
Title: Chief Financial Officer
Date:
<PAGE>
EXHIBIT A-1
-----------
SENIOR TENDER FACILITIES
SUN HEALTHCARE GROUP, INC.
SUMMARY OF PROPOSED TERMS AND CONDITIONS
SEPTEMBER 19, 1997
BORROWER: Sun Healthcare Group, Inc. ("Sun") and certain of its
subsidiaries which NationsBank may elect to designate
as co-Borrowers (collectively, the "Borrower").
GUARANTORS: The Senior Tender Facilities shall be guaranteed by all
domestic subsidiaries of Sun (whether direct or
indirect and whether now existing or hereafter created,
acquired or arising), including, without limitation,
the Acquired Company and all domestic subsidiaries of
the Acquired Company. All guarantees shall be
guarantees of payment and not of collection.
AGENT: NationsBank of Texas, N.A. (the "Agent" or
"NationsBank") will act as sole and exclusive
administrative and collateral agent. As such,
NationsBank will negotiate with the Borrower, act as
the primary contact for the Borrower and perform all
other duties associated with the role of exclusive
administrative agent. No other agents or co-agents may
be appointed without the prior written consent of
NationsBank and NCMI.
ARRANGER &
SYNDICATION AGENT: NationsBanc Capital Markets, Inc. ("NCMI").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NCMI, which institutions shall
be acceptable to the Borrower and the Agent
(collectively, the "Lenders").
SENIOR TENDER An aggregate principal amount of up to $1,200,000,000
FACILITIES: will be available under the conditions hereinafter set
forth:
Revolving Credit Facility: $500,000,000 revolving
-------------------------
credit facility, which will include a $75,000,000
sublimit for the issuance of standby and commercial
letters of credit (each a
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"Letter of Credit"). Letters of Credit will be issued
by NationsBank (in such capacity, the "Fronting Bank"),
and each Lender will purchase an irrevocable and
unconditional participation in each Letter of Credit.
Term Loan Facility: $700,000,000 term loan facility
------------------
comprised of the following term loan tranches.
(i) $200,000,000 Tranche A Term Loan
(ii) $250,000,000 Tranche B Term Loan
(iii) $250,000,000 Tranche C Term Loan
Provided, however, the Agent reserves the right, in its
discretion, to reallocate the principal amount of the
Term Loan Facility among the various tranches if the
Agent believes such reallocation will result in a more
successful syndication of the Senior Tender Facilities.
PURPOSE: The proceeds of the Senior Tender Facilities shall be
used for the following purposes:
(i) to refinance the outstanding principal balance
of existing indebtedness of Sun under a certain
Credit Agreement, dated as of July 1, 1997,
among Sun, NationsBank of Texas, N.A., as
Administrative Agent, and certain lenders party
thereto (the "Existing Sun Credit Agreement");
(ii) to pay the cash portion of the purchase price
for the capital stock of Regency Health
Services, Inc. (the "Acquired Company")
tendered to Sunreg Acquisition Corp., a wholly-
owned domestic subsidiary of Sun (the
"Acquisition Sub"), pursuant to a public tender
offer heretofore made by the Acquisition Sub
for such capital stock (the "Equity Tender");
(iii) to pay the cash purchase price for certain debt
securities of the Acquired Company tendered to
the Acquisition Sub or to the Borrower pursuant
to a tender offer heretofore made by the
Acquisition Sub or the Borrower for such debt
securities (the "Debt Tender");
(iv) to pay fees and expenses incurred in connection
with the foregoing acquisitions of capital
stock and debt securities of the Acquired
Company and the refinancing of existing debt of
the Acquired Company (collectively, the
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<PAGE>
"Acquisitions"); and
(v) to provide for working capital and general
corporate purposes of the Borrower.
INTEREST RATES: The Senior Tender Facilities shall bear interest, at
the option of the Borrower, at a rate per annum equal
to either (i) the LIBOR interbank rate, adjusted for
reserves, or (ii) the Base Rate (defined as the higher
of (a) the NationsBank prime rate and (b) the Federal
Funds rate plus 1/2%), in each case plus the
"Applicable Margins" set forth below.
<TABLE>
<CAPTION>
Facility LIBOR Base Rate
-------- ----- ---------
Applicable Applicable
---------- ----------
Margin Margin
------ ------
<S> <C> <C>
Revolving Credit Loans 250 bps 100 bps
Tranche A Term Loans 250 bps 100 bps
Tranche B Term Loans 275 bps 125 bps
Tranche C Term Loans 300 bps 150 bps
</TABLE>
If any breakage costs, charges or fees are incurred
with respect to LIBOR loans on account of the
syndication of the Senior Tender Facilities, the
Borrower shall immediately reimburse the Agent for any
such costs, charges or fees. Such right of
reimbursement to be in addition to and not in
limitation of customary cost and yield protection.
The Borrower may select interest periods of 7 or 30
days for LIBOR loans, subject to availability.
A penalty rate shall apply on all loans in the event of
default at a rate per annum of 2% above the applicable
interest rate.
The loan documentation shall include cost and yield
protection customary for transactions and facilities of
this type, including without limitation changes in
capital adequacy and capital requirements or their
interpretation, illegality, unavailability, and
reserves, all without proration or offset.
LETTER OF CREDIT FEES: Letter of Credit fees will be equal to the Applicable
LIBOR Margin of 250 bps on a per annum basis to be paid
to the Administrative Agent for the prorata account of
the Lenders, plus a fronting fee of 12.5 bps per annum
to be paid to the Fronting Bank for its own account.
Letter of Credit Fees will be due and payable quarterly
in arrears and will be calculated on the aggregate
stated amount for each Letter of Credit for the stated
duration thereof.
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<PAGE>
COMMITMENT FEE: A 50 basis points per annum (calculated on the basis of
actual number of days elapsed in a year of 360 days)
Commitment Fee, calculated on the unused portion of the
Senior Tender Facilities, shall commence to accrue upon
execution of a definitive credit agreement, and shall
be payable thereafter quarterly in arrears.
MATURITY: The Senior Tender Facilities shall terminate and all
amounts outstanding thereunder shall be due and payable
in full on the earliest to occur of (i) the closing and
funding of the loan facility contemplated to be entered
into among the Borrower, NationsBank of Texas, N.A. and
certain other lenders in connection with, and
substantially contemporaneously with, the anticipated
merger of the Acquired Company with and into Sun or the
Acquisition Sub as soon as practical following the
consummation of the Equity Tender and the Debt Tender
(such loan facility, or any similar financing or loan
facility entered into in lieu therof, being referred to
herein as the "Senior Merger Facility"), or (ii) the
abandonment by Sun or the Acquisition Sub of the
contemplated merger of the Acquired Company with and
into Sun or the Acquisition Sub, or (iii) 12/31/97.
SECURITY: The Agent (on behalf of the Lenders) shall receive a
first priority perfected security interest in (a) all
of the capital stock of each of the domestic
subsidiaries (whether direct or indirect and whether
now existing or hereafter created, acquired or arising)
of Sun, (b) 66% of the capital stock of each foreign
subsidiary which is a direct subsidiary of the Borrower
or any of its domestic subsidiaries, which capital
stock shall not be subject to any other lien or
encumbrance and (c) 100% of the debt securities of the
Acquired Company purchased by the Borrower or the
Acquisition Sub as a result of the Debt Tender.
Additionally, 100% of the capital stock of the Acquired
Company acquired by Sun, the Acquisition Sub or any
other subsidiary of Sun as a result of the Equity
Tender or otherwise shall be subject to a negative
pledge.
The foregoing security shall ratably secure the Senior
Tender Facilities and any interest rate swap/foreign
currency swap or similar agreements with a Lender under
the Senior Tender Facilities.
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<PAGE>
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Senior Tender Facilities shall be prepaid by an
amount equal to (a) 100% of the net cash proceeds of
all asset sales by the Borrower or any domestic
subsidiary of the Borrower (including stock of
subsidiaries), subject to de minimus baskets and
reinvestment provisions to be agreed upon and net of
selling expenses and taxes to the extent such taxes are
paid; (b) 100% of the net cash proceeds from the
issuance of any debt (excluding certain permitted debt,
but including the Senior Merger Facility) by the
Borrower or any domestic subsidiary; and (c) 100% of
the net cash proceeds from the issuance of equity
(excluding certain proceeds such as proceeds from the
exercise of options) by the Borrower or any domestic
subsidiary. Prepayments shall be applied pro rata to
reduce the Tranche A Term Loan, the Tranche B Term Loan
and the Tranche C Term Loan within each tranche pro
rata with respect to each remaining installment of
principal. In the event the Term Loan Facilities shall
have been completely prepaid, the mandatory payments
described above shall be applied to permanently reduce
the amount available under the Revolving Credit
Facility.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Senior Tender Facilities in
whole or in part at any time without penalty, subject
to reimbursement of the Lender's breakage and re-
deployment costs in the case of prepayment of LIBOR
borrowings.
CONDITIONS PRECEDENT
TO CLOSING: The initial funding of the Senior Tender Facilities
will be subject to satisfaction of the conditions
precedent deemed appropriate by the Agent and the
Lenders for leveraged financings generally and for this
transaction in particular, including, but not limited
to, the following:
(i) The completion of all due diligence with
respect to the Borrower and its subsidiaries
(including the Acquired Company and its
subsidiaries) in scope and determination
satisfactory to NationsBank and NCMI in their
sole discretion.
(ii) The negotiation, execution and delivery of
definitive documentation with respect to the
Senior Tender Facilities satisfactory to NCMI,
the Agent and the Lenders.
(iii) The Agent's satisfactory review of all
documents in
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<PAGE>
connection with the Acquisitions, together with
all schedules and exhibits thereto
(collectively, the "Acquisition Documents").
The consummation of the transactions
contemplated by the Acquisition Documents in
accordance with the terms thereof and in
compliance with applicable law and regulatory
requirements. The Acquisition Documents shall
not have been altered, amended or otherwise
changed or supplemented or any condition
therein waived, without the prior written
consent of the Agent.
(iv) The Acquisition Sub or the Borrower, as
applicable, shall have acquired not less than
51% of the capital stock of the Acquired
Company as a result of the Equity Tender and a
percentage of the debt securities of the
Acquired Company acceptable to the Agent as a
result of the Debt Tender.
(v) The Agent shall have received and, in each
case, approved the consolidated financial
statements of the Acquired Company and its
subsidiaries for the fiscal years ended
12/31/94, 12/31/95 and 12/31/96, including
balance sheets, income and cash flow statements
audited by independent public accountants of
recognized national standing and prepared in
conformity with GAAP, a pro forma balance sheet
of the Borrower and its subsidiaries (including
the Acquired Company and its subsidiaries) as
of the Closing Date, giving effect to the
Acquisitions and the transactions contemplated
hereby and reflecting estimated purchase price
accounting adjustments, and such other
information relating to the Acquisitions as the
Agent may require.
(vi) Other than as heretofore disclosed to the Agent
and the Lenders, there shall not have occurred
a material adverse change since 12/31/96 in the
business, assets, operations, condition
(financial or otherwise) or prospects of the
Borrower and its subsidiaries and the Acquired
Company and its subsidiaries, taken as a whole,
or in the facts and information regarding such
entities as represented to date.
(vii) The Agent shall have been satisfied with the
form and content of the reports of the
environmental consultants with respect to all
real properties owned or leased by the Borrower
and its subsidiaries (including the Acquired
Company and its subsidiaries).
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<PAGE>
(viii) The Agent shall have received (a) satisfactory
opinions of counsel to the Borrower and its
subsidiaries (which shall cover, among other
things, authority, legality, validity, binding
effect and enforceability of the documents for
the Senior Tender Facilities) and such
corporate resolutions, certificates and other
documents as the Agent shall reasonably require
and (b) satisfactory evidence that the Agent
(on behalf of the Lenders) holds a perfected,
first priority lien in all collateral for the
Senior Tender Facilities, subject to no other
liens except for permitted liens to be
determined.
(ix) Receipt of all governmental, shareholder and
third party consents (including Hart-Scott
Rodino clearance) and approvals necessary or,
in the opinion of the Agent, desirable in
connection with the Acquisitions and the
related financings and other transactions
contemplated hereby and expiration of all
applicable waiting periods without any action
being taken by any authority that could
restrain, prevent or impose any material
adverse conditions on the Borrower and its
subsidiaries (including the Acquired Company
and its subsidiaries), or such other
transactions, or that could seek or threaten
any of the foregoing, and no law or regulation
shall be applicable which in the judgment of
the Agent could have such effect.
(x) Except as heretofore disclosed to the Agent and
the Lenders, the absence of any action, suit,
investigation, claim or proceeding pending or
threatened in any court or before any
arbitrator or governmental authority that
purports to affect the Borrower or any of its
subsidiaries (including the Acquired Company or
any of its subsidiaries) or any transaction
contemplated hereby, that could, if adversely
determined, have a material adverse effect on
the Borrower or any of its subsidiaries
(including the Acquired Company or any of its
subsidiaries) or any transaction contemplated
hereby, or that could, if adversely determined,
have an adverse effect on the ability of the
Borrower or any of its subsidiaries (including
the Acquired Company or any of its
subsidiaries) to perform their respective
obligations under the documents to be executed
in connection with the Senior Tender
Facilities.
(xi) The Borrower and its subsidiaries and the
Acquired Company and its subsidiaries shall be
in compliance with all existing financial
obligations (after giving effect to
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<PAGE>
the Acquisitions).
(xii) Receipt and review, with results satisfactory
to the Agent and its counsel, of information
regarding litigation, tax, accounting, labor,
insurance, pension liabilities (actual or
contingent), real estate leases, material
contracts, debt agreements, property ownership,
and contingent liabilities of the Borrower and
its subsidiaries (including the Acquired
Company and its subsidiaries).
(xiii) To the extent requested to do so by the Agent,
the Borrower, the Acquired Company and their
respective subsidiaries shall have executed and
delivered to the Agent any and all documents
and agreements as the Agent shall have
requested in order to provide for the pari
passu treatment and cross collateralization of
the Senior Tender Facilities and any existing
indebtedness of the Acquired Company to
NationsBank of Texas, N.A. and the other
lenders under the Acquired Company's existing
credit facility with such lenders.
REPRESENTATIONS &
WARRANTIES: Consistent with the Existing Sun Credit Agreement and
taking into account the transactions contemplated
hereby, to include without limitation: (i) corporate
status; (ii) corporate power and authority/
enforceability; (iii) no violation of law or contracts
or organizational documents; (iv) no material
litigation, except as heretofore disclosed to the Agent
and the Lenders; (v) correctness of specified financial
statements and no material adverse change, except as
heretofore disclosed to the Agent and the Lenders; (vi)
no required governmental or third party approvals;
(vii) use of proceeds/compliance with margin
regulations; (viii) status under Investment Company
Act; (ix) ERISA; (x) environmental matters; (xi)
perfected liens and security interests; (xii) payment
of taxes, and (xiii) consummation of the Acquisitions.
COVENANTS: Consistent with the Existing Sun Credit Agreement and
taking into account the transactions contemplated
hereby, to include without limitation: (i) delivery of
financial statements and other reports; (ii) delivery
of compliance certificates; (iii) notices of default,
material litigation and material governmental and
environmental proceedings; (iv) compliance with laws;
(v) payment of taxes; (vi) maintenance of insurance;
(vii) limitation on liens; (viii) limitations on
mergers, consolidations and sales of assets; (ix)
limitations on incurrence of debt; (x) limitations on
dividends and stock redemptions and the redemption
and/or prepayment of other debt; (xi) limitations
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<PAGE>
on investments; (xii) ERISA; (xiii) limitation on
transactions with affiliates; and (xiv) limitation on
capital expenditures.
Financial covenants to include (but not limited to):
. Maintenance on a rolling four quarter basis of a
Maximum Leverage Ratio (total funded debt + 8x
operating leases/EBITDAR),
. Maintenance on a rolling four quarter basis of an
Adjusted Senior Debt/EBITDAR Ratio,
. Maintenance on a rolling four quarter basis of a
Minimum Fixed Charge Coverage Ratio
(EBITDAR)/(interest expense + scheduled principal
repayments + leases), and
. Maximum Total Debt/Total Capitalization.
EVENTS OF DEFAULT: Consistent with the Existing Sun Credit Agreement and
taking into account the transactions contemplated
hereby, to include without limitation: (i) nonpayment
of principal, interest, fees or other amounts, (ii)
violation of covenants, (iii) cross-default to other
material agreements and indebtedness, (iv) bankruptcy,
(v) material judgments, (vi) ERISA, (vii) actual or
asserted invalidity of any loan documents or security
interests, (viii) Change in Control of the Borrower.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments to
other financial institutions approved by the Borrower
and the Agent, which approvals shall not be
unreasonably withheld. Additionally, Lenders will be
permitted to sell participations with voting rights
limited to significant matters such as changes in
amount, rate, and maturity date. An assignment fee of
$3,500 is payable by the Lender to the Agent upon any
such assignment (including, but not limited to any
assignment by a Lender to another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the loan
agreement and other definitive credit documentation
will require the approval of Lenders holding loans and
commitments representing more than 50% of the aggregate
amount of loans and commitments under the Senior Tender
Facilities, except that (a) the consent of all the
Lenders affected thereby shall be required with respect
to (i) increases in commitment amounts, (ii) reductions
of principal, interest or fees, (iii) extensions of
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<PAGE>
scheduled maturities or times for payment, (iv)
releases of all or substantially all collateral and (v)
releases of all or substantially all guarantors and (b)
the consent of the Lenders holding at least 50% of the
Tranche A Term Loan Facility, at least 50% of the
Tranche B Term Loan Facility and at least 50% of the
Tranche C Term Loan Facility shall be required with
respect to any amendment that changes the allocation of
any payment between the Tranche A Term Loan, the
Tranche B Term Loan and the Tranche C Term Loan
Facilities.
INDEMNIFICATION: The Borrower shall indemnify the Lenders from and
against all losses, liabilities, claims, damages or
expenses relating to their loans, the Borrower's use of
loan proceeds or the commitments, including, but not
limited to, reasonable attorneys' fees and settlement
costs. This indemnification shall survive and continue
for the benefit of the Lenders at all times after the
Borrower's acceptance of the Lender's commitment for
the Senior Tender Facilities, notwithstanding any
failure of the Senior Tender Facilities to close.
CLOSING: October 7, 1997, unless extended to a later Closing
Date in the sole discretion of the Arranger.
GOVERNING LAW: Texas.
EXPENSES: Borrower shall pay all reasonable costs and expenses
associated with the preparation, due diligence,
administration, syndication and enforcement of all
documents executed in connection with the Senior Tender
Facilities, including, without limitation, the legal
fees of the Agent's counsel, regardless of whether or
not the Senior Tender Facilities are closed.
OTHER: This term sheet is intended as an outline only and does
not purport to summarize all the conditions, covenants,
representations, warranties and other provisions which
would be contained in definitive legal documentation
for the Senior Tender Facilities contemplated hereby.
The parties to the Senior Tender Facilities shall waive
their right to a trial by jury.
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