<PAGE>
As filed with the Securities and Exchange Commission on October 23, 1997
Registration No. 333-________
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------
SUN HEALTHCARE GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 85-0410612
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
101 SUN LANE, N.E.
ALBUQUERQUE, NEW MEXICO 87109
(Address of Principal Executive Offices)
SUN HEALTHCARE GROUP, INC. 1997 STOCK INCENTIVE PLAN
SUN HEALTHCARE GROUP, INC. 1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
(Full title of the plans)
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ROBERT MURPHY
GENERAL COUNSEL
101 SUN LANE, N.E.
ALBUQUERQUE, NEW MEXICO 87109
(Name and address of agent for service)
(505) 821-3355
(Telephone number, including area code, of agent for service)
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TITLE OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock 4,900,000 $20.969 $102,748,100 $31,136
par value $.01 per share
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The price shown is the average of the high and low prices of the Common
Stock on the New York Stock Exchange consolidated reporting system on
October 15, 1997, in accordance with Rule 457(c), and is being utilized
solely for the purpose of calculating the registration fee.
<PAGE>
Part I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. PLAN INFORMATION.*
Item 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.*
- ---------------------
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act, and the "Note" to Part I of Form S-8.
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated by reference in this
Registration Statement:
(a) the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended on Form 10-K/A on April 30, 1997);
(b) the Registrant's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1997;
(c) the Registrant's Current Reports on Form 8-K filed February 14,
1997 (as amended on Form 8-K/A filed April 14, 1997), February 24,
1997, March 28, 1997, May 30, 1997 June 18, 1997, July 9, 1997
and August 26, 1997; and
(d) the description of the Registrant's common stock, par value $.01
per share, contained in the Registrant's Registration Statement
on Form 10 filed on June 1, 1993, and the description of Sun's
Preferred Stock Purchase Rights contained in its Registration
Statement on Form 8-A filed on June 6, 1995, as amended by Form
8-A/A-1 filed on August 17, 1995.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
Item 4. DESCRIPTION OF SECURITIES.
Not applicable.
-2-
<PAGE>
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Michael T. Berg, the Company's Assistant Secretary and Corporate
Counsel, has given the legal opinion on the validity of the securities being
registered herewith.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act").
As authorized by Section 102(b)(7) of the DGCL, the Registrant's
Certificate of Incorporation limits the personal liability of each director of
the Registrant to the Registrant or its stockholders for monetary damages for
breach of his fiduciary duty as a director except to the extent such limitation
of liability is not permitted under the DGCL. The DGCL provides that the
liability of a director may not be limited (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for liability for payment of dividends or stock
purchases or redemptions in violation of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit.
In addition, the Registrant's Bylaws provide that the Registrant shall
indemnify any and all of its directors, or former directors, to the fullest
extent permitted by law against claims and liabilities to which such persons may
become subject. The DGCL provides that indemnification is permissible only when
the director acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The DGCL also permits indemnification in respect of any claim,
issue, or matter as to which such person shall have been adjudicated to be
liable to the corporation to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought has determined upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity. The Registrant has also entered into indemnification agreements with
certain of its officers and with its directors and also provides insurance
coverage to such parties.
The Registrant has entered into Registration Rights Agreements with
certain of its stockholders. Such agreements provide for indemnification by
such stockholders of the Registrant and its officers and directors, and by the
Registrant of such stockholders, for certain liabilities arising under the Act
or otherwise.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
Item 8. EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
4.1 Sun Healthcare Group, Inc. 1997 Stock Incentive Plan.
4.2 Sun Healthcare Group, Inc. 1997 Non-Employee Directors' Stock
Plan.
-3-
<PAGE>
4.3 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's Registration Statement
on Form S-1 (File No. 33-62670).
4.4 Amendment to the Certificate of Incorporation filed on April
15, 1993 (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ending December 31, 1995).
4.5 Amendment to Certificate of Incorporation filed on June 23,
1994 (incorporated by reference to Exhibit 3.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ending December 31, 1995).
4.6 Bylaws of the Registrant (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-1
(Reg. No. 33-62670).
5 Opinion of Legal Counsel regarding legality of common stock
being registered.
23.1 Consent of Arthur Andersen LLP.
23.3 Consent of Legal Counsel (included in Exhibit 5).
24 Powers of Attorney (included on signature page).
Item 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That , for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
-4-
<PAGE>
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Albuquerque, State of New Mexico on October 20,
1997.
SUN HEALTHCARE GROUP, INC.
By: /s/ Andrew L. Turner
--------------------------------
Name: Andrew L. Turner
Title: Chief Executive Officer
Each person whose signature to this Registration Statement appears
below hereby appoints each of Robert D. Woltil and Robert F. Murphy, as his
attorney-in-fact to sign on his/her behalf individually and in the capacity
stated below to file all supplements; amendments and post-effective amendments
to this Registration Statement, and any and all instruments or documents filed
as a part of or in connection with this Registration Statement or any amendment
or supplement thereto, and any such attorney-in-fact may make such changes and
additions to this Registration Statement as such attorney-in-fact may deem
necessary or appropriate.
Pursuant to the Requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the indicated capacities on October 20, 1997.
SIGNATURE TITLE
/s/ Andrew L. Turner Chairman of the Board of Directors
- --------------------------------- and Chief Executive Officer
Andrew L. Turner (principal executive officer)
/s/ Robert D. Woltil Chief Financial Officer
- --------------------------------- (principal financial officer)
Robert D. Woltil
/s/ William C. Warrick Vice President-Finance and Corporate
- --------------------------------- Controller (principal accounting officer)
William C. Warrick
/s/ John E. Bingaman Director
- ---------------------------------
John E. Bingaman
/s/ Zev Karkomi Director
- ---------------------------------
Zev Karkomi
/s/ Robert A. Levin Director
- ---------------------------------
Robert A. Levin
-6-
<PAGE>
/s/ Martin G. Mand Director
- ---------------------------------
Martin G. Mand
/s/ Lois E. Silverman Director
- ---------------------------------
Lois E. Silverman
/s/ Warren C. Schelling Director
- ---------------------------------
Warren C. Schelling
/s/ James R. Tolbert Director
- ---------------------------------
James R. Tolbert
Director
- ---------------------------------
R. James Woolsey
/s/ Mark G. Wimer Director
- ---------------------------------
Mark G. Wimer
-7-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
4.1 Sun Healthcare Group, Inc. 1997 Stock Incentive Plan
4.2 Sun Healthcare Group, Inc. 1997 Non-Employee Directors' Stock
Plan.
4.3 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's Registration Statement
on Form S-1 (File No. 33-62670).
4.4 Amendment to the Certificate of Incorporation filed on April
15, 1993 (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ending December 31, 1995).
4.5 Amendment to Certificate of Incorporation filed on June 23,
1994 (incorporated by reference to Exhibit 3.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ending December 31, 1995).
4.6 Bylaws of the Registrant (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-1
(Reg. No. 33-62670).
5 Opinion of Legal Counsel regarding legality of common stock
being registered.
23.1 Consent of Arthur Andersen LLP.
23.3 Consent of Legal Counsel (included in Exhibit 5).
24. Powers of Attorney (included on signature page).
<PAGE>
EXHIBIT 4.1
SUN HEALTHCARE GROUP, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSE. The purposes of the Sun Healthcare Group, Inc. 1997 Stock
Incentive Plan (the "PLAN") are to attract, retain and motivate officers and
other key employees and consultants of Sun Healthcare Group, Inc. (the
"COMPANY"), to compensate them for their contributions to the growth and profits
of the Company and to encourage ownership by them of stock of the Company. The
Plan is being adopted as a replacement to the 1996 Combined Incentive and
Nonqualified Stock Option Plan, under which no additional options shall be
granted as of the Effective Date (as defined herein).
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as follows:
"ADMINISTRATOR" means the individual or individuals to whom the
Committee delegates authority under the Plan in accordance with Section
3(d).
"AFFILIATE" and "Associate" have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.
"AWARD" means an award made pursuant to the terms of the Plan to an
Eligible Individual in the form of Stock Options, Stock Appreciation Rights,
Stock Awards, Performance Share Awards, Section 162(m) Awards or other
awards determined by the Committee.
"AWARD AGREEMENT" means a written agreement or certificate granting an
Award. An Award Agreement shall be executed by an officer on behalf of the
Company and shall contain such terms and conditions as the Committee deems
appropriate and that are not inconsistent with the terms of the Plan. The
Committee may in its discretion require that an Award Agreement be executed
by the Participant to whom the relevant Award is made.
"BENEFICIAL OWNER" has the meaning ascribed to such term in Rule 13d-3
promulgated under the Exchange Act.
"BOARD" means the Board of Directors of the Company.
A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred
when:
(a) any "person" or "group" (within the meaning of Sections 13(d)]and
14(d)(2) of the Securities and Exchange Act of 1934, as amended (the "1934
ACT")), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company (an "ACQUIRING PERSON"), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of more than 33 1/3% of the then outstanding voting
stock of the Company;
(b) the shareholders of the Company and a majority of the non-employee
directors of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 66 2/3%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
(c) the shareholders of the Company approve a plan of reorganization
(other than a reorganization or liquidation under the United States
Bankruptcy Code or complete liquidation of the Company) or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company's assets;
(d) during any period of two consecutive years (beginning on or after
the Effective Date), individuals who at the beginning of such period
constitute the Board and any new director (other than a director who is a
representative or nominee of an Acquiring Person) whose election by the
Board or nomination for election by the Company's shareholders was approved
by a vote of at least a majority
<PAGE>
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, no longer constitute a majority of the Board;
PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have occurred
in the event of
(i) a sale or conveyance in which the Company continues as a holding
company of an entity or entities that conduct the business or businesses
formerly conducted by the Company; or
(ii) any transaction undertaken for the purpose of reincorporating the
Company under the laws of another jurisdiction, if such transaction does not
materially affect the beneficial ownership of the Company's capital stock.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"COMBINED VOTING POWER" means the combined voting power of the Company's
or other relevant entity's then outstanding voting securities.
"COMMITTEE" means the Compensation Committee of the Board, any successor
committee thereto or any other committee appointed by the Board to
administer the Plan.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company.
"ELIGIBLE INDIVIDUALS" means the individuals described in Section 6 who
are eligible for Awards under the Plan.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.
"FAIR MARKET VALUE" means, in the event the Common Stock is traded on a
recognized securities exchange or quoted by the National Association of
Securities Dealers Automated Quotations on National Market Issues, an amount
equal to the average of the high and low prices of the Common Stock on such
exchange or such quotation on the date set for valuation or, if no sales of
Common Stock were made on said exchange or so quoted on that date, the
average of the high and low prices of the Common Stock on the next preceding
day on which sales were made on such exchange or quotations; or, if the
Common Stock is not so traded or quoted, that value determined, in its sole
discretion, by the Committee.
"INCENTIVE STOCK OPTION" means a Stock Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and designated
by the Committee as an Incentive Stock Option in an Award Agreement.
"NONQUALIFIED STOCK OPTION" means a Stock Option which is not an
Incentive Stock Option.
"PARENT" means any corporation which is a "parent corporation" within
the meaning of Section 424(e) of the Code with respect to the relevant
entity.
"PARTICIPANT" means an Eligible Individual to whom an Award has been
granted under the Plan.
"PERFORMANCE PERIOD" means a fiscal year of the Company or such other
period that may be specified by the Committee in connection with the grant
of a Section 162(m) Award.
"PERFORMANCE SHARE AWARD" means a conditional Award of shares of Common
Stock granted to an Eligible Individual pursuant to Section 11 hereof.
"PERSON" means any person, entity or "group" within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
A-2
<PAGE>
"SECTION 162(M) PARTICIPANT" means, for a given fiscal year of the
Company, any Participant designated by the Committee by not later than 90
days following the start of such year as a Participant (or such other time
as may be required or permitted by Section 162(m) of the Code) whose
compensation for such fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.
"STOCK APPRECIATION RIGHT" means an Award to receive all or some portion
of the appreciation on shares of Common Stock granted to an Eligible
Individual pursuant to Section 9 hereof.
"STOCK AWARD" means an Award of shares of Common Stock granted to an
Eligible Individual pursuant to Section 10 hereof.
"STOCK OPTION" means an Award to purchase shares of Common Stock granted
to an Eligible Individual pursuant to Section 8 hereof.
"SUBSIDIARY" means (i) any corporation which is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code with respect
to the Company or (ii) any other corporation or other entity in which the
Company, directly or indirectly, has an equity or similar interest and which
the Committee designates as a Subsidiary for the purposes of the Plan.
"SUBSTITUTE AWARD" means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or
other entity in connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock.
3. ADMINISTRATION OF THE PLAN.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The Plan shall be
administered by the Committee, which shall have full power and authority,
subject to the express provisions hereof, (i) to select Participants from
the Eligible Individuals, (ii) to make Awards in accordance with the Plan,
(iii) to determine the number of Shares subject to each Award or the cash
amount payable in connection with an Award, (iv) to determine the terms and
conditions of each Award, including, without limitation, those related to
vesting, forfeiture, payment and exercisability, and the effect, if any, of
a Participant's termination of employment with the Company or, subject to
Section 16 hereof, of a Change in Control on the outstanding Awards granted
to such Participant, and including the authority to amend the terms and
conditions of an Award after the granting thereof to a Participant in a
manner that is not, without the consent of the Participant, prejudicial to
the rights of such Participant in such Award, (v) to specify and approve the
provisions of the Award Agreements delivered to Participants in connection
with their Awards, (vi) to construe and interpret any Award Agreement
delivered under the Plan, (vii) to prescribe, amend and rescind rules and
procedures relating to the Plan, (viii) to vary the terms of Awards to take
account of tax, securities law and other regulatory requirements of foreign
jurisdictions, (ix) subject to the provisions of the Plan and subject to
such additional limitations and restrictions as the Committee may impose, to
delegate to one or more officers of the Company some or all of its authority
under the Plan, and (x) to make all other determinations and to formulate
such procedures as may be necessary or advisable for the administration of
the Plan.
(b) PLAN CONSTRUCTION AND INTERPRETATION. The Committee shall have
full power and authority, subject to the express provisions hereof, to
construe and interpret the Plan.
(c) DETERMINATIONS OF COMMITTEE FINAL AND BINDING. All determinations
by the Committee in carrying out and administering the Plan and in
construing and interpreting the Plan shall be final, binding and conclusive
for all purposes and upon all persons interested herein.
(d) DELEGATION OF AUTHORITY. The Committee may, but need not, from
time to time delegate some or all of its authority under the Plan to an
Administrator consisting of one or more members of the Committee or of one
or more officers of the Company; PROVIDED, HOWEVER, that the Committee may
not delegate its authority (i) to make Awards to Eligible Individuals (A)
who are subject on the date
A-3
<PAGE>
of the award to the reporting rules under Section 16(a) of the Exchange Act,
(B) who are Section 162(m) Participants or (C) who are officers of the
Company who are delegated authority by the Committee hereunder, or (ii)
under Sections 3(b) and 17 of the Plan. Any delegation hereunder shall be
subject to the restrictions and limits that the Committee specifies at the
time of such delegation or thereafter. Nothing in the Plan shall be
construed as obligating the Committee to delegate authority to an
Administrator, and the Committee may at any time rescind the authority
delegated to an Administrator appointed hereunder or appoint a new
Administrator. At all times, the Administrator appointed under this Section
3(d) shall serve in such capacity at the pleasure of the Committee. Any
action undertaken by the Administrator in accordance with the Committee's
delegation of authority shall have the same force and effect as if
undertaken directly by the Committee, and any reference in the Plan to the
Committee shall, to the extent consistent with the terms and limitations of
such delegation, be deemed to include a reference to the Administrator.
(e) LIABILITY OF COMMITTEE. No member of the Committee shall be liable
for anything whatsoever in connection with the administration of the Plan
except such person's own willful misconduct. Under no circumstances shall
any member of the Committee be liable for any act or omission of any other
member of the Committee. In the performance of its functions with respect to
the Plan, the Committee shall be entitled to rely upon information and
advice furnished by the Company's officers, the Company's accountants, the
Company's counsel and any other party the Committee deems necessary, and no
member of the Committee shall be liable for any action taken or not taken in
reliance upon any such advice.
4. DURATION OF PLAN. The Plan shall remain in effect until terminated by
the Board of Directors and thereafter until all Awards granted under the Plan
are satisfied by the issuance of shares of Common Stock or the payment of cash
or are terminated under the terms of the Plan or under the Award Agreement
entered into in connection with the grant thereof. Notwithstanding the
foregoing, no Awards may be granted under the Plan after the tenth anniversary
of the Effective Date (as defined in Section 18(k)).
5. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided
in Section 15(b) hereof, the number of shares of Common Stock that may be issued
under the Plan pursuant to Awards shall not exceed, in the aggregate, 4,500,000
shares (the "SECTION 5 LIMIT"), of which the number of shares of Common Stock
that may be issued under the Plan pursuant to Incentive Stock Options may not
exceed, in the aggregate, 500,000 shares. Such shares may be either authorized
but unissued shares, treasury shares or any combination thereof. For purposes of
determining the number of shares that remain available for issuance under the
Plan, the following rules shall apply:
(a) the number of Shares subject to outstanding Awards shall be charged
against the Section 5 Limit; and
(b) the Section 5 Limit shall be increased by:
(i) the number of shares subject to an Award (or portion thereof)
which lapses, expires or is otherwise terminated without the issuance of
such shares or is settled by the delivery of consideration other than
shares,
(ii) the number of shares tendered to pay the exercise price of a
Stock Option or other Award, and
(iii) the number of shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay the
exercise price of a Stock Option or other Award.
In addition, any shares underlying Substitute Awards shall not be counted
against the Section 5 Limit set forth in the first sentence of this Section 5.
A-4
<PAGE>
6. ELIGIBLE INDIVIDUALS.
(a) ELIGIBILITY CRITERIA. Awards may be granted by the Committee to
individuals ("ELIGIBLE INDIVIDUALS") who are officers or other key employees
or consultants of the Company or a Subsidiary with the potential to
contribute to the future success of the Company or its Subsidiaries. Members
of the Committee will not be eligible to receive Awards under the Plan. An
individual's status as an Administrator will not affect his or her
eligibility to participate in the Plan.
(b) MAXIMUM NUMBER OF SHARES PER ELIGIBLE INDIVIDUAL. In accordance
with the requirements under Section 162(m) of the Code, no Eligible
Individual shall receive grants of Awards with respect to an aggregate of
more than 400,000 shares of Common Stock in respect of any fiscal year of
the Company. For purposes of the preceding sentence, any Award that is made
as bonus compensation, or is made in lieu of compensation that otherwise
would be payable to an Eligible Individual, shall be considered made in
respect of the fiscal year to which such bonus or other compensation relates
or otherwise was earned.
7. AWARDS GENERALLY. Awards under the Plan may consist of Stock Options,
Stock Appreciation Rights, Stock Awards, Performance Share Awards, Section
162(m) Awards or other awards determined by the Committee. The terms and
provisions of an Award shall be set forth in a written Award Agreement approved
by the Committee and delivered or made available to the Participant as soon as
practicable following the date of the award. The vesting, exercisability,
payment and other restrictions applicable to an Award (which may include,
without limitation, restrictions on transferability or provision for mandatory
resale to the Company) shall be determined by the Committee and set forth in the
applicable Award Agreement. Notwithstanding the foregoing, the Committee may
accelerate (i) the vesting or payment of any Award, (ii) the lapse of
restrictions on any Award or (iii) the date on which any Option or Stock
Appreciation Right first becomes exercisable. The date of a Participant's
termination of employment for any reason shall be determined in the sole
discretion of the Committee. The Committee shall also have full authority to
determine and specify in the applicable Award Agreement the effect, if any, that
a Participant's termination of employment for any reason will have on the
vesting, exercisability, payment or lapse of restrictions applicable to an
outstanding Award.
8. STOCK OPTIONS.
(a) TERMS OF STOCK OPTIONS GENERALLY. Subject to the terms of the Plan
and the applicable Award Agreement, each Stock Option shall entitle the
Participant to whom such Stock Option was granted to purchase the number of
shares of Common Stock specified in the applicable Award Agreement and shall
be subject to the terms and conditions established by the Committee in
connection with the Award and specified in the applicable Award Agreement.
Upon satisfaction of the conditions to exercisability specified in the
applicable Award Agreement, a Participant shall be entitled to exercise the
Stock Option in whole or in part and to receive, upon satisfaction or
payment of the exercise price or an irrevocable notice of exercise in the
manner contemplated by Section 8(d) below, the number of shares of Common
Stock in respect of which the Stock Option shall have been exercised. Stock
Options may be either Nonqualified Stock Options or Incentive Stock Options.
(b) EXERCISE PRICE. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and set forth in the Award Agreement, PROVIDED, that the
exercise price per share shall be no less than 100% of the Fair Market Value
per share on the date of grant. Notwithstanding the foregoing, the exercise
price per share of a Stock Option that is a Substitute Award may be less
than the Fair Market Value per share on the date of award, PROVIDED that the
excess of:
(i) the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares subject to the Substitute Award, over
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(ii) the aggregate exercise price thereof,
does not exceed the excess of:
(iii) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such fair
market value to be determined by the Committee) of the shares of the
predecessor entity that were subject to the award assumed or substituted
for by the Company, over
(iv) the aggregate exercise price of such shares.
(c) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee and set forth in the Award Agreement; PROVIDED, HOWEVER, that a
Stock Option shall not be exercisable after the expiration of ten (10) years
after the date the Stock Option is granted.
(d) METHOD OF EXERCISE. Subject to the provisions of the applicable
Award Agreement, the exercise price of a Stock Option may be paid in cash or
previously owned shares or a combination thereof and, if the applicable
Award Agreement so provides, in whole or in part through the withholding of
shares subject to the Stock Option with a value equal to the exercise price.
In accordance with the rules and procedures established by the Committee for
this purpose, the Stock Option may also be exercised through a "cashless
exercise" procedure approved by the Committee involving a broker or dealer
approved by the Committee, that affords Participants the opportunity to sell
immediately some or all of the shares underlying the exercised portion of
the Stock Option in order to generate sufficient cash to pay the Stock
Option exercise price and/or to satisfy withholding tax obligations related
to the Stock Option.
9. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be subject
to the terms and conditions established by the Committee in connection with the
Award thereof and specified in the applicable Award Agreement. Upon satisfaction
of the conditions to the payment specified in the applicable Award Agreement,
each Stock Appreciation Right shall entitle a Participant to an amount, if any,
equal to the Fair Market Value of a share of Common Stock on the date of
exercise over the Stock Appreciation Right exercise price specified in the
applicable Award Agreement. At the discretion of the Committee, payments to a
Participant upon exercise of a Stock Appreciation Right may be made in Shares,
cash or a combination thereof. A Stock Appreciation Right may be granted alone
or in addition to other Awards, or in tandem with a Stock Option. If granted in
tandem with a Stock Option, a Stock Appreciation Right shall cover the same
number of shares of Common Stock as covered by the Stock Option (or such lesser
number of shares as the Committee may determine) and shall be exercisable only
at such time or times and to the extent the related Stock Option shall be
exercisable, and shall have the same term and exercise price as the related
Stock Option. Upon exercise of a Stock Appreciation Right granted in tandem with
a Stock Option, the related Stock Option shall be cancelled automatically to the
extent of the number of shares covered by such exercise; conversely, if the
related Stock option is exercised as to some or all of the shares covered by the
tandem grant, the tandem Stock Appreciation Right shall be cancelled
automatically to the extent of the number of shares covered by the Stock Option
exercise.
10. STOCK AWARDS. Stock Awards shall consist of one or more shares of
Common Stock granted or offered for sale to an Eligible Individual, and shall be
subject to the terms and conditions established by the Committee in connection
with the Award and specified in the applicable Award Agreement. The shares of
Common Stock subject to a Stock Award may, among other things, be subject to
vesting requirements or restrictions on transferability.
11. PERFORMANCE SHARE AWARDS. Performance Share Awards shall be evidenced
by an Award Agreement in such form and containing such terms and conditions as
the Committee deems appropriate and which are not inconsistent with the terms of
the Plan. Each Award Agreement shall set forth the number of shares of Common
Stock to be earned by a Participant upon satisfaction of certain specified
performance criteria and subject to such other terms and conditions as the
Committee deems appropriate. Payment in
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settlement of a Performance Share Award shall be made as soon as practicable
following the conclusion of the applicable performance period, or at such other
time as the Committee shall determine, in shares of Common Stock, in an
equivalent amount of cash or in a combination of Common Stock and cash, as the
Committee shall determine.
12. OTHER AWARDS. The Committee shall have the authority to specify the
terms and provisions of other forms of equity-based or equity-related Awards not
described above which the Committee determines to be consistent with the purpose
of the Plan and the interests of the Company, which Awards may provide for cash
payments based in whole or in part on the value or future value of Common Stock,
for the acquisition or future acquisition of Common Stock, or any combination
thereof. Other Awards shall also include cash payments (including the cash
payment of dividend equivalents) under the Plan which may be based on one or
more criteria determined by the Committee which are unrelated to the value of
Common Stock and which may be granted in tandem with, or independent of, other
Awards under the Plan.
13. SECTION 162(M) AWARDS.
(a) TERMS OF SECTION 162(M) AWARDS GENERALLY. In addition to any other
Awards under the Plan, the Company may make Awards that are intended to
qualify as "qualified performance-based compensation" for purposes of
Section 162(m) of the Code ("SECTION 162(M) AWARDS"). Section 162(m) Awards
may consist of Stock Options, Stock Appreciation Rights, Stock Awards,
Performance Share Awards or Other Awards the vesting, exercisability and/or
payment of which is conditioned upon the attainment for the applicable
Performance Period of specified performance targets related to designated
performance goals for such period selected by the Committee from among the
performance goals specified in Section 13(b) below. Section 162(m) Awards
will be made in accordance with the procedures specified in applicable
Treasury regulations for compensation intended to be "qualified
performance-based compensation."
(b) PERFORMANCE GOALS. For purposes of this Section 13, performance
goals shall be limited to one or more of the following: (i) net revenue,
(ii) net earnings, (iii) operating earnings or income, (iv) absolute and/or
relative return on equity or assets, (v) earnings per share, (vi) cash flow,
(vii) pretax profits, (viii) earnings growth, (ix) revenue growth, (x) book
value per share, (xi) stock price and (xii) performance relative to peer
companies, each of which may be established on a corporate-wide basis or
established with respect to one or more operating units, divisions, acquired
businesses, minority investments, partnerships or joint ventures.
(c) OTHER PERFORMANCE-BASED COMPENSATION. The Committee's decision to
make, or not to make, Section 162(m) Awards within the meaning of this
Section 13 shall not in any way prejudice the qualification of any other
Awards as performance-based compensation under Section 162(m). In
particular, Awards of Stock Options may, pursuant to applicable regulations
promulgated under Section 162(m), be qualified as performance-based
compensation for Section 162(m) purposes without regard to this Section 13.
14. NON-TRANSFERABILITY. No Award granted under the Plan or any rights or
interests therein shall be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of except by will or by the laws of descent and
distribution or pursuant to a "qualified domestic relations order" ("QDRO") as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder; PROVIDED, HOWEVER,
that the Committee may, subject to such terms and conditions as the Committee
shall specify, permit the transfer of an Award to a Participant's family members
or to one or more trusts established in whole or in part for the benefit of one
or more of such family members; and PROVIDED FURTHER, that the restrictions in
this sentence shall not apply to the shares received in connection with an Award
after the date that the restrictions on transferability of such shares set forth
in the applicable Award Agreement have lapsed. During the lifetime of a
Participant, a Stock Option or Stock Appreciation Right shall be exercisable
only by, and payments in settlement of Awards shall be payable only to, the
Participant or, if applicable, the "alternate payee" under a QDRO or the family
member or
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trust to whom such Stock Option, Stock Appreciation Right or other Award has
been transferred in accordance with the previous sentence.
15. RECAPITALIZATION OR REORGANIZATION.
(a) AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence of the
Plan, the Award Agreements and the Awards granted hereunder shall not affect
or restrict in any way the right or power of the Company or the shareholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of stock or
of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect
the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) CHANGE IN CAPITALIZATION. Notwithstanding any provision of the
Plan or any Award Agreement, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization,
reorganization, merger, consolidation, stock split, combination or exchange
of shares or any other significant corporate event affecting the Common
Stock, the Committee, in its discretion, may make (i) such proportionate
adjustments as it considers appropriate (in the form determined by the
Committee in its sole discretion) to prevent diminution or enlargement of
the rights of Participants under the Plan with respect to the aggregate
number of shares of Common Stock for which Awards in respect thereof may be
granted under the Plan, the number of shares of Common Stock covered by each
outstanding Award, and the exercise or Award prices in respect thereof
and/or (ii) such other adjustments as it deems appropriate. The Committee's
determination as to what, if any, adjustments shall be made shall be final
and binding on the Company and all Participants.
16. CHANGE IN CONTROL. In the event of a Change in Control and except as
the Committee (as constituted immediately prior to such Change in Control) may
otherwise determine in its sole discretion, (i) all Stock Options or Stock
Appreciation Rights then outstanding shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable, (ii) all
restrictions and conditions of all Stock Awards then outstanding shall lapse as
of the date of the Change in Control, (iii) all Performance Share Awards shall
be deemed to have been fully earned as of the date of the Change in Control, and
(iv) in the case of a Change in Control involving a merger of, or consolidation
involving, the Company in which the Company is (A) not the surviving corporation
(the "SURVIVING ENTITY") or (B) becomes a wholly owned subsidiary of the
Surviving Entity or any Parent thereof, each outstanding Stock Option granted
under the Plan and not exercised (a "PREDECESSOR OPTION") will be converted into
an option (a "SUBSTITUTE OPTION") to acquire common stock of the Surviving
Entity or its Parent, which Substitute Option will have substantially the same
terms and conditions as the Predecessor Option, with appropriate adjustments as
to the number and kind of shares and exercise prices.
17. AMENDMENT OF THE PLAN. The Board or Committee may at any time and from
time to time terminate, modify, suspend or amend the Plan in whole or in part;
PROVIDED, HOWEVER, that no such termination, modification, suspension or
amendment shall be effective without shareholder approval if such approval is
required to comply with any applicable law or stock exchange rule; and PROVIDED
FURTHER, that the Board or Committee may not, without shareholder approval,
increase the maximum number of shares issuable under the Plan. No termination,
modification, suspension or amendment of the Plan shall, without the consent of
a Participant to whom any Awards shall previously have been granted, adversely
affect his or her rights under such Awards. Notwithstanding any provision herein
to the contrary, the Board or Committee shall have broad authority to amend the
Plan or any Stock Option to take into account changes in applicable tax laws,
securities laws, accounting rules and other applicable state and federal laws.
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18. MISCELLANEOUS.
(a) TAX WITHHOLDING. No later than the date as of which an amount
first becomes includable in the gross income of the Participant for
applicable income tax purposes with respect to any award under the Plan, the
Participant shall pay to the Company or make arrangements satisfactory to
the Committee regarding the payment of any federal, state or local taxes of
any kind required by law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, in accordance with rules and
procedures established by the Committee, the minimum required withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the award that gives rise to the withholding requirement. The
obligation of the Company under the Plan shall be conditioned upon such
payment or arrangements and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
(b) LOANS. On such terms and conditions as shall be approved by the
Committee, the Company may directly or indirectly lend money to a
Participant to accomplish the purposes of the Plan, including to assist such
Participant to acquire or carry shares of Common Stock acquired upon the
exercise of Stock Options granted hereunder, and the Committee may also
separately lend money to any Participant to pay taxes with respect to any of
the transactions contemplated by the Plan.
(c) NO RIGHT TO GRANTS OR EMPLOYMENT. No Eligible Individual or
Participant shall have any claim or right to receive grants of Awards under
the Plan. Nothing in the Plan or in any Award or Award Agreement shall
confer upon any employee of the Company or any Subsidiary any right to
continued employment with the Company or any Subsidiary, as the case may be,
or interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time, with or
without cause.
(d) UNFUNDED PLAN. The Plan is intended to constitute an unfunded plan
for incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of
the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Common Stock or payments in lieu thereof with
respect to awards hereunder.
(e) OTHER EMPLOYEE BENEFIT PLANS. Payments received by a Participant
under any Award made pursuant to the provisions of the Plan shall not be
included in, nor have any effect on, the determination of benefits under any
other employee benefit plan or similar arrangement provided by the Company.
(f) SECURITIES LAW RESTRICTIONS. The Committee may require each
Eligible Individual purchasing or acquiring shares of Common Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree
with the Company in writing that such Eligible Individual is acquiring the
shares for investment and not with a view to the distribution thereof. All
certificates for shares of Common Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any exchange upon
which the Common Stock is then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions. No
shares of Common Stock shall be issued hereunder unless the Company shall
have determined that such issuance is in compliance with, or pursuant to an
exemption from, all applicable federal and state securities laws.
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(g) COMPLIANCE WITH RULE 16B-3.
(i) The Plan is intended to comply with Rule 16b-3 under the
Exchange Act or its successors under the Exchange Act and the Committee
shall interpret and administer the provisions of the Plan or any Award
Agreement in a manner consistent therewith. To the extent any provision
of the Plan or Award Agreement or any action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee. Moreover, in the event the Plan or
an Award Agreement does not include a provision required by Rule 16b-3 to
be stated therein, such provision (other than one relating to eligibility
requirements, or the price and amount of Awards) shall be deemed
automatically to be incorporated by reference into the Plan or such Award
Agreement insofar as Participants subject to Section 16 of the Exchange
Act are concerned.
(ii) Notwithstanding anything contained in the Plan or any Award
Agreement to the contrary, if the consummation of any transaction under
the Plan would result in the possible imposition of liability on a
Participant pursuant to Section 16(b) of the Exchange Act, the Committee
shall have the right, in its sole discretion, but shall not be obligated,
to defer such transaction to the extent necessary to avoid such
liability.
(h) AWARD AGREEMENT. In the event of any conflict or inconsistency
between the Plan and any Award Agreement, the Plan shall govern, and the
Award Agreement shall be interpreted to minimize or eliminate any such
conflict or inconsistency.
(i) EXPENSES. The costs and expenses of administering the Plan shall
be borne by the Company.
(j) APPLICABLE LAW. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of New Mexico without giving effect to
conflicts of law principles.
(k) EFFECTIVE DATE. The Plan shall be effective as of the date (the
"EFFECTIVE DATE") of its approval by the shareholders of the Company. Awards
granted under the Plan prior to such shareholder approval shall be and are
made subject to defeasance by the failure of shareholders to approve the
Plan.
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EXHIBIT 4.2
SUN HEALTHCARE GROUP, INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. DEFINITIONS.
"ANNUAL MEETING" means an annual meeting of the Company's stockholders.
"ANNUAL RETAINER" means any annual fee payable to a Non-Employee Director
for service on the Board and any other fee payable to a Non-Employee Director
for acting as chairperson of any committee of the Board.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer the
Plan, which shall be composed exclusively of members of the Board who are not
Non-Employee Directors.
"COMMON STOCK" means the Common Stock of the Company, par value $.01 per
share.
"COMPANY" means Sun Healthcare Group, Inc., a Delaware corporation, or any
successor to substantially all of its business.
"DISABILITY" means eligibility for disability benefits under the terms of
the Company's long-term disability plan in effect at the time the Non-Employee
Director becomes disabled.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, in the event the Common Stock is traded on a
recognized securities exchange or quoted by the National Association of
Securities Dealers Automated Quotations on National Market Issues, an amount
equal to the average of the high and low prices of the Common Stock on such
exchange or such quotation on the date set for valuation or, if no sales of
Common Stock were made on said exchange or so quoted on that date, the average
of the high and low prices of the Common Stock on the next preceding day on
which sales were made on such exchange or quotations; or, if the Common Stock is
not so traded or quoted, that value determined, in its sole discretion, by the
Committee.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an employee
of the Company or any of its Subsidiaries.
"OPTION" means an option to purchase shares of Common Stock awarded to a
Non-Employee Director pursuant to the Plan, which option shall not be intended
to qualify, and shall not be treated, as an "incentive stock option" within the
meaning of Section 422 of the Code.
"PERSON" means any person, entity, or "group" within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act.
"PLAN" means the Sun Healthcare Group, Inc. 1997 Non-Employee Directors'
Stock Plan.
"RESTRICTED GRANT SHARES" means shares of Common Stock granted to a
Non-Employee Director, which shares are subject to such restrictions on transfer
or other incidents of ownership for such periods of time, and are subject to
such terms and conditions as are set forth in Section 5 below.
"RESTRICTED SHARES" means Restricted Grant Shares and Restricted Retainer
Shares.
"RESTRICTED RETAINER SHARES" means shares of Common Stock which a
Non-Employee Director elects to receive in lieu of part of his or her Annual
Retainer, which shares are subject to such restrictions on transfer or other
incidents of ownership for such periods of time, and are subject to such terms
and conditions as are set forth in Section 5 below.
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"RETIREMENT" means a Non-Employee Director ceasing to be a member of the
Board as a result of retirement from the Board in accordance with the retirement
policy then applicable to Board members.
"SUBSIDIARY" means (i) any corporation which is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code with respect to the Company or
(ii) any other corporation or other entity in which the Company, directly or
indirectly, has an equity or similar interest and which the Committee designates
as a Subsidiary for the purposes of the Plan.
2. PURPOSES. The purposes of the Plan are to retain the services of
qualified individuals who are not employees of the Company to serve as members
of the Board and to secure for the Company the benefits of the incentives
inherent in increased Common Stock ownership by such individuals by awarding
such individuals Restricted Shares and Options to purchase shares of Common
Stock.
3. ADMINISTRATION.
(a) AUTHORITY. The Committee will be responsible for administering the
Plan. The Committee will have authority to adopt such rules as it may deem
appropriate to carry out the purposes of the Plan, and shall have authority to
interpret and construe the provisions of the Plan and any agreements and notices
under the Plan and to make determinations pursuant to any Plan provision. Each
interpretation, determination or other action made or taken by the Committee
pursuant to the Plan shall be final and binding on all Persons. No member of the
Committee shall be liable for any action or determination made in good faith,
and the members of the Committee shall be entitled to indemnification and
reimbursement in the manner provided in the Company's Restated Certificate of
Incorporation as it may be amended from time to time.
(b) DELEGATION. The Committee may designate a committee composed of one or
more members of the Board to carry out its responsibilities under such
conditions as it may set.
4. SHARES AVAILABLE. Subject to the provisions of Section 7 of the Plan,
the maximum number of shares of Common Stock which may be issued under the Plan
shall not exceed 400,000 shares (the "Section 4 Limit"). Either authorized and
unissued shares of Common Stock or treasury shares may be delivered pursuant to
the Plan. For purposes of determining the number of shares that remain available
for issuance under the Plan, the following rules shall apply:
(a) the number of shares subject to awards granted under the Plan shall
be charged against the Section 4 Limit; and
(b) the Section 4 Limit shall be increased by:
(i) the number of shares subject to an Option which lapses, expires
or is otherwise terminated without the issuance of such shares,
(ii) the number of shares tendered to pay the exercise price of an
Option, and
(iii) the number of shares withheld to satisfy any tax withholding
obligations of a Non-Employee Director with respect to any shares or
other payments hereunder.
5. RESTRICTED SHARES.
(a) RESTRICTED RETAINER SHARE AWARDS.
With respect to each Annual Meeting commencing with the Annual
Meeting coincident with or first succeeding the Effective Date, each
Non-Employee Director who will remain in office after the date of such
Annual Meeting may elect, no later than the date of such Annual Meeting,
to receive a specified percentage of his or her Annual Retainer in the
form of Restricted Retainer Shares; provided, however, that such
percentage may not exceed 50%. In the event that such an annual election
is made, the Non-Employee Director will receive a number of Restricted
Retainer Shares determined by dividing (i) by (ii), and rounding up the
result to the next whole
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share, where (i) is the product of (x) the percentage of the Annual
Retainer which the Non-Employee Director elects to receive in the form of
Restricted Retainer Shares and (y) 110%, and (ii) is the Fair Market
Value as of the date of such Annual Meeting.
(b) RESTRICTED GRANT SHARE AWARDS.
(i) At the Annual Meeting coincident with or first succeeding a
Non-Employee Director's election to the Board (other than reelection for
a successive term), each Non-Employee Director (including any
Non-Employee Director reelected after a period during which he did not
serve on the Board) shall receive an award of 5,000 Restricted Grant
Shares.
(ii) At each Annual Meeting, other than Annual Meeting coincident
with or first succeeding a Non-Employee Director's initial election to
the Board (or reelection after a period during which he or she did not
serve on the Board), each Non-Employee Director who will remain in office
after the date of such Annual Meeting shall receive an additional award
of 2,000 Restricted Grant Shares (or such lesser number determined by
multiplying 2,000 by a fraction, the numerator of which is the number of
full or partial months since the immediately preceding Annual Meeting
during which such individual served on the Board in the capacity of a
Non-Employee Director, and the denominator of which is the number of full
or partial months since the immediately preceding Annual Meeting).
(c) TERMS OF RESTRICTED SHARES.
(i) VESTING SCHEDULE OF RESTRICTED RETAINER SHARES. Each award of
Restricted Retainer Shares granted as of an Annual Meeting shall vest and
become nonforfeitable on a quarterly basis commencing with the first day
of the calendar quarter coincident with or first succeeding the date of
such Annual Meeting.
(ii) VESTING SCHEDULE OF RESTRICTED GRANT SHARES. Each award of
Restricted Grant Shares granted as of an Annual Meeting shall vest and
become nonforfeitable in equal installments as of each of the first three
Annual Meetings following the date of grant
(iii) LAPSE OF RESTRICTIONS; FORFEITURE. Notwithstanding anything
herein to the contrary, if a Non-Employee Director ceases to be a member
of the Board by reason of death, Disability, Retirement or in the event
of his or her involuntary termination of service on the Board other than
for cause, all Restricted Shares issued to such Non-Employee Director
shall immediately vest in full and become nonforfeitable. If a
Non-Employee Director ceases to be a member of the Board for any other
reason, any Restricted Shares that have not vested as of the date of such
termination of service shall immediately be forfeited and all further
rights of such Non-Employee Director to or with respect to such
Restricted Shares shall terminate without any obligation on the part of
the Company.
(iv) SHARE CERTIFICATES; RIGHTS AND PRIVILEGES. At the time
Restricted Shares are granted to a Non-Employee Director, share
certificates representing the appropriate number of Restricted Shares
shall be registered in the name of the Non-Employee Director but, prior
to vesting, shall be held in the custody of the Company for the account
of such Non-Employee Director. The certificates shall bear a legend
restricting their transferability as provided in Section 5(c)(v) below.
The Non-Employee Director shall have all the rights and privileges of a
stockholder as to the Restricted Shares, including the right to receive
dividends and the right to vote such Restricted Shares, subject to the
restrictions set forth in Section 5(c)(v) below, unless and until such
Restricted Shares are forfeited pursuant to Section 5(c)(ii) above.
(v) RESTRICTIONS ON TRANSFER. Prior to vesting, the Restricted
Shares granted hereunder may not be sold, transferred, assigned, pledged
or otherwise encumbered or disposed of.
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6. OPTIONS. In addition to the awards of Restricted Shares described above
in Section 5, each Non-Employee Director shall also receive awards of Options
under the Plan as follows:
(a) OPTION GRANTS.
(i) INITIAL AWARD. At the Annual Meeting coincident with or first
succeeding a Non-Employee Director's election to the Board (other than
reelection for a successive term), such Non-Employee Director (including
any Non-Employee Director reelected after a period during which he or she
did not serve on the Board) shall receive an award consisting of an
Option to purchase 10,000 shares of Common Stock. Such Option shall have
a per share exercise price equal to the Fair Market Value of the Common
Stock on the date of award and shall be subject to the vesting schedule
provided for in Section 6(b) and the other terms and conditions provided
for herein.
(ii) ANNUAL AWARDS. At each Annual Meeting, other than the Annual
Meeting coincident with or first succeeding a Non-Employee Director's
initial election to the Board (or reelection after a period during which
he or she did not serve on the Board), each Non-Employee Director who
will remain on the Board following the date of such Annual Meeting shall
receive as of such date an award consisting of an Option to purchase
4,000 shares of Common Stock (or such lesser number determined by
multiplying 4,000 by a fraction, the numerator of which is the number of
full or partial months since the immediately preceding Annual Meeting
during which such individual served on the Board in the capacity of a
Non-Employee Director, and the denominator of which is the number of full
or partial months since the immediately preceding Annual Meeting). Such
Option shall have a per share exercise price equal to the Fair Market
Value of the Common Stock on the date of award and shall be subject to
the vesting schedule provided for in Section 6(b) and the other terms and
conditions provided for herein.
(b) VESTING SCHEDULE AND TERM OF OPTIONS. Options awarded pursuant to
the Plan shall vest and become exercisable in equal installments as of each
of the first three Annual Meetings following the date of grant; provided,
however, that an Option shall become fully vested and exercisable upon a
Non-Employee ceasing to be a member of the Board as a result of death,
Disability or Retirement, or in the event of his or her involuntary
termination of service on the Board other than for cause. An Option shall
expire on the date of the Annual Meeting held in the tenth calendar year
following the date of grant.
(c) EXERCISE OF OPTIONS FOLLOWING TERMINATION OF SERVICE.
(i) EXERCISE FOLLOWING TERMINATION OF SERVICE DUE TO DEATH,
DISABILITY OR RETIREMENT. If a Non-Employee Director's ceases to be a
member of the Board by reason of death, Disability, Retirement or in the
event of his involuntary termination of service on the Board other than
for cause, all Options awarded to such Non-Employee Director may be
exercised by such Non-Employee Director, or by his or her estate,
personal representative or beneficiary, as the case may be, at any time
within three years after the date of termination of service, subject to
earlier termination as provided in Section 6(b) above.
(ii) EXERCISE FOLLOWING OTHER TERMINATIONS OF SERVICE. If a
Non-Employee Director ceases to be a member of the Board for any reason
other than as set forth above in subsection (i) hereof, then (A) the
Non-Employee Director shall have the right, subject to the terms and
conditions hereof, to exercise the Option, to the extent it has vested as
of the date of such termination of service, at any time within six months
after the date of such termination, subject to earlier termination as
provided in Section 6(b) above, and (B) the unvested portion of any
Options awarded to the Non-Employee Director shall be forfeited as of the
date of termination of service.
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(d) TIME AND MANNER OF EXERCISE OF OPTIONS.
(i) NOTICE OF EXERCISE. Subject to the other terms and conditions
hereof, a Non-Employee Director may exercise any Options, to the extent
such Options are vested, by giving written notice of exercise to the
Company; provided, however, that in no event shall an Option be
exercisable for a fractional share. The date of exercise of an Option
shall be the later of (i) the date on which the Company receives such
written notice or (ii) the date on which the conditions provided in
Section 6(d)(ii) are satisfied.
(ii) PAYMENT. Prior to the issuance of a certificate pursuant to
Section 6(d)(v) hereof evidencing the shares of Common Stock in respect
of which all or a portion of an Option shall have been exercised, a
Non-Employee Director shall have paid to the Company the exercise price
of the Option for all such shares purchased pursuant to the exercise of
such Option. Payment may be made by personal check, bank draft or postal
or express money order (such modes of payment are collectively referred
to as "cash") payable to the order of the Company in U.S. dollars or in
shares of Common Stock already owned by the Non-Employee Director valued
at their Fair Market Value as of the last business day preceding the date
of exercise, or in any combination of cash or such shares as the
Committee in its sole discretion may approve. Payment of the exercise
price in shares of Common Stock shall be made by delivering to the
Company the share certificate(s) representing the required number of
shares, with the Non-Employee Director signing his or her name on the
back, or by attaching executed stock powers (the signature of the
Non-Employee Director must be guaranteed in either case).
(iii) STOCKHOLDER RIGHTS. A Non-Employee Director shall have no
rights as a stockholder with respect to any shares of Common Stock
issuable upon exercise of an Option until a certificate evidencing such
shares shall have been issued to the Non-Employee Director pursuant to
Section 6(d)(v), and no adjustment shall be made for dividends or
distributions or other rights in respect of any share for which the
record date is prior to the date upon which the Non-Employee Director
shall become the holder of record thereof.
(iv) LIMITATION ON EXERCISE. No Option shall be exercisable unless
the Common Stock subject thereto has been registered under the Securities
Act and qualified under applicable state "blue sky" laws in connection
with the offer and sale thereof, or the Company has determined that an
exemption from registration under the Securities Act and from
qualification under such state "blue sky" laws is available.
(v) ISSUANCE OF SHARES. Subject to the foregoing conditions, as soon
as is reasonably practicable after its receipt of a proper notice of
exercise and payment of the exercise price of the Option for the number
of shares with respect to which the Option is exercised, the Company
shall deliver to the Non-Employee Director (or following the Non-Employee
Director's death, such other Person entitled to exercise the Option), at
the principal office of the Company or at such other location as may be
acceptable to the Company and the Non-Employee Director (or such other
Person), one or more stock certificates for the appropriate number of
shares of Common Stock issued in connection with such exercise. Such
shares shall be fully paid and nonassessable and shall be issued in the
name of the Non-Employee Director (or such other Person).
(e) RESTRICTIONS ON TRANSFER. An Option may not be transferred,
pledged, assigned, or otherwise disposed of, except by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of ERISA ("QDRO"); PROVIDED,
HOWEVER, that the Committee may, subject to such terms and conditions as the
Committee shall specify, permit the transfer of an Option to a Non-Employee
Director's family members or to one or more trusts established in whole or
in part for the benefit of one or more of such family members. The Option
shall be exercisable, during the Non-Employee Director's lifetime, only by
the Non-Employee Director or by the Person to whom the Option has been
transferred in accordance with the previous
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sentence. No assignment or transfer of the Option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law
or otherwise, except by will or the laws of descent and distribution or
pursuant to a QDRO, shall vest in the assignee or transferee any interest or
right in the Option, but immediately upon any attempt to assign or transfer
the Option the same shall terminate and be of no force or effect.
7. RECAPITALIZATION OR REORGANIZATION.
(a) AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence of the
Plan shall not affect or restrict in any way the right or power of the
Company or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of
the Company, any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Stock or the rights
thereof or which are convertible into or exchangeable for Common Stock, or
the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
(b) CHANGE IN CAPITALIZATION. Notwithstanding any other provision of
the Plan, in the event of any change in the outstanding Common Stock by
reason of a stock dividend, recapitalization, reorganization, merger,
consolidation, stock split, combination or exchange of shares or any other
significant corporate event affecting the Common Stock, the Committee, in
its discretion, may make (i) such proportionate adjustments as it considers
appropriate (in the form determined by the Committee in its sole discretion)
to prevent diminution or enlargement of the rights of Non-Employee Directors
under the Plan with respect to the aggregate number of shares of Common
Stock authorized to be awarded under the Plan, the number of shares of
Common Stock covered by each outstanding Option and the exercise prices in
respect thereof, the number of shares of Common Stock covered by future
Option awards and/or (ii) such other adjustments as it deems appropriate.
The Committee's determination as to what, if any, adjustments shall be made
shall be final and binding on the Company and all Non-Employee Directors.
8. TERMINATION AND AMENDMENT OF THE PLAN.
(a) TERMINATION. The Plan shall terminate as of the tenth anniversary
of the Effective Date.
(b) GENERAL POWER OF BOARD. Notwithstanding anything herein to the
contrary, the Board or the Committee may at any time and from time to time
terminate, modify, suspend or amend the Plan in whole or in part; provided,
however, that no such termination, modification, suspension or amendment
shall be effective without shareholder approval if such approval is required
to comply with any applicable law or stock exchange rule; and provided
further, that the Board may not, without shareholder approval, increase the
maximum number of shares issuable under the Plan except as provided in
Section 7(b) above.
(c) WHEN NON-EMPLOYEE DIRECTORS' CONSENTS REQUIRED. The Committee may
not alter, amend, suspend, or terminate the Plan without the consent of any
Non-Employee Director to the extent that such action would adversely affect
his or her rights with respect to Restricted Shares or Options that have
previously been granted.
9. MISCELLANEOUS.
(a) TAX WITHHOLDING. No later than the date as of which an amount
first becomes includable in the gross income of the Non-Employee Director
for applicable income tax purposes with respect to any award under the Plan,
the Non-Employee Director shall pay to the Company or make arrangements
satisfactory to the Committee regarding the payment of any federal, state or
local taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the
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Committee, in accordance with rules and procedures established by the
Committee, the minimum required withholding obligations may be settled with
Common Stock, including Common Stock that is part of the award that gives
rise to the withholding requirement. The obligation of the Company under the
Plan shall be conditioned upon such payment or arrangements and the Company
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the Non-Employee
Director.
(b) NO RIGHT TO REELECTION. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any of its
members for reelection by the Company's stockholders, nor confer upon any
Non-Employee Director the right to remain a member of the Board for any
period of time, or at any particular rate of compensation.
(c) SECURITIES LAW RESTRICTIONS. The Committee may require each
Non-Employee Director purchasing or acquiring shares of Common Stock
pursuant to the Plan to agree with the Company in writing that such
Non-Employee Director is acquiring the shares for investment and not with a
view to the distribution thereof. All certificates for shares of Common
Stock delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and Exchange
Commission or any exchange upon which the Common Stock is then listed, and
any applicable federal or state securities laws, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. No shares of Common Stock shall be issued
hereunder unless the Company shall have determined that such issuance is in
compliance with, or pursuant to an exemption from, all applicable federal
and state securities laws.
(d) COMPLIANCE WITH RULE 16B-3.
(i) The Plan is intended to comply with the requirements of Rule
16b-3 under the Exchange Act or its successors under the Exchange Act and
the Committee shall interpret and administer the provisions of the Plan
in a manner consistent therewith. To the extent any provision of the Plan
or any action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan does not include a provision
required by Rule 16b-3 to be stated therein, such provision (other than
one relating to eligibility requirements, or the price and amount of
Options) shall be deemed automatically to be incorporated by reference
into the Plan.
(ii) Notwithstanding anything contained in the Plan to the contrary,
if the consummation of any transaction under the Plan would result in the
possible imposition of liability on a Non-Employee Director pursuant to
Section 16(b) of the Exchange Act, the Committee shall have the right, in
its sole discretion, but shall not be obligated, to defer such
transaction to the extent necessary to avoid such liability.
(e) EXPENSES. The costs and expenses of administering the Plan shall
be borne by the Company.
(f) APPLICABLE LAW. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.
(g) EFFECTIVE DATE. Subject to the approval of the Plan by the
Company's shareholders, the Plan shall be effective as of the date of the
1997 Annual Meeting (the "EFFECTIVE DATE"). Upon the effectiveness of the
Plan, the Company's 1995 Non-Employee Directors' Stock Option Plan shall be
terminated.
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EXHIBIT 5
October 20, 1997
Sun Healthcare Group, Inc.
101 Sun Lane, NE
Albuquerque, New Mexico 87109
Ladies and Gentlemen:
I am the Corporate Counsel for Sun Healthcare Group, Inc., a Delaware
corporation (the "Company"), and as such, I have acted on behalf of the
Company in connection with the Registration Statement on Form S-8 (the
"Registration Statement") of the Company filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to 4,900,000 shares (the "Shares") of common
stock, par value $.01 per share, of the Company (the "Common Stock"), to be
issued pursuant to the Company's 1997 Stock Incentive Plan and 1997
Non-Employee Directors' Stock Plan (each, a "Plan"). Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in the
applicable Plan.
In so acting, we have examined the Registration Statement and also examined
and relied as to factual matters upon the representations and warranties
contained in originals, or copies certified or otherwise identified to our
satisfaction, of such documents, records, certificates and other instruments as
in our judgment are necessary or appropriate to enable us to render the opinion
expressed below. In such examination, I or members of the legal department of
the Company have assumed the genuineness of all signatures, the authenticity of
all documents, certificates and instruments submitted to us as originals and the
conformity with originals of all documents submitted to us as copies.
I am admitted to practice law in the State of Minnesota. The opinion
expressed below is limited to the General Corporation Law of Delaware and the
federal law of the United States, and I do not express any opinion herein
concerning any other law.
Based upon the foregoing and having regard for such legal considerations
as I have deemed relevant, I am of the opinion that the Shares have been duly
authorized by the Company and, when (a) issued and delivered by the Company
in accordance with the terms of the relevant Plan and (b) paid in full in
accordance with the terms of the relevant Plan, the Shares will be validly
issued, fully paid and non-assessable.
<PAGE>
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Michael T. Berg
--------------------------------------
Michael T. Berg
Corporate Counsel of Sun Healthcare Group, Inc.
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February 27,
1997 included in Sun Healthcare Group, Inc.'s Form 10-K for the year ended
December 31, 1996 and the incorporation by reference of our report dated March
26, 1997 on the financial statement of Golden Care, Inc. for the year ended
December 31, 1994 included in Sun Healthcare Group, Inc.'s Current Report on
Form 8-K filed with the Securities and Exchange Commission on March 28, 1997
and to all references to our Firm included in this Registration Statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Albuquerque, New Mexico
October 21, 1997
