<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-12040
SUN HEALTHCARE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 85-0410612
(State of Incorporation) (I.R.S. Employer Identification No.)
101 Sun Avenue, NE
Albuquerque, New Mexico 87109
(505) 821-3355
(Address and telephone number of Registrant)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes X No
------- --------
As of May 6, 1998, there were 49,607,942 shares of the Registrant's $.01
par value Common Stock outstanding, net of treasury shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUN HEALTHCARE GROUP, INC.
INDEX
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Numbers
<C> <S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 3-4
Consolidated Statement of Earnings
For the three months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 6-7
Notes to the Consolidated Financial Statements 8-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 6. Exhibits and Reports on Form 8-K 33
Signatures 34
</TABLE>
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
As of March 31, As of December 31,
-------------- ------------------
ASSETS 1998 1997
-------------- ------------------
(In thousands, except share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,113 $ 21,020
Accounts receivable, net of allowance for doubtful accounts
of $36,620 and $34,433 as of March 31, 1998 and 601,120 523,161
December 31, 1997, respectively
Other receivables 53,710 33,550
Prepaids and other assets 50,941 38,440
Deferred tax assets 8,621 16,546
-------------- ------------------
Total current assets 715,505 632,717
-------------- ------------------
Property and equipment, net 654,971 631,102
Goodwill, net 1,035,181 1,030,893
Notes receivable 97,919 91,062
Other assets 179,692 171,898
Deferred tax assets 4,718 21,564
-------------- ------------------
Total assets $2,687,986 $2,579,236
-------------- ------------------
-------------- ------------------
</TABLE>
(Continued on next page)
3
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
As of March 31, As of December 31,
--------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
--------------- ------------------
(In thousands, except share data)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 54,013 $ 56,817
Current portion of obligations under capital leases 2,260 2,054
Accounts payable 59,389 61,873
Accrued compensation and benefits 101,148 78,960
Accrued interest 14,306 20,451
Accrued self-insurance obligations 35,907 34,354
Other accrued liabilities 74,597 71,183
Income taxes payable -- --
--------------- ------------------
Total current liabilities 341,620 325,692
--------------- ------------------
Long-term debt, net of current portion 1,558,343 1,488,861
Obligations under capital leases, net of current portion 80,022 79,110
Other long-term liabilities 41,915 42,428
Deferred tax liabilities 9,963 9,807
--------------- ------------------
Total liabilities 2,031,863 1,945,898
--------------- ------------------
Minority interest 16,573 16,285
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock of $.01 par value, authorized 5,000,000 shares,
none issued -- --
Common stock of $.01 par value, authorized 100,000,000 shares,
51,716,655 and 51,697,914 shares issued and outstanding
as of March 31, 1998 and December 31, 1997, respectively 517 517
Additional paid-in capital 638,324 639,637
Retained earnings 75,501 57,114
Accumulated other comprehensive income 5,391 1,766
--------------- ------------------
719,733 699,034
--------------- ------------------
Less:
Unearned compensation 12,952 14,203
Common stock held in treasury, at cost, 2,122,701 and
2,053,207 shares as of March 31, 1998 and December 31,
1997, respectively 26,931 25,574
Grantor stock trust, at market, 2,163,747 and 2,178,315
shares as of March 31, 1998 and December 31, 1997,
respectively 40,300 42,204
--------------- ------------------
Total stockholders' equity 639,550 617,053
--------------- ------------------
Total liabilities and stockholders' equity $2,687,986 $2,579,236
--------------- ------------------
--------------- ------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
4
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
-------- --------
(In thousands, except per share data)
<S> <C> <C>
Total net revenues $741,490 $398,636
-------- --------
Costs and expenses:
Operating 608,585 327,903
Corporate general and administrative 39,301 18,447
Provision for losses on accounts receivable 6,013 3,194
Depreciation and amortization 20,474 11,641
Interest, net 35,140 11,324
-------- --------
Total costs and expenses 709,513 372,509
-------- --------
Earnings before income taxes 31,977 26,127
Income taxes 13,590 10,190
-------- --------
Net earnings $ 18,387 $ 15,937
-------- --------
-------- --------
Net earnings per common and common equivalent share:
Net earnings:
Basic $ 0.39 $ 0.35
-------- --------
-------- --------
Diluted $ 0.37 $ 0.33
-------- --------
-------- --------
Weighted average number of common and common equivalent
shares outstanding:
Basic 46,905 46,119
-------- --------
-------- --------
Diluted 52,381 51,352
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
<S> <C> <C>
Net earnings $ 18,387 $ 15,937
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities -
Depreciation and amortization 20,474 11,641
Provision for losses on accounts receivable 6,013 3,194
Other, net 2,086 (272)
Changes in operating assets and liabilities:
Accounts receivable (85,499) (25,105)
Other current assets (21,638) 6,730
Other current liabilities 12,252 18,924
Income taxes payable 12,175 9,988
-------- ---------
Net cash provided by (used for) operating activities (35,750) 41,037
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (24,829) (13,113)
Acquisitions, net of cash acquired (7,339) (166,832)
Proceeds from sale and leaseback of property and equipment -- 32,138
Increase in long-term note receivables (6,857) (17,197)
Other assets expenditures (9,909) (11,678)
-------- ---------
Net cash used for investing activities (48,934) (176,682)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings 88,318 148,420
Long-term debt repayments (22,070) (1,630)
Net proceeds from issuance of common stock 543 342
Purchases of treasury stock (1,357) -
Financing fees paid (255) (120)
-------- ---------
Net cash provided by financing activities 65,179 147,012
-------- ---------
Effect of exchange rate on cash and cash equivalents (402) (1,381)
-------- ---------
Net increase (decrease) in cash and cash equivalents (19,907) 9,986
Cash and cash equivalents at beginning of year 21,020 14,880
-------- ---------
Cash and cash equivalents at end of period $ 1,113 $ 24,866
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
SUN HEALTHCARE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
(In Thousands)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest net of $573 and $535 capitalized during the three months
ended March 31, 1998 and 1997, respectively $43,897 $ 13,492
------- ---------
------- ---------
Income taxes $505 $202
------- ---------
------- ---------
Supplementary schedule of non-cash investing and financing activities:
The Company's acquisitions during the three months ended March 31,
1998 and 1997, involved the following:
Fair value of assets acquired $ 7,438 $ 253,572
Liabilities assumed (99) (105,742)
Cash payments made to former APTA shareholders -- 19,192
Fair value of stock and warrants issued -- (190)
------- ---------
Cash payments made, net of cash received from others $ 7,339 $ 166,832
------- ---------
------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
7
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management of Sun Healthcare Group, Inc. (the
"Company" or "Sun"), the accompanying interim consolidated financial
statements present fairly the Company's financial position at March 31, 1998
and December 31, 1997, the consolidated results of its operations for the
three month periods ended March 31, 1998 and 1997, and the consolidated
statements of cash flows for the three month periods ended March 31, 1998 and
1997. All adjustments are of a normal and recurring nature. These
statements are presented in accordance with the rules and regulations of the
United States Securities and Exchange Commission ("SEC"). Accordingly, they
are unaudited, and certain information and footnote disclosures normally
included in the Company's annual consolidated financial statements have been
condensed or omitted, as permitted under the applicable rules and
regulations. Readers of these statements should refer to the Company's
audited consolidated financial statements and notes thereto for the year
ended December 31, 1997, which are included in the Company's Annual Report on
Form 10-K as amended on Form 10-K/A for the year ended December 31, 1997.
The results of operations presented in the accompanying financial statements
are not necessarily representative of operations for an entire year.
Certain amounts in the 1997 consolidated financial statements and notes
have been reclassified to conform to the 1998 presentation.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
Comprehensive income is defined as the change in equity of a business during
a period from transactions and other events and circumstances from non-owner
sources. Under SFAS 130, the term "comprehensive income" is used to describe
the total of net earnings plus other comprehensive income which, for the
Company, includes foreign currency translation adjustments.
The adoption of SFAS 130 did not impact the calculations of net earnings
or earnings per share, nor did it impact reported assets, liabilities or
total stockholders' equity. It did impact the presentation of stockholders'
equity within the balance sheet and will result in the presentation of
comprehensive income within the annual financial statements, which must be
displayed with the same prominence as other financial statements.
The components of the Company's total comprehensive income were for the
three months ended March 31, (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net earnings $18,387 $15,937
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Foreign currency translation adjustments,
net of tax 3,625 (3,291)
------- -------
Total comprehensive income $22,012 $12,646
------- -------
------- -------
</TABLE>
2. ACQUISITIONS
The Company agreed in February 1997 to acquire Retirement Care
Associates, Inc. ("Retirement Care"), an operator of skilled nursing
facilities and assisted living centers in seven states in the southeastern
United States. Retirement Care also owns (and the Company would acquire)
approximately 65% of Contour Medical, Inc. ("Contour"), a national provider
of medical/surgical supplies. The amended terms of the RCA Merger provide for
a purchase price of approximately $144.7 million in Sun Common Stock (based
upon the closing price of Sun Common Stock as of May 11, 1998), approximately
$2.8 million of Sun Preferred Stock and the assumption of approximately
$173.1 million of indebtedness, excluding approximately $19.8 million of
indebtedness which will be eliminated in consolidation (based on Retirement
Care's December 31, 1997 balance sheet). Specifically, the agreement, as
amended, calls for the Company to issue shares of Sun Common Stock having a
value equal to $10.00 in exchange for each outstanding share of Retirement
Care's common stock (subject to a 10% collar centered on a $22.00 share price
for Sun Common Stock). The Company expects that the RCA Merger will be
accounted for as a pooling of interests. The Company has also agreed to
acquire the remaining 35% of Contour not presently owned by Retirement Care
for approximately $35 million, payable in Sun Common Stock or cash, at the
option of the Company. The Contour Merger will be accounted for as a
purchase. While there can be no assurance that either the RCA Merger or the
Contour Merger will be consummated, these mergers are expected to close
during the second quarter of 1998.
Costs to be incurred in connection with the mergers of Retirement Care
and Contour are expected to be significant and will be charged against
earnings of the combined company. The charge is currently estimated to be
approximately $30 million for transaction costs and integration expenses,
including elimination of redundant corporate functions, severance costs
related to headcount reductions, the write-off of certain intangibles and
property and equipment and the settlement of certain class action lawsuits
(described below). Approximately $25 million of these estimated charges are
expected to be charged to operations in the fiscal quarter in which the RCA
Merger is consummated. Approximately $5 million of the estimated charges
relating to the integration expenses are expected to be expensed as incurred
as these costs will benefit future combined operations. These amounts are
preliminary estimates only and are, therefore, subject to change. In
addition, there can be no assurance that the Company will not incur
additional charges in subsequent quarters to reflect costs associated with
the RCA Merger and the Contour Merger. As of March 31, 1998, the Company has
incurred approximately $2.6 million in transaction costs (as described above).
On January 10, 1997, the Company loaned Retirement Care $9.8 million in
order to enable Retirement Care to cause the repayment of certain
indebtedness incurred by Contour in connection with Contour's acquisition of
Atlantic Medical Supply Company, Inc. ("Atlantic") on August 6, 1996. On July
10, 1997, the Company and Retirement Care amended the terms of the loan to:
(i) increase the applicable interest rate by 2.0%; (ii) extend the maturity
date to 120 days after the termination of the agreement; and (iii) replace
the collateral securing the loan with a second lien on all of Retirement
Care's accounts receivable. Consistent with Retirement Care's bank line of
credit, the loan is unconditionally and irrevocably guaranteed by certain
officers of Retirement Care. On July 10, 1997, the Company also agreed to
loan Retirement Care an additional $5.0 million which is also secured by a
second lien on all of Retirement Care's accounts receivable and is
unconditionally and irrevocably guaranteed by certain officers
9
<PAGE>
of Retirement Care. The interest receivable related to the promissory notes
was $1.3 million and $1.0 million as of March 31, 1998 and December 31, 1997,
respectively. In addition, Retirement Care owed the Company an additional
$22.9 million and $12.4 million in the form of unsecured trade receivables in
respect to ancillary and management services provided by the Company as of
March 31, 1998 and December 31, 1997, respectively.
On November 25, 1997, the Company, Retirement Care and representatives
of the plaintiffs in certain pending class actions against Retirement Care
and its management reached an agreement in principle to settle these class
actions for $9.0 million. In connection with the agreement in principle, the
Company has escrowed on behalf of the defendants the settlement amount into
an escrow fund which is included in other long-term assets as of March 31,
1998. The settlement is contingent upon the closing of the RCA Merger and is
subject to, among other things, confirmatory discovery, the execution of
definitive documentation and court approval.
In October 1997, the Company acquired the capital stock of Regency
Health Services, Inc. ("Regency"), an operator of skilled nursing facilities
and a provider of related specialty healthcare services, including
rehabilitation therapy, pharmacy and home health services in the United
States. Total consideration for the shares acquired was approximately $367.2
million. The total fair value of Regency's assets acquired, including
goodwill of approximately $412.2 million, was approximately $736.6 million,
and liabilities assumed totaled approximately $354.7 million. Recorded
purchase liabilities included approximately $11.2 million for severance and
related costs and $2.0 million for costs associated with the shut down of
certain acquired pharmacies and home health service agencies that will be
consolidated with the Company's existing facilities. At March 31, 1998,
liabilities for approximately $2.5 million in severance costs and $2.0
million for facility related costs remained on the balance sheet. The
Company expects to complete its termination of pharmacy, home health service
agency and corporate employees and consolidation of pharmacies and home
health service agencies by mid-1998.
The acquisition of Regency was accounted for as a purchase and the
operating results of Regency have been included in the consolidated
statements of earnings from the date of acquisition. The following unaudited
proforma results for the three months ended March 31, 1997 assume that the
acquisition occurred as of January 1, 1997 (in thousands, except for share
data):
<TABLE>
<CAPTION>
<S> <C>
Net revenues $558,083
Net earnings 12,323
Net earnings per share:
Basic $ 0.27
Diluted 0.26
</TABLE>
In addition, during the three months ended March 31, 1998, the Company
acquired from various third parties the net ownership of, leasehold rights to
or the management contracts of 15 long-term care facilities in the United
Kingdom. Also during the three months ended March 31, 1998, the Company
acquired four pharmacies in the United States. The pro forma impact of these
acquisitions is immaterial.
3. COMMITMENTS
10
<PAGE>
(A) CONSTRUCTION COMMITMENTS
As of March 31, 1998, the Company had capital commitments of
approximately $22.7 million, including a corporate office building and a
long-term care facility, and various contracts related to improvements to
existing facilities in the United States, and capital commitments of
approximately L0.6 million ($1.0 million as of March 31, 1998).
(B) FINANCING COMMITMENTS
The Company has advanced $41.4 million and has agreed to advance up to a
total of $47.0 million under a revolving subordinated credit agreement
("Financing Facility") to a developer of assisted living facilities for the
development, construction and operation of assisted living facilities. Any
advances under the Financing Facility have been and are expected to be funded
by borrowings under the Company's Senior Credit Facility and will be subject
to certain conditions, including the approval of each project by the Company.
The developer has obtained a commitment for mortgage financing to fund 50%
of the cost of each project. The Company's advances under the Financing
Facility are subordinate to the mortgage financing. The Financing Facility
with respect to each facility bears interest at 9% or 13% depending on the
percentage of completion of the facility under construction. All amounts
advanced are due in full on November 1, 2001. The advances to the developer
totaled $41.4 million and $32.8 million at March 31, 1998 and December 31,
1997, respectively. As of March 31, 1998, four assisted living facilities
were under development. Construction was completed on two facilities during
the three months ended March 31, 1998. In addition, the Company has entered
into a purchase option agreement with the developer whereby the Company will
pay the developer $50,000 for each option to purchase any of the facilities.
The option will grant the Company the right to purchase the facilities, after
a specified time period, at the greater of the estimated fair market value of
the property or the total amount invested by the developer.
4. NET EARNINGS PER SHARE
Basic net earnings is based upon the weighted average number of common
shares outstanding during the period.
Diluted net earnings per share in periods of earnings is based upon the
weighted average number of common shares outstanding during the period plus
the number of incremental shares of common stock contingently issuable upon
exercise of stock options and, if dilutive, including the assumption that the
Company's convertible debentures were converted as of the beginning of the
period. Net earnings, if conversion of the debentures is assumed, is
adjusted for the interest on the debentures, net of interest related to
additional assumed borrowings to fund the cash consideration on conversion of
certain convertible debentures and the related income tax benefits.
Earnings per share is calculated as follows for the three months ended
March 31, (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
BASIC:
Net earnings $18,387 $15,937
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Weighted average shares outstanding 46,905 46,119
Earnings per share:
Net earnings $ 0.39 $ 0.35
------- -------
------- -------
DILUTED:
Net earnings used in basic calculation $18,387 $15,937
Income impact of assumed conversion 811 855
------- -------
Adjusted net earnings $19,198 $16,792
------- -------
------- -------
Weighted average shares used in basic calculation 46,905 46,119
Effect of dilutive securities:
Stock options and warrants 831 520
Assumed conversion of convertible debt 4,645 4,713
------- -------
Weighted average common and common equivalent
shares outstanding 52,381 51,352
------- -------
------- -------
Earnings per share:
Net earnings $ 0.37 $ 0.33
------- -------
------- -------
</TABLE>
On May 4, 1998, the Company issued $345 million of 7% convertible trust
issued preferred securities. These securities are convertible into the
Company's common stock at a conversion rate of 1.2419 shares of Sun Common
Stock for each convertible trust issued preferred security (equivalent to an
initial conversion price of $20.13 per share of Sun Common Stock).
5. OTHER EVENTS
(a) GOVERNMENT INVESTIGATION
In January 1995, the Company learned that it was the subject of a
pending Federal investigation. The investigating agencies are the United
States Department of Health and Human Services' Office of the Inspector
General ("OIG") and the United States Department of Justice. At this time,
the Company does not know the full scope of the investigation. However, the
Company currently believes that the investigation is focused principally on
whether the Company provided and billed for unnecessary or unordered therapy
services to residents of skilled nursing facilities and whether the Company
adequately documented the therapy services which it provided.
In July 1997, the Criminal Division of the U.S. Department of Justice
informed the Company that it had completed its investigation of the Company,
and that it would not initiate any actions against the Company or any
individuals. The investigation by the Civil Division of the Department of
Justice and the OIG is still proceeding. The government continues to collect
information, and the Company continues to cooperate with the investigators.
The Company and the government have had preliminary discussions, and the
Company expects to have continuing discussions, regarding a possible
settlement of the investigation.
12
<PAGE>
The Company is unable to determine at this time when the investigation
will be concluded, how large a monetary settlement the government may seek,
the nature of any other remedies that may be sought by the government,
whether or when a settlement will in fact occur or whether any such
settlement or any other outcome of the investigation will have a material
adverse effect on the Company's financial condition or results of operations.
From time to time the negative publicity surrounding the investigation has in
the past adversely affected the private pay enrollment in certain inpatient
facilities and slowed the Company's success in obtaining additional outside
contracts in the rehabilitation therapy business, which resulted in higher
than required therapist staffing levels. Negative publicity in the future
could have a similar effect.
(b) LITIGATION
On or about January 23, 1996, two former stockholders of SunCare, John
Brennan and Susan Bird, filed a lawsuit (the "SunCare Litigation") against
the Company and certain of its officers and directors in the United States
District Court for the Southern District of Indiana. Plaintiffs allege, among
other things, that the Company did not disclose material facts concerning the
investigation by the OIG and that the Company's financial results were
misstated. The complaints purport to state claims, INTER ALIA, under Federal
and state securities laws and for breach of contract, including a breach of a
registration rights agreement pursuant to which the Company agreed to
register the shares of the Company's common stock issued to such former
stockholders of SunCare in the acquisition. Plaintiffs purport to seek
recision, unspecified compensatory damages, punitive damages and other
relief. The trial is currently scheduled to begin in the summer of 1998.
The Company believes the SunCare Litigation will not have a material
adverse impact on its financial condition or results of operations, although
the unfavorable resolution of this action in any reporting period could have
a material adverse impact on the Company's results of operations for that
period.
On September 8, 1995, a derivative action was filed by Brickell Partners
against certain of the Company's current and former directors and officers in
the United States District Court for the District of New Mexico, captioned
BRICKELL PARTNERS V. TURNER, ET AL. The complaint was not served on any
defendant. On June 19, 1996, an amended complaint alleging breach of
fiduciary duty by certain of the Company's current and former directors and
officers was filed and subsequently served on the defendants. On August 5,
1996, the District Court dismissed this action without prejudice for failure
to serve the defendants within the required time period. The plaintiffs filed
a new complaint, alleging the same claims, on August 19, 1996. In December
1997, the Company and the plaintiffs reached an agreement in principle to
settle the action for an immaterial amount. The settlement is subject to
definitive documentation and court approval.
(c) OTHER INQUIRIES
From time to time, fiscal intermediaries and Medicaid agencies examine
cost reports filed by predecessor operators. The Company is currently the
subject of several such examinations. If, as a result of any such
examination, it is concluded that overpayments to a predecessor operator were
made, the Company, as the current operator of such facilities, may be held
financially responsible for such overpayments. At this time, the Company is
unable to predict the outcome of any existing or future examinations.
13
<PAGE>
The Company was notified in 1997 by a law firm representing several
national insurance companies that these companies believed that the Company
had engaged in improper billing and other practices in connection with the
Company's delivery of therapy and related services. In response, the Company
began discussions directly with these insurers and hopes to resolve these
matters without litigation; however, the Company is unable at this time to
predict whether it will be able to do so, what the eventual outcome may be or
the extent of its liability, if any, to these insurers.
6. SUMMARIZED FINANCIAL INFORMATION
The Company acquired The Mediplex Group, Inc. ("Mediplex") on June 23,
1994 and became a co-obligor with Mediplex with respect to the 6 1/2%
Convertible Subordinated Debentures and the 11 3/4% Senior Subordinated Notes
subsequent to the acquisition. Summarized financial information of Mediplex
is provided below (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Current assets $112,764 $108,232
Noncurrent assets 388,869 391,048
Current liabilities 27,386 26,016
Noncurrent liabilities 71,716 72,373
Due to parent 175,825 165,207
</TABLE>
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Net revenues $144,631 $121,359
Costs and expenses 136,106 116,128
-------- --------
Earnings before intercompany
charges and income taxes 8,525 5,231
Intercompany charges (1) 24,265 16,355
-------- --------
Earnings (loss) before income
taxes (15,740) (11,124)
Income taxes (benefit) (6,763) (4,407)
-------- --------
Net earnings (loss) $ (8,977) $ (6,717)
-------- --------
-------- --------
</TABLE>
- -----------------
(1) Through various intercompany agreements entered into by Sun and
Mediplex, Sun provides management services, licenses the use of its
trademarks and acts on behalf of Mediplex to make financing available for its
operations. Sun charged Mediplex for management services totaling $11.4
million and $7.6 million for the three months ended March 31, 1998 and 1997,
respectively. Royalty fees charged to
14
<PAGE>
Mediplex for the three months ended March 31, 1998 and 1997 for the use of
Sun trademarks were $2.6 million and $1.7 million, respectively. Intercompany
interest charged to Mediplex for the three months ended March 31, 1998 and
1997 for advances from Sun was $10.2 million and $7.0 million, respectively.
7. SUBSEQUENT EVENTS
On May 4, 1998, the Company issued $345 million of 7% convertible trust
issued preferred securities and $125 million of 9 3/8% Senior Subordinated
Notes due 2008 (yield of 9.425%) (collectively, the "Offerings"). Each
convertible preferred security is convertible into shares of Common Stock,
par value $0.01 per share, of Sun, at an equivalent rate of 1.2419 shares of
Sun common stock for each convertible preferred security (equivalent to an
initial conversion price of $20.13 per share of Sun Common Stock). $300
million of the net proceeds from the Offerings were used by the Company to
permanently repay certain outstanding borrowings under the term loan portion
of the Senior Credit Facility and the remainder of the net proceeds from the
Offerings were used to reduce certain outstanding borrowings under the
revolving credit portion of the Senior Credit Facility (which amounts may be
subsequently reborrowed).
On May 5, 1998 the Company entered into certain interest rate
transactions with an aggregate notional value of $850 million to minimize the
risks and/or costs associated with certain long-term debt of the Company. The
Company does not otherwise utilize financial instruments for trading or other
speculative purposes. The counterparty to these contractual arrangements is a
major international financial institution with which the Company has other
financial relationships. The Company will be exposed to credit loss in the
event of non-performance by the counterparty. However, the Company does not
anticipate non-performance.
The interest rate swap transactions have been designated as hedges for
accounting purposes. The Company will continue to evaluate this designation
on a periodic basis. The amounts to be paid or received are accrued and are
recognized as an adjustment to interest expense.
Under the interest rate swap transactions, the Company will be a
variable rate payor, effectively converting $550 million of fixed rate debt
and $300 million of variable rate Senior Credit Facility debt, which is based
on U.S. LIBOR, into variable rate debt based on an index of foreign interest
rates. All payments will be denominated in U.S. dollars. Each interest rate
swap includes cap protection limiting the Company's exposure to interest rate
fluctuations. The following summarizes the terms of the various interest rate
swap transactions at May 5, 1998:
<TABLE>
<CAPTION>
NOTIONAL MATURITY INTEREST RATE MAXIMUM INTEREST
AMOUNT DATE RECEIVE PAY(1) RATE PAID
-------- -------- ------- -------- --------------------
<S> <C> <C> <C> <C>
$300,000,000 5/2003 5.69%(2) 5.53% 7.0%
$300,000,000 5/2008 7.00%(3) 6.35% 7.0% (5/1998-5/2001)
8.5% (5/2001-5/2008)
$250,000,000 7/2002 9.50%(3) 8.95% 9.5% (5/1998-4/2000)
10.5% (4/2000-7/2002)
</TABLE>
(1) An index of foreign interest rates, reset quarterly.
(2) U.S. LIBOR, reset quarterly.
(3) Fixed.
15
<PAGE>
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company, through its direct and indirect subsidiaries (hereinafter
collectively referred to as the "Company"), is a provider of long-term,
subacute and related specialty healthcare services, including rehabilitation
and respiratory therapy services and pharmaceutical services. Long-term care
and subacute care services and outpatient therapy services are provided
through affiliated facilities. Therapy services and pharmaceutical services
are provided by the Company in both affiliated and nonaffiliated facilities
located in the United States. The Company also provides long-term care
services in the United Kingdom, Spain and Germany and acute care services in
Australia and pharmaceutical services in the United Kingdom, Germany and
Spain.
The Company's earnings growth has historically resulted from the
acquisition of long-term and subacute care facilities, use of its long-term
and subacute care operations as a base for expansion of its ancillary
services, provision of ancillary services to nonaffiliated facilities and
expansion of ancillary services through acquisitions. Under the current
Medicare reimbursement system, ancillary services, such as rehabilitation and
respiratory therapy services and pharmaceutical services, have significantly
higher operating margins than the margins associated with the provision of
routine services to patients at long-term and subacute care facilities and
accordingly have provided more than half of the Company's operating profits.
The higher operating margins from the provision of ancillary services are
primarily attributable to more favorable reimbursement rates. In addition, a
substantial portion of the Company's consolidated interest expense was
attributable to the Company's long-term and sub-acute services and its
foreign operations due to the capital intensive nature of these businesses
and to related acquisitions. The Company believes that when Medicare
implements the Prospective Payment System ("PPS") for long-term and subacute
care services it may be better able than some of its competitors to respond
to the new PPS environment because it provides more types of ancillary
services in-house and to nonaffiliated facilities than many of its
competitors. There can be no assurance that the Company will be able to
maintain its margins or that its margins will not decrease and that PPS will
not have a material adverse effect on the Company's financial condition or
results of operations. See "-- Effects from Changes in Reimbursement."
The Company's results of operations for the three months ended March 31,
1998 and 1997 reflect the acquisition of facilities, the growth of the
Company's existing facility operations, the expansion of the Company's
therapy service operations and temporary therapy staffing services, and the
growth of the Company's pharmaceutical service operations.
In October 1997, the Company acquired Regency, an operator of skilled
nursing facilities and a diversified provider of rehabilitation therapy,
pharmacy and home health services. At the date of acquisition, Regency
operated 111 long-term care facilities (including one managed facility) in
the United States and provided rehabilitation therapy and pharmacy services
to both affiliated and nonaffiliated facilities.
In February 1997, the Company agreed to acquire Retirement Care, an
operator of approximately 106 skilled nursing facilities and assisted living
centers, in seven states in the southeastern United States.
16
<PAGE>
Retirement Care also owns (and Sun would acquire) approximately 65% of
Contour, a national provider of medical/surgical supplies. The amended terms
of the RCA Merger provide for a purchase price of approximately $144.7
million in Sun Common Stock (based upon the closing price of Sun Common Stock
as of May 11, 1998), approximately $2.8 million of Sun Preferred Stock and
the assumption of approximately $173.1 million of indebtedness, excluding
approximately $19.8 million of long-term indebtedness which will be
eliminated in consolidation (based on Retirement Care's December 31, 1997
balance sheet.) The acquisition of Retirement Care is expected to be
accounted for as a pooling of interests and the acquisition of the minority
interest of Contour is expected to be accounted for as a purchase. While
there can be no assurance that either the RCA Merger or the Contour Merger
will be consummated, these mergers are expected to close during the second
quarter of 1998.
At March 31, 1998, the Company operated 318 facilities with 36,488
licensed beds in the United States, 177 facilities with 11,132 licensed beds
in the United Kingdom, eight facilities with 1,328 licensed beds in Spain, 11
facilities with 934 licensed beds in Germany and six facilities with 353
licensed beds in Australia. During the three months ended March 31, 1998,
the Company acquired one facility with 134 licensed beds in the United States
and 12 facilities with 616 licensed beds in the United Kingdom. Also, during
the three months ended March 31, 1998, the Company developed and opened one
facility in the United Kingdom with a total of 64 licensed beds.
At December 31, 1997, the Company operated 321 facilities with 36,655
licensed beds in the United States and 137 facilities with 7,837 licensed
beds in the United Kingdom, 8 facilities with 1,328 licensed beds in Spain,
11 facilities with 930 licensed beds in Germany and 6 facilities with 353
licensed beds in Australia. In addition to Regency and Ashbourne, during
1997, the Company acquired 54 facilities in the United States and 9
facilities in the United Kingdom, resulting in a total increase of 6,399 and
476 licensed beds in the United States and United Kingdom, respectively.
Also, in 1997 the Company developed and opened one facility in the United
States and 9 facilities in the United Kingdom with a total of 154 and 604
licensed beds in the United States and United Kingdom, respectively. The
Company also acquired 38% of the equity of Alpha, an operator of ten acute
care facilities in Australia.
The Company's therapy service operations include the provision of
physical, occupational and speech therapy, the provision of respiratory care,
the provision of additional ancillary healthcare services, such as dentistry,
and the distribution of related equipment and supplies. As of March 31, 1998,
the Company provided its therapy services to 1,389 nonaffiliated facilities,
an increase of 131 facilities from the 1,258 nonaffiliated facilities
serviced at March 31, 1997.
The Company's temporary therapy service operations which provide
temporary therapists, had 29 and 27 division offices at March 31, 1998 and
December 31, 1997, respectively. During the three months ended March 31,
1998, the Company provided a total of 672,000 temporary therapy staffing
hours to nonaffiliates, an increase of 1,000 hours from the 671,000
nonaffiliated temporary therapy staffing hours provided during the three
months ended March 31, 1997.
The Company's pharmaceutical service operations include the provision of
pharmaceuticals, the distribution of related supplies and home care. As of
March 31, 1998, the Company operated 38 regional pharmacies, four in-house
long-term care pharmacies, 14 home health service agencies, and a
pharmaceutical billing and consulting center.
The Company's foreign operations, in addition to the nursing home
facilities in the United Kingdom, Spain and Germany and acute care facilities
in Australia, include the provision of pharmaceutical services in the United
Kingdom, Germany and Spain and outpatient therapy services in Canada. During
1997, the Company announced its intention to sell and divest itself of its
outpatient therapy service
17
<PAGE>
operations in Canada, as well as in the United States. As of March 31, 1998,
the Company operated 19 pharmacies and one supply distribution center in the
United Kingdom and one pharmacy in Spain.
The following table sets forth certain operating data for the Company as
of the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, 1997
--------- -----------------
1998 1997
---- ----
<S> <C> <C> <C>
Long-term and Subacute Care Facility Operations:
Long-term and subacute care facilities
(including managed facilities):
Domestic operations 318 173 321
Foreign operations 177 131 162
----- ----- -----
Total 495 304 483
----- ----- -----
----- ----- -----
Licensed beds (including managed facilities):
Domestic operations 36,488 20,707 36,655
Foreign operations 11,132 7,531 10,448
----- ----- -----
Total 47,620 28,238 47,103
----- ----- -----
----- ----- -----
Therapy Service Operations:
Nonaffiliated facilities served 1,389 789 1,278
Affiliated facilities served 287 163 287
----- ----- -----
Total 1,676 952 1,565
----- ----- -----
----- ----- -----
Temporary Therapy Staffing Service Operations:
Hours billed to nonaffiliates (in thousands)
Three months ended March 31 672 671 --
Twelve months ended December 31 -- -- 2,817
Pharmaceutical Operations:
Nonaffiliated facilities served 576 364 546
Affiliated facilities served 264 118 255
----- ----- -----
Total 840 482 801
----- ----- -----
----- ----- -----
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth the amount and percentages of certain
elements of total net revenues for the periods presented (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Long-term and subacute
care services $480,008 65% $239,289 60%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Therapy services to
nonaffiliates 102,042 13 65,424 16
Foreign operations 66,306 9 37,773 10
Temporary therapy staffing
services to nonaffiliates 35,526 5 32,945 8
Pharmaceutical services to
nonaffiliates 52,842 7 20,721 5
Management fees and other 4,766 1 2,484 1
-------- --- -------- ---
Total net revenues $741,490 100% $398,636 100%
-------- --- -------- ---
-------- --- -------- ---
</TABLE>
Revenues for long-term and subacute care services include revenues
billed to patients for therapy and pharmaceutical services provided by the
Company's affiliated operations. Revenues for therapy services provided to
domestic affiliated facilities were $79.5 million and $34.0 million for the
three months ended March 31, 1998 and 1997, respectively. Revenues provided
to domestic affiliated facilities for pharmaceutical services were $15.2
million and $6.0 million for the three months ended March 31, 1998 and 1997,
respectively.
The following table presents the percentage of total net revenues
represented by certain items for the Company for the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
<S> <C> <C>
Total net revenues 100.0% 100.0%
----- -----
Costs and expenses:
Operating 82.1 82.3
Corporate general and administrative 5.3 4.6
Provision for losses on accounts receivable 0.8 0.8
Depreciation and amortization 2.8 2.9
Interest, net 4.7 2.8
----- -----
Total costs and expenses 95.7 93.4
----- -----
Earnings before income taxes 4.3 6.6
Income taxes 1.8 2.6
----- -----
Net earnings 2.5% 4.0%
----- -----
----- -----
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Total net revenues for the three months ended March 31, 1998 increased
86% from approximately $398.6 million for the three months ended March 31,
1997 to approximately $741.5 million.
19
<PAGE>
Net revenues from long-term and subacute care services, which includes
revenues generated from therapy and pharmaceutical services provided at the
Company's facilities, increased from $239.3 million for the three months
ended March 31, 1997 to approximately $480.0 million for the three months
ended March 31, 1998, a 101% increase. Approximately $137.4 million or 57%
of this increase results from the 110 leased or owned facilities acquired
from Regency in October 1997 and approximately $78.8 million or 33% of this
increase resulted from an additional 67 leased or owned facilities acquired
or opened since December 31, 1996. The acquisition of Regency occurred in
October 1997 and net revenues include the results of operations since the
date of acquisition. The remaining net revenues increase of $29.6 million,
after giving effect to a decrease in net revenues of approximately $5.1
million relating to four facilities sold during 1997 and six facilities sold
during 1998, is primarily attributable to an increase in revenue per patient
day on a same facility basis for the 141 leased or owned facilities in
operation for all of 1997 and 1998. The increase in revenue per patient day
was a result of payor rate increases and the expansion of the Company's
subacute services.
Net revenues from therapy services to nonaffiliated facilities increased
56% from $65.4 million for the three months ended March 31, 1997 to $102.0
million for the three months ended March 31, 1998, primarily as a result of
an increase in the number of nonaffiliated facilities served from 789
facilities at March 31, 1997 to 1,389 facilities at March 31, 1998. This
increase includes 72 nonaffiliated facilities and approximately $9.3 million
in net revenues from therapy services provided to Retirement Care facilities
during the three months ended March 31, 1998.
Net revenues from foreign operations increased 75% from $37.8 million
for the three months ended March 31, 1997 to $66.3 million for the three
months ended March 31, 1998. Approximately $12.8 million or 45% of this
increase was the result of increased net revenues from the nursing home
operations in the United Kingdom. The increase relating to the nursing home
operations in the United Kingdom was primarily the result of the Company's
acquisition of Ashbourne on January 30, 1997 which added approximately $6.4
million or 50% of the increase in net revenues from the nursing home
operations in the United Kingdom during the three months ended March 31,
1998. Approximately $13.2 million or 46% of this total increase is the
result of the Company's acquisitions of nursing homes in Germany, Australia
and Spain during 1997. Approximately $3.9 million or 14% of the total
increase was the result of increased net revenues from the pharmacy
operations which was primarily the result of 13 pharmacies and a supply
distribution center acquired or opened since December 31, 1996 in the United
Kingdom.
Net revenues from pharmaceutical services to nonaffiliated facilities
increased 155% from $20.7 million for the three months ended March 31, 1997
to $52.8 million for the three months ended March 31, 1998. Approximately
$21.6 million or 85% of the increase in net revenues was the result of the
addition of 10 pharmacies and 14 home health agencies acquired from Regency.
In addition, the remaining net revenues increase was primarily the result of
the increase in nonaffiliated facilities served as a result of additional
acquisitions during 1997.
Operating expenses, which includes rent expense of $55.2 million and
$27.6 million for the three months ended March 31, 1998 and 1997,
respectively, increased 86% from approximately $327.9 million
20
<PAGE>
for the three months ended March 31, 1997 to approximately $608.6 million for
the three months ended March 31, 1998. The increase resulted primarily from
the net increase of 257 leased or owned facilities during various times
during the year ended December 31, 1997 and 12 leased or owned facilities
during the three months ended March 31, 1998 and the growth in therapy and
pharmaceutical services. Operating expenses as a percentage of net revenues
decreased from 82.3% for the three months ended March 31, 1997 to 82.1% for
the three months ended March 31, 1998. The decrease in operating expenses as
a percentage of net revenues was primarily due to the acquisition of
Ashbourne on January 30, 1997 whose facility leases are primarily capital
leases and therefore include interest and depreciation expense instead of
rent expense. The decrease is offset by lower operating margins in the United
Kingdom as occupancy rates in the United Kingdom have been negatively
impacted by an excess number of available beds in the United Kingdom. In
addition, since December 31, 1996, the Company has opened 21 long-term care
facilities in the United Kingdom which has also negatively impacted occupancy
as well as operating margins.
Corporate general and administrative expenses, which include regional
costs related to the supervision of operations, increased 114% from $18.4
million for the three months ended March 31, 1997 to $39.3 million for the
three months ended March 31, 1998. As a percentage of net revenues, corporate
general and administrative expenses increased from 4.6% for the three months
ended March 31, 1997 to 5.3% for the three months ended March 31, 1998. The
increase was primarily due to an increase in costs relating to the expansion
of the Company's corporate infrastructure to support newly acquired domestic
operations including the acquisition of Regency and the pending merger with
Retirement Care, and implementation of new business strategies.
The provision for losses on accounts receivable increased 88% from $3.2
million for the three months ended March 31, 1997 to $6.0 million for the
three months ended March 31, 1998. As a percentage of net revenues, provision
for losses on accounts receivable remained relatively constant at 0.8% for
the three months ended March 31, 1997 and 1998.
Depreciation and amortization increased 77% from $11.6 million for the
three months ended March 31, 1997 to $20.5 million for the three months ended
March 31, 1998. As a percentage of net revenues, depreciation and
amortization expense remained relatively constant at 2.9% for the three
months ended March 31, 1997 as compared to 2.8% for the three months ended
March 31, 1998.
Net interest expense increased 211% from $11.3 million for the three
months ended March 31, 1997 to $35.1 million for the three months ended March
31, 1998. As a percentage of net revenues, interest expense increased from
2.8% for the three months ended March 31, 1997 to 4.7% for the three months
ended March 31, 1998. The increase was related to (i) an increase in the
Company's weighted average interest rate resulting from the Company's
issuance of $250 million of 9 1/2% Notes in July 1997, (ii) higher interest
rates and borrowing costs under the Company's Senior Credit Facility as
compared to the old credit facility that was retired in October 1997 and
(iii) an increase in borrowings including under the Company's Senior Credit
Facility associated with various acquisitions during 1997 and 1998 including
Regency and Ashbourne and various acquisitions in Spain, Germany and
Australia. The increase was also due to interest expense related to capital
leases assumed by the Company as part of the Company's acquisition of
Ashbourne.
The Company's effective tax rate was 42.5% for the three months ended
March 31, 1998 and was 39.0% for the three months ended March 31, 1997. The
increase in the effective tax rate was primarily due
21
<PAGE>
to a less favorable mix of state income in the United States and the
increased amount of nondeductible goodwill amortization expense resulting
primarily from the acquisition of Regency.
Net earnings increased 16% from $15.9 million for the three months ended
March 31, 1997 to $18.4 million for the three months ended March 31, 1998.
As a percentage of net revenues, net earnings before income taxes decreased
from 6.6% for the three months ended March 31, 1997 to 4.3% for the three
months ended March 31, 1998. The margin decrease was primarily due to
increased borrowings and borrowing costs, increased corporate and general
administrative expenses and the increased costs and lower margins from the
Company's nursing home operations in the United Kingdom (discussed above).
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had working capital of $373.9 million,
including cash and cash equivalents of $1.1 million, as compared to working
capital of $307.0 million, including cash and cash equivalents of $21.0
million at December 31, 1997. For the three months ended March 31, 1998, net
cash used for operations was $35.8 million compared to net cash used for
operations for the three months ended March 31, 1997 of $41.0 million. The
net cash used for operations for the three months ended March 31, 1998
reflects an increase in the net cash used to fund an increase in accounts
receivable. This was offset by the Company's growth in net earnings and
timing of payment of certain obligations of the Company.
The Company's accounts receivable have increased since December 31,
1997. Accounts receivable increased in part because of the growth in the
Company's inpatient, therapy and pharmaceutical services businesses since
December 31, 1997. The growth in accounts receivable is also attributable to
the fact that when long-term care facilities are acquired by the Company, the
fiscal intermediaries are changed to the Company's fiscal intermediary
resulting in temporary delays in timing of third-party payments. The Company
is currently in the process of changing fiscal intermediaries related to
facilities acquired from Regency and other acquisitions which occurred during
the latter half of 1997. This process has resulted in temporary delays in
receiving reimbursement from third-party payors.
Accounts receivable for therapy services have also increased in part
because the ability of nonaffiliated facilities to provide timely payments
has been impacted by their receipt of payments from fiscal intermediaries
which, in some instances, have been delayed due to the fiscal intermediaries
conducting reviews of facilities' therapy claims.
Other significant operating uses of cash for the three months ended
March 31, 1998 were payments of $44.5 million for interest and net payments
totaling $0.5 million for income taxes.
The Company incurred approximately $24.8 million in capital expenditures
during the three months ended March 31, 1998. Substantially all such
expenditures during the three months ended March 31, 1998 related to the
Company's long-term and subacute care facility operations and were for the
continued development and construction of one facility in the United States,
two new facilities in the United Kingdom, and routine capital expenditures.
These routine capital expenditures include expenditures to refurbish existing
and recently acquired facilities. These capital expenditures were financed
through borrowings under the Company's Senior Credit Facility. The Company
had capital expenditure commitments, as of March 31, 1998, under various
contracts, including approximately $22.7 million in the United States and
L0.6 million ($1.0 million as of March 31, 1998) in the United Kingdom. These
include contractual commitments to
22
<PAGE>
improve existing facilities and to develop, construct and complete a
corporate office building and a long-term care facility in the United States.
The Company paid approximately a net of $7.3 million in cash for
acquisitions during the three months ended March 31, 1998. These
acquisitions were funded by borrowings under the Company's Senior Credit
Facility.
In total, during the three months ended March 31, 1998, the Company
acquired a total net ownership of, the leasehold rights to, or the management
of 15 long-term care facilities in the United Kingdom. The Company also
acquired or opened a total net four pharmacies in the United States and a
supply distribution center in Germany.
The Company agreed in February 1997 to acquire Retirement Care, an
operator of skilled nursing facilities and assisted living centers in seven
states in the southeastern United States. Retirement Care also owns (and the
Company would acquire) approximately 65% of Contour, a national provider of
medical/surgical supplies. The amended terms of the RCA Merger provide for a
purchase price of approximately $144.7 million in Sun Common Stock (based
upon the closing price of Sun Common Stock as of May 11, 1998), approximately
$2.8 million of Sun Preferred Stock and the assumption of approximately
$173.1 million of indebtedness, excluding approximately $19.8 million of
indebtedness which will be eliminated in consolidation (based on Retirement
Care's December 31, 1997 balance sheet). Specifically, the agreement, as
amended, calls for the Company to issue shares of Sun Common Stock having a
value equal to $10.00 in exchange for each outstanding share of Retirement
Care's common stock (subject to a 10% collar centered on a $22.00 share price
for Sun Common Stock). The Company expects that the RCA Merger will be
accounted for as a pooling of interests. The Company has also agreed to
acquire the remaining 35% of Contour not presently owned by Retirement Care
for approximately $35 million, payable in Sun Common Stock or cash, at the
option of the Company. The Contour Merger will be accounted for as a
purchase. While there can be no assurance that either the RCA Merger or the
Contour Merger will be consummated, these mergers are expected to close during
the second quarter of 1998.
Based upon a review of Retirement Care's, Contour's and the Company's
publicly available historical financial statements, the RCA and Contour
Mergers would have had a dilutive impact on the Company's reported earnings
per share for the twelve months ended December 31, 1997. There can be no
assurance that the future combined results will not continue to be dilutive.
Costs to be incurred in connection with the mergers of Retirement Care
and Contour are expected to be significant and will be charged against
earnings of the combined company. The charge is currently estimated to be
approximately $30 million for transaction costs and integration expenses,
including elimination of redundant corporate functions, severance costs
related to headcount reductions, the write-off of certain intangibles and
property and equipment and the settlement of certain class action lawsuits
(described below). Approximately $25 million of these estimated charges are
expected to be charged to operations in the fiscal quarter in which the RCA
Merger is consummated. Approximately $5 million of the estimated charges
relating to the integration expenses are expected to be expensed as incurred
as these costs will benefit future combined operations. These amounts are
preliminary estimates only and are, therefore, subject to change. In
addition, there can be no assurance that the Company will not incur
additional charges in subsequent quarters to reflect costs associated with
the RCA Merger and the Contour Merger. As of March 31, 1998, the Company has
incurred approximately $2.6 million in transaction costs (as described above).
On January 10, 1997, the Company loaned Retirement Care $9.8 million in
order to enable Retirement Care to cause the repayment of certain
indebtedness incurred by Contour in connection with
23
<PAGE>
Contour's acquisition of Atlantic Medical Supply Company, Inc. ("Atlantic")
on August 6, 1996. On July 10, 1997, the Company and Retirement Care amended
the terms of the loan to: (i) increase the applicable interest rate by 2.0%;
(ii) extend the maturity date to 120 days after the termination of the
agreement; and (iii) replace the collateral securing the loan with a second
lien on all of Retirement Care's accounts receivable. Consistent with
Retirement Care's bank line of credit, the loan is unconditionally and
irrevocably guaranteed by certain officers of Retirement Care. On July 10,
1997, the Company also agreed to loan Retirement Care an additional $5.0
million which is also secured by a second lien on all of Retirement Care's
accounts receivable and is unconditionally and irrevocably guaranteed by
certain officers of Retirement Care. The interest receivable related to the
promissory notes was $1.3 million and $1.0 million as of March 31, 1998 and
December 31, 1997, respectively. In addition, Retirement Care owed the
Company an additional $22.9 million and $12.4 million in the form of
unsecured trade receivables in respect to ancillary and management services
provided by the Company as of March 31, 1998 and December 31, 1997,
respectively.
On November 25, 1997, the Company, Retirement Care and representatives
of the plaintiffs in certain pending class actions against Retirement Care
and its management reached an agreement in principle to settle these class
actions for $9.0 million. In connection with the agreement in principle, the
Company has escrowed on behalf of the defendants the settlement amount into
an escrow fund which is included in other long-term assets as of March 31,
1998. The settlement is contingent upon the closing of the RCA Merger and is
subject to, among other things, confirmatory discovery, the execution of
definitive documentation and court approval.
The Company conducts business outside of the United States, in the
United Kingdom, Spain, Australia, Germany and Canada. The foreign operations
accounted for 9% and 10% of the Company's total net revenues during the three
months ended March 31, 1998 and 1997, respectively, and 24% of the Company's
consolidated total assets as of March 31, 1998. The Company's financial
condition and results of operations are subject to foreign exchange risk.
Because of the Company's foreign growth strategies, the Company does not
expect to repatriate funds invested overseas and, therefore, foreign currency
transaction exposure is not normally hedged. Exceptional planned foreign
currency cash flow requirements, such as acquisitions overseas, are hedged
selectively to prevent fluctuations in the anticipated foreign currency
value. Changes in the net worth of the Company's foreign subsidiaries arising
from currency fluctuations are accumulated in the translation adjustments
component of stockholders' equity.
The Company has advanced $41.4 million and has agreed to advance up to a
total of $47.0 million under a revolving subordinated credit agreement
("Financing Facility") to a developer of assisted living facilities for the
development, construction and operation of assisted living facilities. Any
advances under the Financing Facility have been and are expected to be funded
by borrowings under the Company's Senior Credit Facility and will be subject
to certain conditions, including the approval of each project by the Company.
The developer has obtained a commitment for mortgage financing to fund 50% of
the cost of each project. The Company's advances under the Financing Facility
are subordinate to the mortgage financing. The Financing Facility with
respect to each facility bears interest at 9% or 13% depending on the
percentage of completion of the facility under construction. All amounts
advanced are due in full on November 1, 2001. The advances to the developer
totaled approximately $41.4 million and $32.8 million at March 31, 1998 and
December 31, 1997. As of March 31, 1998, four assisted living facilities were
under development. Construction was completed on two facilities during the
three months ended March 31, 1998. In addition, the Company has entered into
a purchase option agreement with the developer whereby the Company will pay
the developer $50,000 for each option to purchase any
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<PAGE>
of the facilities. The option will grant the Company the right to purchase
any of the facilities, after a specified time period, at the greater of the
estimated fair market value of the property or the total amount invested by
the developer.
At March 31, 1998, the Company had, on a consolidated basis,
approximately $1.7 billion of outstanding indebtedness including capital
lease obligations, including approximately $1.1 billion of indebtedness under
its $1.2 billion Senior Credit Facility. The Company also had $51.0 million
of outstanding standby letters of credit under its Senior Credit Facility as
of March 31, 1998.
On May 4, 1998, the Company issued $345 million of 7% convertible trust
issued preferred securities and $125 million of 9 3/8% Senior Subordinated
Notes due 2008 (yield of 9.425%) (collectively the "Offerings"). Each
convertible preferred security is convertible into shares of common stock,
par value $0.01 per share, of Sun, at an equivalent rate of 1.2419 shares of
Sun common stock for each convertible preferred security (equivalent to an
initial conversion price of $20.13 per share of Sun common stock). $300
million of the net proceeds from the Offerings were used by the Company to
permanently repay certain outstanding borrowings under the term loan portion
of the Senior Credit Facility and the remainder of the net proceeds from the
Offerings were used to reduce certain outstanding borrowings under the
revolving credit portion of the Senior Credit Facility (which amounts may be
subsequently reborrowed).
On May 5, 1998 the Company entered into certain interest rate swap
transactions with an aggregate notional value of $850 million to minimize the
risks and/or costs associated with certain long-term debt of the Company. The
Company does not otherwise utilize financial instruments for trading or other
speculative purposes.
The interest rate swaps have been designated as hedges for accounting
purposes. The Company will continue to evaluate this designation on a
periodic basis. The amounts to be paid or received are accrued and are
recognized as an adjustment to interest expense.
Under the interest rate swap transactions, the Company is a variable
rate payor, effectively converting $550 million of fixed rate debt and $300
million of variable rate Senior Credit Facility debt, which is based on U.S.
LIBOR, into variable rate debt based on an index of foreign interest rates.
All payments are denominated in U.S. dollars. Each interest rate swap
includes cap protection limiting the Company's exposure to interest rate
fluctuations. The following summarizes the terms of the various interest rate
swap transactions at May 5, 1998:
<TABLE>
<CAPTION>
NOTIONAL MATURITY INTEREST RATE MAXIMUM INTEREST
AMOUNT DATE RECEIVE PAY(1) RATE PAID
-------- -------- ------- -------- --------------------
<S> <C> <C> <C> <C>
$300,000,000 5/2003 5.69%(2) 5.53% 7.0%
$300,000,000 5/2008 7.00%(3) 6.35% 7.0% (5/1998-5/2001)
8.5% (5/2001-5/2008)
$250,000,000 7/2002 9.50%(3) 8.95% 9.5% (5/1998-4/2000)
10.5% (4/2000-7/2002)
</TABLE>
(1) An index of foreign interest rates, reset quarterly.
(2) U.S. LIBOR, reset quarterly.
(3) Fixed.
The Company's hedging strategy in entering into the interest rate swap
transactions is to obtain the benefit of less costly variable rate debt while
capping its overall exposure to interest rate fluctuations. The Company
believes that an index of foreign interest rates lessens the volatility of
interest rate fluctuations. However, no assurance can be given that such a
strategy will lower the volatility of interest rate fluctuations or reduce
the cost of capital.
The Company's ongoing capital requirements relate to, among other
things, the costs associated with its facilities under construction, routine
capital expenditures, advances under the Financing Facility, potential
acquisitions and implementation of growth strategies.
The Company believes that its current borrowing capacity under its
Senior Credit Facility, the net proceeds from the Offerings and cash from
operations will be sufficient to satisfy its working capital needs, capital
commitments related to its facilities under construction, routine capital
expenditures, advances under the Financing Facility, current debt service
obligations and to fund potential conversions of 6 1/2% Convertible
Debentures. The Company anticipates that it will fund its construction
commitments as well as its requirements relating to future growth through (i)
the available borrowing capacity under its Senior Credit Facility, (ii) the
use of operating leases and debt or equity related securities in the future
as a means of acquiring facilities and new operations, (iii) the availability
of sale and leaseback financing through real estate investment trusts and
other financing sources and (iv) the sale of debt or equity securities in the
public or private capital markets. There can be no assurance that the Company
will seek or obtain additional sources of financing in the next twelve
months. In addition, such additional financing, if any, may be subject to
certain restrictions including mandatory prepayment provisions in the Senior
Credit Facility or otherwise require approval of various lenders under the
Company's Senior Credit Facility. The Company has on file with the Securities
and Exchange Commission a shelf registration statement on Form S-3 which,
among other things, provides for the sale of up to $1.0 billion of securities
which sales are subject to the registration statement being declared
effective by the Securities and Exchange Commission. If such additional
sources of financing are not available, the Company may not be able to pursue
growth opportunities as actively as it has in the past, and may be required
to alter certain of its operating strategies.
EFFECTS FROM CHANGES IN REIMBURSEMENT
The Company derives a substantial percentage of its total revenues from
Medicare, Medicaid and private insurance. The Company's financial condition
and results of operations may be affected by the revenue reimbursement
process, which is complex and can involve lengthy delays between the
recognition of revenue and the time reimbursement amounts are settled. Net
revenues realizable under third-party payor agreements are subject to change
due to examination and retroactive adjustment by payors during the settlement
process. Payors may disallow in whole or in part requests for reimbursement
based on determinations that certain costs are not reimbursable or reasonable
or because additional supporting documentation is necessary. The Company
recognizes revenues from third-party payors and accrues estimated settlement
amounts in the period in which the related services are provided. The Company
estimates these settlement balances by making determinations based on its
prior settlement experience and its understanding of the applicable
reimbursement rules and regulations. The majority of third-party payor
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<PAGE>
balances are settled two to three years following the provision of services.
The Company has experienced differences between the net amounts accrued and
subsequent settlements, which differences are recorded in operations at the
time of settlement. For example, in the fourth quarter of 1997, the Company
recorded negative revenue adjustments totaling approximately $15.0 million
resulting from changes in accounting estimates of amounts realizable from
third-party payors. These changes in accounting estimates primarily arose out
of the settlement in late 1997 of certain facility cost reports for 1994 and
1995 and also include estimated charges for projected settlements in 1996.
Accounts receivable have also increased in part because the ability of
nonaffiliated facilities to provide timely payments has been impacted by
their receipt of payments from fiscal intermediaries which, in some
instances, have been delayed due to the fiscal intermediaries conducting
reviews of facilities' therapy claims.
The Company's financial condition and results of operations would be
materially and adversely affected if the amounts actually received from
third-party payors in any reporting period differed materially from the
amounts accrued in prior periods. The Company's financial condition and
results of operations may also be affected by the timing of reimbursement
payments and rate adjustments from third-party payors. The Company has from
time to time experienced delays in receiving final settlement and
reimbursement from government agencies.
Various cost containment measures adopted by governmental and private
pay sources have begun to restrict the scope and amount of reimbursable
healthcare expenses and limit increases in reimbursement rates for medical
services. Any reductions in reimbursement levels under Medicaid, Medicare or
private payor programs and any changes in applicable government regulations
or interpretations of existing regulations could significantly affect the
Company's profitability. Furthermore, government programs are subject to
statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and government funding restrictions, all of which may
materially affect the rate of payment to the Company's facilities and its
therapy and pharmaceutical businesses. There can be no assurance that
payments under governmental or private payor programs will remain at levels
comparable to present levels or will be adequate to cover the costs of
providing services to patients eligible for assistance under such programs.
Significant decreases in utilization, changes in reimbursement, including
salary equivalency and PPS, could have a material adverse effect on the
Company's financial condition and results of operations, including the
possible impairment of certain assets.
In the Balanced Budget Act of 1997 (the "BBA"), Congress passed numerous
changes to the reimbursement policies applicable to exempt hospital services,
skilled nursing, therapy and other ancillary services. The BBA generally
provides for a phase-in of a prospective payment system for skilled nursing
facilities over a four year period, effective for the Company's facilities on
January 1, 1999. Under PPS, Medicare will pay skilled nursing facilities a
fixed fee per patient day based on the acuity level of the patient to cover
all post-hospital extended care routine service costs (i.e. Medicare Part A
patients), including ancillary and capital related costs for beneficiaries
receiving skilled services. The per diem rate will also cover substantially
all items and services furnished during a covered stay for which
reimbursement is currently made separately under Medicare. Such services are
currently reimbursed on a "pass through" basis. During the phase-in, payments
will be based on a blend of the facility's historical costs and a federally
established per diem rate. Interim final regulations, including the federal
per diem rate, were published on May 12, 1998. It is unclear what impact PPS
will have on the Company. There can be no assurance that PPS will not have a
material adverse effect on the results of operations and financial condition
of the Company.
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<PAGE>
The Company's revenues from its inpatient facilities will be
significantly affected by the size of the federally established per diem
rate. There can be no assurance that the per diem rate will not be less than
the amount the Company's inpatient facilities currently receive for treating
the patients currently in its care. Moreover, since the Company treats a
greater percentage of higher acuity patient than many nursing homes, the
Company may also be adversely impacted if the federal per diem rates for
higher acuity patients does not adequately compensate the Company for the
additional expenses and risks for caring for such patients. As a result,
there can be no assurance that the Company's financial condition and results
of operations will not be materially and adversely affected.
The Company is responding to the implementation of PPS by establishing
SunSolution. SunSolution will offer to provide ancillary services for a fixed
fee to nonaffiliated facilities. There can be no assurance that there will be
a market for the SunSolution products and services or whether a change in the
demand for the Company's services following the imposition of PPS will not
adversely affect the Company's revenues. Even if SunSolution is successful,
no assurance can be given that the costs of providing the contracted for
services will be less than the fixed fee received by the Company for such
services. Given the relative profitability of Sun's ancillary services, there
can be no assurance that the Company's margins and ultimately the Company's
results of operations and financial condition will not be materially and
adversely affected.
In addition, for all Medicare patients not receiving post-hospital
extended care services (i.e., Medicare Part B patients), effective July 1,
1998, reimbursement for ancillary services, including rehabilitation therapy,
medical supplies, pharmacy, temporary staffing for rehabilitation therapy,
and other ancillary services, will be made pursuant to yet-to-be developed
fee schedules. In addition, effective January 1, 1999, there will be an
annual per beneficiary cap of $1,500 on reimbursement for outpatient physical
therapy and speech therapy and an annual per beneficiary cap of $1,500 on
reimbursement for occupational therapy. Facilities will be permitted to bill
patients directly for services rendered in excess of these caps; however,
there can be no assurance that the Company will receive any payments in
excess of these caps. There also can be no assurance that such yet-to-be
developed fee schedules or caps will not have a material adverse effect on
the Company.
The Company's growth strategy relies heavily on the acquisition of
long-term and subacute care facilities. Regardless of the legal form of the
acquisition, the Medicare and Medicaid Programs often require that the
Company assume certain obligations relating to the reimbursement paid to the
former operators of the facilities acquired by the Company. From time to
time, fiscal intermediaries and Medicaid agencies examine cost reports filed
by such predecessor operators. The Company is currently the subject of
several such examinations. If, as a result of any such examinations, it is
concluded that overpayments to a predecessor operator were made, the Company,
as the current operator of such facilities, may be held financially
responsible for such overpayments. At this time the Company is unable to
predict the outcome of any existing or future examinations.
Reimbursement for therapy services is currently evaluated under
Medicare's reasonable cost principles. Under current law, the reasonable
costs for physical therapy and respiratory services may not exceed an amount
equal to the salary that would reasonably have been paid to a therapist for
providing the services (together with certain additional costs) within each
geographical area. Salary equivalency guidelines are the amounts published by
HCFA which reflect the prevailing salary, fringe benefit and expense factors
as determined by HCFA. HCFA then uses the salary equivalency guidelines to
determine the reimbursement rates for physical therapy and respiratory
therapy costs. Although salary equivalency
27
<PAGE>
guidelines will no longer be effective following the implementation of PPS
and fee schedule reimbursement, HCFA has published new salary equivalency
guidelines.
On January 30, 1998, HCFA revised salary equivalency guidelines for
respiratory therapy and physical therapy, and for the first time published
new salary equivalency guidelines for speech therapy and occupational
therapy. HCFA has applied the new salary equivalency guidelines to all
services rendered on or after April 10, 1998. Implementation of these
guidelines has increased reimbursement rates for respiratory therapy and
physical therapy, but reduced reimbursement rates for speech therapy and
occupational therapy. The effect of the changes could have a material adverse
impact on the Company's results of operations. The salary equivalency
guidelines rates will have no continuing impact on reimbursement for therapy
services rendered to a Medicare patient receiving post-hospital extended care
services following the commencement of PPS, because under PPS, therapy
services will be bundled into each facility's per diem reimbursement from
Medicare. In addition, the salary equivalency guidelines will have no
continuing impact on therapy services rendered to all other Medicare patients
after the institution of fee schedule reimbursement for therapy services,
which may be effective as early as July 1, 1998.
Additionally, if the proposed guidelines are adopted, it could have an
adverse effect on the cash flow of the facilities to whom the Company
provides services, thereby potentially adversely affecting the collectibility
of amounts owed to the Company.
In 1995, and periodically since then, HCFA has provided information to
intermediaries for use in determining reasonable costs for occupational and
speech therapy. This information, although not intended to impose limits on
such costs, suggests that fiscal intermediaries should carefully review costs
which appear to be in excess of what a "prudent buyer" would pay for those
services. While the effect of these directives is still uncertain, they are a
factor considered by such intermediaries in evaluating the reasonableness of
amounts paid by providers for the services of the Company's rehabilitation
therapy subsidiary. When salary equivalency guidelines, PPS and fee schedules
are implemented, reimbursement for these services will no longer be on a
"pass through" basis and the HCFA directives and reasonable cost guidelines
discussed in this paragraph will become moot as to services rendered after
their effectiveness. In addition, some intermediaries require facilities to
justify the cost of contract therapists versus employed therapists as an
aspect of the "prudent buyer" analysis. With respect to rehabilitation
therapy services provided to affiliated facilities, a retroactive adjustment
of Medicare reimbursement could be made for some prior periods. With respect
to nonaffiliated facilities, an adjustment of reimbursement rates for therapy
services could result in indemnity claims against the Company, based on the
terms of substantially all of the Company's existing contracts with such
facilities, for payments previously made by such facilities to the Company
that are reduced by Medicare in the audit process. Any change in
reimbursement rates resulting from implementation of the HCFA directives or a
reduction in reimbursement as a result of a change in application of
reasonable cost guidelines could have a material adverse effect on the
Company's financial condition and results of operations (depending on the
rates adopted) and customers' ability to pay for prior and continuing
services. When PPS with respect to Medicare Part A (effective for the
Company's facilities on January 1, 1999) and fee schedules with respect to
Medicare Part B (which may be effective as early as July 1, 1998) are
implemented, the Company's facilities' reimbursement will no longer be
affected by salary equivalency guidelines and the cost reporting settlement
process for services rendered after their effectiveness.
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<PAGE>
Current Medicare regulations that apply to transactions between related
parties, such as the Company's subsidiaries, are relevant to the amount of
Medicare reimbursement that the Company is entitled to receive for the
rehabilitation and respiratory therapy and pharmaceutical services that it
provides to Company-operated facilities. These related party regulations
require that, among other things, a substantial part of the rehabilitation
and respiratory therapy services or pharmaceutical services, as the case may
be, of the relevant subsidiary be transacted with nonaffiliated entities in
order for the Company to receive reimbursement for services provided to
Company-operated facilities at the rates applicable to services provided to
nonaffiliated entities. The related party regulations do not indicate a
specific level of services that must be provided to nonaffiliated entities in
order to satisfy the "substantial part" requirement of such regulations. In
instances where this issue has been litigated by others, no consistent
standard has emerged as to the appropriate threshold necessary to satisfy the
"substantial part" requirement.
The Company's net revenues from rehabilitation therapy services,
including net revenues from temporary therapy staffing services, provided to
nonaffiliated facilities represented 63%, 70% and 74% of total
rehabilitation and temporary therapy staffing services net revenues for the
three months ended March 31, 1998 and the years ended December 31, 1997 and
1996, respectively. Respiratory therapy services provided to nonaffiliated
facilities represented 56%, 63% and 55% of total respiratory therapy services
net revenues for the three months ended March 31, 1998 and the years ended
December 31, 1997 and 1996, respectively. Net revenues from pharmaceutical
services billed to nonaffiliated facilities represented 78%, 79% and 78% of
total pharmaceutical services revenues for the three months ended March 31,
1998 and the years ended December 31, 1997 and 1996, respectively. The
Company believes that it satisfies the requirements of these regulations
regarding nonaffiliated business. Consequently, it has claimed and received
reimbursement under Medicare for rehabilitation and respiratory therapy and
pharmaceutical services provided to patients in its own facilities at a
higher rate than if it did not satisfy these requirements. If the Company
were deemed to not have satisfied these regulations, the reimbursement that
the Company receives for rehabilitation and respiratory therapy and
pharmaceutical services provided to its own facilities would be significantly
reduced, as a result of which the Company's financial condition and results
of operations would be materially and adversely affected. If, upon audit by
Federal or state reimbursement agencies, such agencies find that these
regulations have not been satisfied, and if, after appeal, such findings are
sustained, the Company could be required to refund some or all of the
difference between its cost of providing these services to any entity found
to be subject to the related party regulations and the higher amount actually
received. While the Company believes that it has satisfied and will continue
to satisfy these regulations, there can be no assurance that its position
would prevail if contested by relevant reimbursement agencies. The foregoing
statements with respect to the Company's ability to satisfy these regulations
are forward looking and could be affected by a number of factors, including
the interpretation of Medicare regulations by Federal or state reimbursement
agencies and the Company's ability to provide services to nonaffiliated
facilities. When the salary equivalency guidelines, PPS and the fee schedules
are implemented, the Medicare impact of the related party rule will be
significantly reduced.
In addition, the OIG recently published a report, based on a limited
review of patient records in six unidentified long-term care facilities in
California, that found that between 4% and 80% of therapy services were
medically unnecessary in such facilities. The OIG announced that it will
conduct a full national study to quantify the extent of medically unnecessary
services and to develop baseline data to compare therapy utilization before
and after the BBA.
REGULATION
The Company's subsidiaries, including those which provide subacute and
long-term care, rehabilitation and respiratory therapy and pharmaceutical
services, are engaged in industries which are extensively regulated. As such,
in the ordinary course of business, the operations of these subsidiaries are
continuously subject to state and Federal regulatory scrutiny, supervision
and control. Such regulatory scrutiny often includes inquiries,
investigations, examinations, audits, site visits and surveys, some of which
may be non-routine. The Company is currently the subject of several such
investigations.
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<PAGE>
In addition to being subject to the direct regulatory oversight of state
and Federal regulatory agencies, these industries are frequently subject to
the regulatory supervision of fiscal intermediaries. Fiscal intermediaries
are agents of HCFA who interpret and implement applicable laws and
regulations and make decisions about the appropriate reimbursement to be paid
under Medicare and Medicaid. The Company's subsidiaries are subject to the
oversight of several different intermediaries. Those different intermediaries
have taken varying interpretations of the applicable laws and regulations.
The lack of uniformity in the interpretation and implementation of such laws
and regulations reflects in part the fact that the statutory standards are
subject to interpretation and the manuals which are published and utilized by
HCFA and the intermediaries in performing their regulatory functions are
often not sufficiently specific to provide clear guidance in the areas which
are the subject of regulatory scrutiny.
It is the policy of the Company to comply with all applicable laws and
regulations, and the Company believes that its subsidiaries are in
substantial compliance with all material laws and regulations which are
applicable to their businesses. However, given the extent to which the
interpretation and implementation of applicable laws and regulations vary and
the lack of clear guidance in many of the areas which are the subject of
regulatory scrutiny, there can be no assurance that the business activities
of the Company's subsidiaries will not from time to time become the subject
of regulatory scrutiny, or that such scrutiny will not result in
interpretations of applicable laws or regulations by government regulators or
intermediaries which differ materially from those taken by the Company's
subsidiaries. In addition, if a provider is ever found to have engaged in
improper practices, it could be subject to civil, administrative or criminal
fines, penalties or restitutionary relief, and reimbursement authorities
could also seek the suspension or exclusion of the provider or individuals
from participation in their programs.
In January 1995, the Company learned that it was the subject of a
pending Federal investigation. The investigating agencies are the OIG and the
United States Department of Justice. At this time, the Company does not know
the full scope of the investigation. However, the Company currently believes
that the investigation is focused principally on whether the Company provided
and billed for unnecessary or unordered therapy services to residents of
skilled nursing facilities and whether the Company adequately documented the
therapy services which it provided.
In July 1997, the Criminal Division of the U.S. Department of Justice
informed the Company that it had completed its investigation of the Company,
and that it would not initiate any actions against the Company or any
individuals. The investigation by the Civil Division of the Department of
Justice and the OIG is still proceeding. The government continues to collect
information, and the Company continues to cooperate with the investigators.
The Company and the government have had preliminary discussions, and the
Company expects to have continuing discussions, regarding a possible
settlement of the investigation.
The Company is unable to determine at this time when the investigation
will be concluded, how large a monetary settlement the government may seek,
the nature of any other remedies that may be sought by the government,
whether or when a settlement will in fact occur or whether any such
settlement or any other outcome of the investigation will have a material
adverse effect on the Company's financial condition or results of operations.
The foregoing statements with respect to the outcome of the investigation are
forward-looking and could be affected by a number of factors, including the
actual scope of the investigation, the government's factual findings and the
interpretation of Federal statutes and regulations by the government and
federal courts and whether any such factual findings could serve as a basis
for proceedings by other governmental authorities. From time to time the
negative publicity surrounding the investigation has in the past adversely
affected the private pay enrollment in certain inpatient facilities and
slowed the Company's success in obtaining additional outside contracts in the
rehabilitation therapy
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<PAGE>
business, which resulted in higher than required therapist staffing levels.
Negative publicity in the future could have a similar effect.
In 1996, the Connecticut Attorney General's office and the Connecticut
Department of Social Services ("DSS") began an investigation and initiated a
hearing in order to determine whether the Company's long-term care subsidiary
submitted false and misleading fiscal information on its 1993 and 1994
Medicaid cost reports. Since 1997, the investigation has also covered
information for the 1995 cost year as well as cost reporting periods prior to
1993. The information under review includes submissions and representations
by the long-term care subsidiary and the Company's chief executive officer.
The evidentiary phase of the hearing has concluded, and the Company has
submitted a settlement offer to the DSS. Based on the Company's current
understanding of the investigation, the Company does not believe the terms of
a settlement would have a material adverse effect on the Company's business,
financial condition or results of operations. However, the proceedings are
still in progress and the Company is unable to determine at this time when
the investigation will be concluded or whether the evidence will warrant
further administrative action or Medicaid reimbursement sanctions by the DSS.
The DSS has not responded to the Company's settlement offer, and no assurance
may be given that any counter-proposal by the DSS would contain terms and
conditions that would be acceptable to the Company, that a settlement will in
fact occur or whether any such settlement or other outcome of the
investigation will not have a material adverse effect on the Company's
business, financial condition or results of operations. The foregoing
statement with regard to the outcome of this investigation is forward looking
and could be affected by a number of factors, including factual findings and
the interpretation of applicable laws and regulations by the Attorney General
and the DSS and whether any such factual findings could serve as a basis for
proceedings by other governmental authorities in Connecticut or elsewhere.
Pursuant to the Health Insurance Portability and Accountability Act of
1996, Congress has provided additional funding to Medicare and Medicaid
enforcement units to investigate potential cases of reimbursement abuse in
the health care services industry. The Act also sets guidelines to encourage
federal, state, and local law enforcement agencies to share general
information and to coordinate specific law enforcement activities including
conducting investigations, audits, evaluations, and inspections relating to
the delivery of and payment for health care. From time to time enforcement
agencies conduct audits, inspections and investigations with respect to the
reimbursement activities of the subsidiaries of the Company. The Company is
currently the subject of several such investigations. It is the Company's
practice to cooperate fully in such matters.
LITIGATION
On or about January 23, 1996, two former stockholders of SunCare, John
Brennan and Susan Bird, filed a lawsuit (the "SunCare Litigation") against
the Company and certain of its officers and directors in the United States
District Court for the Southern District of Indiana. Plaintiffs allege, among
other things, that the Company did not disclose material facts concerning the
investigation by the OIG and that the Company's financial results were
misstated. The complaints purport to state claims, INTER ALIA, under Federal
and state securities laws and for breach of contract, including a breach of a
registration rights agreement pursuant to which the Company agreed to
register the shares of the Company's common stock issued to such former
stockholders of SunCare in the acquisition. Plaintiffs purport to seek
recision, unspecified compensatory damages, punitive damages and other
relief. The trial is currently scheduled to begin in the summer of 1998.
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The Company believes the SunCare Litigation will not have a material
adverse impact on its financial condition or results of operations, although
the unfavorable resolution of this action in any reporting period could have
a material adverse impact on the Company's results of operations for that
period. The foregoing statements with respect to the possible outcome of the
SunCare Litigation are forward-looking and could be affected by a number of
factors, including judicial interpretations of applicable law, the
uncertainties and risk inherent in any litigation, particularly a jury trial,
the existence and scope of any subsequently filed complaints, the scope of
insurance coverage, and the outcome of the OIG investigation and all factors
that could affect that outcome.
On September 8, 1995, a derivative action was filed by Brickell Partners
against certain of the Company's current and former directors and officers in
the United States District Court for the District of New Mexico, captioned
BRICKELL PARTNERS V. TURNER, ET AL. The complaint was not served on any
defendant. On June 19, 1996, an amended complaint alleging breach of
fiduciary duty by certain of the Company's current and former directors and
officers was filed and subsequently served on the defendants. On August 5,
1996, the District Court dismissed this action without prejudice for failure
to serve the defendants within the required time period. The plaintiffs filed
a new complaint, alleging the same claims, on August 19, 1996. In December
1997, the Company and the plaintiffs reached an agreement in principle to
settle the action for an immaterial amount. The settlement is subject to
court approval.
The Company was notified in 1997 by a law firm representing several
national insurance companies that these companies believed that the Company
had engaged in improper billing and other practices in connection with the
Company's delivery of therapy and related services. In response, the Company
began discussions directly with these insurers and hopes to resolve these
matters without litigation; however, the Company is unable at this time to
predict whether it will be able to do so, what the eventual outcome may be or
the extent of its liability, if any, to these insurers.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item is found in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
is hereby incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10.1) Second Amendment to Credit Agreement among Sun, certain lenders,
certain co-agents, and NationsBank of Texas, as Administrative
Lender, dated as of March 27, 1998.
(10.2) Indenture among the Company, U.S. Bank Trust National
Association, as trustee, and certain guarantors, dated as of
May 4, 1998.
(10.3) Amended and Restated Declaration of Trust of Sun Financing I
among the Company, as sponsor, Robert F. Murphy, as trustee,
Robert D. Woltil, as trustee, William C. Warrick, as trustee,
The Bank of New York (Delaware), as trustee, and The Bank of
New York, dated as of May 4, 1998.
(10.4) Indenture among the Company and The Bank of New York, as
trustee, dated as of May 4, 1998.
(10.5) Preferred Securities Guarantee among the Company and The Bank
of New York, as trustee, dated as of May 4, 1998.
(10.6) Registration Rights Agreement among the Company, certain
guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, J.P. Morgan Securities Inc.,
NationsBanc Montgomery Securities LLC and Schroder & Co. Inc.,
dated as of May 4, 1998.
(10.7) Registration Rights Agreement among Sun Financing I, the
Company and Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, J.P. Morgan Securities Inc.,
NationsBanc Montgomery Securities LLC and Schroder & Co. Inc.,
dated as of May 4, 1998.
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
Report dated February 26, 1998 and filed March 20, 1998 reporting the
earnings of the Company for the fourth quarter and the twelve months ended
December 31, 1997.
Report dated April 3, 1998 and filed April 10, 1998 reporting an Amendment
to the Agreement and Plan of Merger and Reorganization, dated as of
February 17, 1997, as amended by Amendment No. 1 thereto dated as of May
27, 1997, by Amendment No. 2 thereto dated as of August 21, 1997 and by
Amendment No. 3 thereto dated as of November 27, 1997, by and among Sun,
Retirement Care Associates, Inc. and Peach Acquisition Corporation.
Report dated April 14, 1998 and filed April 16, 1998 reporting that Sun has
commenced marketing two private placements of its securities. Sun and Sun
Financing, a Delaware statutory business trust and subsidiary of Sun, will
offer $300 million ($345 million if the initial purchasers' overallotment
is exercised in full) of convertible trust issued preferred securities and
Sun will offer $125 million of Senior Subordinated Notes due 2008.
Report dated October 8, 1997 and filed April 16, 1998 reporting the
financial statements of Regency Health Services, Inc.
Report dated April 29, 1998 and filed April 29, 1998 reporting the pricing
of two private placements of $150 million of Senior Subordinated Notes due
2008 and $345 million of convertible trust issued preferred securities.
33
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
Date: May 15, 1998 By: /s/ Robert D. Woltil*
----------------------------
Robert D. Woltil
Chief Financial Officer
*Signing on the behalf of the Registrant and as principal financial officer.
34
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SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"),
dated as of March 27, 1998, is entered into among Sun Healthcare Group, Inc.,
a Delaware corporation ("Borrower"), the entities listed on the signature
pages hereto as Lenders (collectively, "Lenders"), the co-agents listed on
the signature pages hereto as Co-Agents (collectively, the "Co-Agents"), and
NationsBank of Texas, N.A., as Administrative Agent (in said capacity, "the
Administrative Agent").
BACKGROUND
The Borrower, certain of the Lenders (herein, the "Existing Lenders"),
the Co-Agents and the Administrative Agent heretofore entered into that
certain Credit Agreement, dated as of October 8, 1997, as amended by that
certain First Amendment to Credit Agreement, dated as of November 12, 1997
(the "Credit Agreement"; the terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
The Borrower, the Lenders, the Co-Agents and the Administrative Agent
desire to amend the Credit Agreement to (a) permit (i) the Investment in and
Acquisitions of Restricted Subsidiaries that are not required to execute a
Subsidiary Guaranty and whose capital stock or other equity interest is not
required to be pledged pursuant to the Credit Agreement, and (ii)
Sunscript/HRA L.L.C., an Illinois limited liability company ("Sunscript
L.L.C."), of which Sunscript Pharmacy Corporation, a New Mexico corporation
and wholly-owned Subsidiary of the Borrower ("Sunscript Corp."), will own up
to 60% of the equity interests, to incur Indebtedness and grant Liens on its
assets, and (b) make certain other changes therein.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby acknowledged,
the Borrower, the Lenders, the Co-Agents and the Administrative Agent
covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) The definition of "FIXED CHARGES" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
"FIXED CHARGES" means, for any date of calculation, calculated
for the Borrower and its Subsidiaries on a consolidated basis
(provided that if Non-Guaranteeing Subsidiary EBITDAR shall ever
equal or exceed 15% of EBITDAR, Fixed Charges shall be calculated
for the Borrower and its Restricted Subsidiaries which are not
Non-Guaranteeing Restricted Subsidiaries on a consolidated basis)
determined in accordance with GAAP, the sum of, without duplication,
(a) scheduled principal or residual or similar payments made on
Total Debt (other than (i) lease expense pursuant to Operating
Leases,
<PAGE>
(ii) principal payments made on the Obligations, and (iii)
debt for borrowed money having (x) a maturity of less than twelve
months and (y) no principal amortization), plus (b) interest paid,
whether or not capitalized (including interest paid pursuant to
Capitalized Lease Obligations), plus (c) lease expense pursuant to
Operating Leases, plus (d) Dividends paid in respect of the Sun
Financing Preferred Securities, in each case for the four fiscal
quarters immediately preceding the date of calculation. For purpose
of the calculation of Fixed Charges with respect to assets not owned
at all times during the four fiscal quarters immediately preceding
the date of determination, Fixed Charges shall be adjusted, on a
pro-forma basis, to (i) include the Fixed Charges attributable to an
Acquisition which occurred during any such fiscal quarter for the
twelve month period preceding the date of determination, provided
the Acquisition Consideration for such Acquisition is in excess of
$5,000,000 and (ii) exclude the Fixed Charges of any asset or group
of related amounts disposed of in one transaction or a series of
related transactions during any such fiscal quarter for the twelve
month period preceding the date of determination, provided the
consideration received from the disposition of such asset or group
of related assets is in excess of $5,000,000."
(b) The defined term "FOREIGN SUBSIDIARY EBITDA" is hereby deleted and
the defined term "NON-GUARANTEEING SUBSIDIARY EBITDA" is inserted in lieu
thereof in proper alphabetical order to read as follows:
"NON-GUARANTEEING SUBSIDIARY EBITDA" means, for any period,
determined in accordance with GAAP on a consolidated basis for the
Non-Guaranteeing Subsidiaries, the sum of (a) pre-tax net income
(excluding therefrom (i) any items of extraordinary gain, including
net gains on the sale of assets other than asset sales in the
ordinary course of business, and (ii) any items of extraordinary
loss, including net losses on the sale of assets other than asset
sales in the ordinary course of business), plus (b) interest
expense, whether or not capitalized (including interest expense
pursuant to Capitalized Lease Obligations), Depreciation and
amortization, in each case for the four fiscal quarters immediately
preceding the date of calculation. For purpose of the calculation
of Non-Guaranteeing Subsidiary EBITDA with respect to assets not
owned at all times during the four fiscal quarters immediately
preceding the date of determination, Non-Guaranteeing Subsidiary
EBITDA shall be adjusted, on a pro-forma basis, to (i) include the
Non-Guaranteeing Subsidiary EBITDA attributable to an Acquisition
which occurred during any such fiscal quarter for the twelve month
period preceding the date of determination, provided the Acquisition
Consideration for such Acquisition is in excess of $5,000,000 and
(ii) exclude the Non-Guaranteeing Subsidiary EBITDA of any asset or
group of related amounts disposed of in one transaction or a series
of related transactions during any such fiscal quarter for the
twelve month period preceding the date of determination, provided
the consideration received from the disposition of such asset or
group of related assets is in excess of $5,000,000."
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<PAGE>
(c) The defined term "FOREIGN SUBSIDIARY EBITDAR" is hereby deleted and
the defined term "NON-GUARANTEEING SUBSIDIARY EBITDAR" is inserted in lieu
thereof in proper alphabetical order to read as follows:
"NON-GUARANTEEING SUBSIDIARY EBITDAR" means, for any period,
determined in accordance with GAAP on a consolidated basis for the
Borrower's Non-Guaranteeing Subsidiaries, the sum of (a)
Non-Guaranteeing Subsidiary EBITDA, plus (b) lease expense pursuant
to Operating Leases."
(d) The definition of "FIXED CHARGE COVERAGE RATIO" set forth in
SECTION 1.1 of the Credit Agreement is hereby amended to read as follows:
"FIXED CHARGE COVERAGE RATIO" means, for any date of
calculation, the ratio of EBITDAR (provided that if Non-Guaranteeing
Subsidiary EBITDAR shall ever equal or exceed 15% of EBITDAR, the
Fixed Charge Coverage Ratio shall be calculated using Domestic
EBITDAR but adjusted to exclude EBITDAR of Non-Guaranteeing
Restricted Subsidiaries) to Fixed Charges for the four fiscal
quarters immediately preceding such date of calculation."
(e) The definition of "GUARANTOR" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
"GUARANTOR" means each Restricted Subsidiary other than (a)
Inactive Subsidiaries of the Borrower and (b) Non-Guaranteeing
Subsidiaries."
(f) The definition of "LEVERAGE RATIO" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
"LEVERAGE RATIO" means, for any date of calculation, calculated
for the Borrower and its Subsidiaries on a consolidated basis
(provided that if Non-Guaranteeing Subsidiary EBITDAR shall ever
equal or exceed 15% of EBITDAR, the Leverage Ratio shall be
calculated using Domestic EBITDAR but adjusted to exclude EBITDAR
for Non-Guaranteeing Restricted Subsidiaries), the ratio of Total
Debt to EBITDAR for the four fiscal quarters immediately preceding
the date of calculation."
(g) The definition of "NET WORTH" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
"NET WORTH" means, for the Borrower and its Subsidiaries, on a
consolidated basis (provided that if Non-Guaranteeing Subsidiary
EBITDAR shall ever equal or exceed 15% of EBITDAR, Net Worth shall
be calculated for the Borrower and its Restricted Subsidiaries on a
consolidated basis, but adjusted to exclude (i), (ii) and (iii)
immediately following for Non-Guaranteeing Restricted Subsidiaries),
determined in accordance with GAAP, the sum of (i) capital stock
taken at par value, plus (ii) capital surplus, plus
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<PAGE>
(iii) retained earnings less treasury stock; provided, however,
notwithstanding the above, for purposes of calculation of Net Worth
(but without duplication) there shall be added to Net Worth an
amount equal to 50% of the aggregate liquidation amount (not to
exceed $25 per share) of the outstanding Sun Financing Preferred
Securities."
(h) The definition of "PERMITTED LIENS" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended by (i) deleting "and" at the end of clause
(i) thereof, (ii) deleting "." at the end of clause (j) thereof and inserting
"; and" in lieu thereof and (iii) adding the following clause (k) thereto to
read as follows:
"(k) Liens on direct obligations of, or guaranteed by, the
United States of America or any agency thereof and maturing in one
year or less of the date of purchase in an aggregate amount not in
excess of $5,000,000 to secure obligations of the Borrower and its
Subsidiaries in respect of private placements of capital stock of
the Borrower and its Subsidiaries."
(i) The definition of "PERMITTED RESTRICTED PAYMENTS" set forth in
SECTION 1.1 of the Credit Agreement is hereby amended to read as follows:
"PERMITTED RESTRICTED PAYMENTS" means (a) the declaration and
payment of Dividends to the Borrower or any of its Restricted
Subsidiaries (other than Non-Guaranteeing Restricted Subsidiaries),
(b) the declaration and payment of Dividends by Non-Guaranteeing
Restricted Subsidiaries other than Sun Financing, (c) payments made
after the Agreement Date to the Bondholders in connection with a
tender of the Bonds, not to exceed $8,000,000 in aggregate amount,
(d) the repurchase of shares by the Borrower of its shares held by
Don A. Karchmer, John E. Bingaman, Thomas E. Stewart and James W.
Campbell pursuant to the terms of that certain Registration Rights
Agreement with the Borrower, dated as of June 29, 1993, as amended
by that certain First Amendment to Registration Rights Agreement,
dated as of May 26, 1994, (e) payments made after the Agreement Date
to the Convertible Bondholders in connection with the redemption or
conversion of any of the Convertible Bonds pursuant to the terms of
the Convertible Indenture, not to exceed $22,500,000 in aggregate
amount, (f) payments made in respect of the Regency Tender for the
Regency Subordinated Notes, (g) payments of regularly scheduled
interest on Subordinated Debt, and (h) Dividends declared and paid
in respect of the Sun Financing Preferred Securities."
(j) The definition of "RESTRICTED PAYMENTS" set forth in SECTION 1.1 of
the Credit Agreement is hereby amended to read as follows:
"RESTRICTED PAYMENTS" means, collectively, (a) Dividends, (b)
Treasury Stock Purchases, and (c) any payment or prepayment of
principal, premium, penalty or interest on any Subordinated Debt or
any defeasance, redemption, repurchase or other acquisition or
retirement for value, in whole or in part, of any Subordinated Debt
(including, without limitation, the setting aside of assets or the
deposit of funds therefor)."
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<PAGE>
(k) The definition of "SENIOR DEBT TO EBITDAR RATIO" set forth in
SECTION 1.1 of the Credit Agreement is hereby amended to read as follows:
"SENIOR DEBT TO EBITDAR RATIO" means, for any date of
calculation, calculated for the Borrower and its Subsidiaries on a
consolidated basis (provided that if Non-Guaranteeing Subsidiary
EBITDAR shall ever equal or exceed 15% of EBITDAR, the Senior Debt
to EBITDAR Ratio shall be calculated using Domestic EBITDAR but
adjusted to exclude EBITDAR of Non-Guaranteeing Restricted
Subsidiaries), the ratio of (i) Senior Debt as of the date of
calculation to (ii) EBITDAR for the four fiscal quarters immediately
preceding the date of calculation."
(l) The definition of "SUBORDINATED DEBT" set forth in SECTION 1.1 of
the Credit Agreement is hereby amended by adding the following sentence to
the end thereof:
"For purposes of calculation of Subordinated Debt, there shall be
included as Subordinated Debt such amount of the Borrower's
Subordinated Debentures as are included in Total Debt."
(m) The definition of "SUBSIDIARY" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
"SUBSIDIARY" of any Person means any corporation, partnership,
joint venture, trust or other Person of which (or in which) more
than 50% of:
(i) the outstanding capital stock having voting power to elect a
majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other
class or classes shall or might have voting power upon the
occurrence of any contingency);
(ii) the ownership interests having voting power to elect persons
performing functions similar to board of directors;
(iii) the interest in the capital or profits of such partnership
or joint venture;
(iv) the beneficial interest of such trust, or
(v) the equity interest of such other Person,
is at the time directly or indirectly owned by such Person, by such Person
and one or more of its Subsidiaries or by one of more of such Person's
Subsidiaries."
(n) The definition of "TOTAL DEBT" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended to read as follows:
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<PAGE>
"TOTAL DEBT" means, as of any date of determination, determined
for the Borrower and its Subsidiaries on a consolidated basis
(provided that if Non-Guaranteeing Subsidiary EBITDAR shall ever
equal or exceed 15% of EBITDAR, Total Debt shall be calculated for
the Borrower and its Restricted Subsidiaries which are not
Non-Guaranteeing Restricted Subsidiaries on a consolidated basis) in
accordance with GAAP, the sum (without duplication) of (a) all
principal outstanding under the Loan Documents, plus (b) all
obligations evidenced by a promissory note or otherwise representing
borrowed money, plus (c) all reimbursement obligations for letters
of credit (excluding reimbursement obligations in respect of letters
of credit to support indebtedness and other obligations otherwise
included in the calculation of Total Debt), plus (d) all Capitalized
Lease Obligations, plus (e) lease expense pursuant to Operating
Leases other than Synthetic Leases (such lease expense to be in an
amount equal to the product of rental expense for the four fiscal
quarters immediately preceding the date of calculation multiplied by
eight and shall be net of any income being received pursuant to
subleases during such period, provided that no such sublessee is in
default under its sublease), plus (f) the principal portion of all
obligations in respect of Synthetic Leases, less (g) an amount equal
to any write-up, to market value, of the Bonds and the Convertible
Bonds as required by GAAP. For the purpose of the calculation of
lease expense pursuant to Operating Leases for Subsidiaries not
owned at all times during the four fiscal quarters immediately
preceding the date of determination, such lease expense shall be
adjusted, on a pro-forma basis, to (i) include the lease expense
pursuant to Operating Leases attributable to an Acquisition which
occurred during any such fiscal quarter for the four fiscal quarters
of the Subsidiary acquired immediately preceding the date of
determination (such lease expense to be multiplied by eight),
provided the Acquisition Consideration for such Acquisition is in
excess of $5,000,000 and (ii) exclude any such lease expense of any
asset or group of related assets disposed of in one transaction or a
series of related transactions during any such fiscal quarter for
the four fiscal quarters immediately preceding the date of
determination, provided the consideration received from the
disposition of such asset or group of related assets is in excess of
$5,000,000. In addition, notwithstanding anything above to the
contrary, there shall be added to Total Debt, but without
duplication, an amount equal to (a) 50% of the aggregate outstanding
principal amount of the Borrower Subordinated Debentures during such
time as Sun Financing holds the Borrower Subordinated Debentures and
(b) 100% of the aggregate outstanding principal amount of the
Borrower Subordinated Debentures during such time as Persons other
than Sun Financing hold the Borrower Subordinated Debentures."
(o) The definition of "TOTAL DEBT TO CAPITALIZATION RATIO" set forth in
SECTION 1.1 of the Credit Agreement is hereby amended to read as follows:
"TOTAL DEBT TO CAPITALIZATION RATIO" means, for any date of
calculation, calculated for the Borrower and its Subsidiaries on a
consolidated basis (provided that if Non-Guaranteeing Subsidiary
EBITDAR shall ever equal or exceed 15% of EBITDAR, the Total Debt to
Capitalization Ratio shall be calculated for the Borrower and its
Restricted Subsidiaries which are not Non-Guaranteeing Restricted
Subsidiaries on a consolidated
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basis) in accordance with GAAP, the ratio of (a) Total Debt to (b)
an amount equal to the sum of (i) Total Debt plus (ii) Net Worth as
of the date of calculation."
(p) SECTION 1.1 of the Credit Agreement is hereby amended by adding the
following defined terms thereto in proper alphabetical order to read as
follows:
"BORROWER SUBORDINATED DEBENTURES" means the Convertible Junior
Subordinated Debentures not to exceed $345,000,000 in aggregate
principal amount issued under the Indenture of Trust to be dated
approximately April 1998 between the Borrower and the trustee
thereunder which are subordinate in right of payment to senior debt
of the Borrower and issued initially to Sun Financing for the
proceeds of the sale of the Sun Financing Preferred Securities,
issued pursuant to terms and documentation approved in writing by
the Determining Lenders."
"NON-GUARANTEEING RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary which does not execute a Subsidiary Guaranty and whose
capital stock or equity interest is not pledged pursuant to a Pledge
Agreement."
"NON-GUARANTEEING SUBSIDIARIES" means, collectively, each
Non-Guaranteeing Restricted Subsidiary and each Foreign Subsidiary;
PROVIDED, HOWEVER, the Borrower covenants and agrees that no
Non-Guaranteeing Subsidiary shall execute a Guaranty, or otherwise
be obligated in respect of a Guaranty, of any Indebtedness of the
Borrower or any of its Subsidiaries."
"SUN FINANCING" means Sun Financing I, a statutory business
trust formed under the laws of the State of Delaware, all of the
issued and outstanding common stock of which is owned by the
Borrower."
"SUN FINANCING PREFERRED SECURITIES" means not more than
$345,000,000 of Convertible Trust Issued Preferred Securities of Sun
Financing, which may be convertible into common stock of the
Borrower, issued pursuant to terms and documentation approved in
writing by the Determining Lenders."
"SUN FINANCING PREFERRED SECURITIES GUARANTEE" means the
agreement from the Borrower for the benefit of the holders of the
Sun Financing Preferred Securities guaranteeing on a subordinated
basis as more fully set forth therein, certain payments to be made
with respect to the Sun Financing Preferred Securities."
(q) SECTION 5.12 of the Credit Agreement is hereby amended to read as
follows:
"Section 5.12 RESTRICTED SUBSIDIARIES. Within 15 days following the
Acquisition or formation of any Restricted Subsidiary (other than Inactive
Subsidiaries and Non-Guaranteeing Restricted Subsidiaries), the Borrower
shall cause (a) the capital stock of, or other equity interest in, such
Restricted Subsidiary to be pledged to the Administrative
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<PAGE>
Agent pursuant to a Pledge Agreement and take such other steps as
may be necessary or reasonably requested by Administrative Agent in
order to cause Administrative Agent to have a perfected, first
priority security interest in such capital stock or equity interest
and (b) such Restricted Subsidiary to become party to a Subsidiary
Guaranty and deliver such evidence of corporate authority as may be
reasonably requested by Administrative Agent in connection
therewith."
(r) SECTION 7.1 of the Credit Agreement is hereby amended by (i)
deleting "and" at the end of clause (j) thereof, (ii) re-lettering existing
clause "(k)" thereto as clause "(l)" and (iii) adding a new clause (k)
thereto to read as follows:
"(k) Indebtedness in respect of the Sun Financing Preferred
Securities, the Borrower Subordinated Debentures and the Sun
Financing Preferred Securities Guarantee; and"
(s) SECTION 7.3(g) of the Credit Agreement is hereby amended to read as
follows:
"(g) Investments by Borrower in one or more Restricted
Subsidiaries (other than Inactive Subsidiaries and Non-Guaranteeing
Restricted Subsidiaries); PROVIDED THAT, (i) any such Restricted
Subsidiary is subject to the provisions hereof, (ii) any such
Restricted Subsidiary is or immediately becomes party to a
Subsidiary Guaranty and the Intercompany Line of Credit, (iii) all
of the capital stock of, or other equity interest in, such
Restricted Subsidiary (other than CareerStaff Subsidiaries unless
otherwise required by SECTION 5.11) is pledged pursuant to a Pledge
Agreement, as applicable, and (iv) to the extent such Investment is
in the form of a loan or advance, the obligation to repay such loan
or advance is recorded on the books and records of such Restricted
Subsidiary in form and with detail satisfactory to the Lenders;"
(t) SECTION 7.3(j) of the Credit Agreement is hereby amended to read as
follows:
"(j) other Investments primarily related to the business of
providing healthcare services, including nursing care,
rehabilitation therapy and other specialized healthcare services (i)
in Domestic Entities (including Non-Guaranteeing Restricted
Subsidiaries) (A) prior to and including December 31, 1997, (1) as
set forth on SCHEDULE 13 hereto, and (2) such other Investments not
to exceed $5,000,000 in aggregate principal amount, and (B)
thereafter, not to exceed, together with the aggregate Acquisition
Consideration for all Non-Guaranteeing Restricted Subsidiaries
(other than Sun Financing) acquired pursuant to SECTION
7.5(a)(ii)(b) hereof, $50,000,000 in aggregate principal amount, and
(ii) in Foreign Entities (A) prior to and including December 31,
1997, (1) as set forth on SCHEDULE 11 hereto and (2) such other
Investments, together with the aggregate Acquisition Consideration
for all Foreign Subsidiaries acquired pursuant to SECTION 7.5(b)(ii)
hereof and obligations incurred in respect of Guaranties and letters
of credit pursuant to SECTION 7.1(i) hereof which are not set forth
on SCHEDULE 11 hereto, not to exceed $5,000,000 in aggregate
principal amount, and (B) for each fiscal year thereafter, such
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<PAGE>
other Investments (calculated net of any repayment of loans and
advances by Foreign Entities) together with the Acquisition
Consideration for all Foreign Subsidiaries acquired pursuant to
SECTION 7.5(b)(ii) hereof and obligations in respect of Guaranties
and letters of credit pursuant to SECTION 7.1(i) hereof, not to
exceed in aggregate amount (1) $60,000,000 or (2) $75,000,000 if the
Leverage Ratio as of the end of any fiscal quarter during such
fiscal year is less than 5.50 to 1; PROVIDED, HOWEVER, that no
individual Investment in any Foreign Entity shall exceed $30,000,000.
(u) SECTION 7.4(a) of the Credit Agreement is hereby amended to read as
follows:
"(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, or sell, lease, abandon, transfer
or otherwise dispose of all or any part of its assets, properties or
business, other than (i) immaterial assets sold or otherwise
disposed of in the ordinary course of business, (ii) sales by the
Borrower or any of its Restricted Subsidiaries of assets to the
Borrower or any other of its Restricted Subsidiaries (other than
Non-Guaranteeing Restricted Subsidiaries), (iii) liquidations or
dissolutions of Foreign Subsidiaries, Inactive Subsidiaries or
Non-Guaranteeing Restricted Subsidiaries, (iv) sales of assets
occurring when the Leverage Ratio set forth in the Compliance
Certificate received by the Lenders immediately preceding such sale
is less than 5.50 to 1 and in which the Net Cash Proceeds thereof
are used within 180 days of such sale to purchase assets to be used
in the business of the Borrower and its Restricted Subsidiaries
described in SECTION 4.1(d) hereof, (v) sales of the facilities set
forth on SCHEDULES 8 and 9 hereto, (vi) sales of assets permitted by
SECTION 7.16 hereof, (vii) voluntary dissolutions or liquidations of
CareerStaff Subsidiaries, or (viii) other sales, leases, transfers
or other dispositions of assets for full and fair consideration
pursuant to arm's-length transactions, except that to the extent
that the aggregate book value of assets sold during any fiscal year
exceeds $1,000,000, the Net Cash Proceeds of such excess sales are
applied as required pursuant to SECTION 2.5(c) hereof;"
(v) SECTION 7.4(b) of the Credit Agreement is hereby amended to read as
follows:
"(b) enter into any merger or consolidation except that (i) any
of the Borrower's Restricted Subsidiaries may merge with the
Borrower (provided that the Borrower shall be the continuing or
surviving corporation), (ii) any of the Borrower's Restricted
Subsidiaries may merge with one or more of the Borrower's other
Restricted Subsidiaries (other than Non-Guaranteeing Restricted
Subsidiaries), (iii) any of the Borrower's Restricted Subsidiaries
may merge or consolidate with any other corporation, provided that,
immediately after giving effect to such merger or consolidation (A)
the continuing or surviving corporation shall constitute a
Restricted Subsidiary that is not a Non-Guaranteeing Restricted
Subsidiary and (B) no Default or Event of Default shall exist
hereunder, and (iv) the Borrower may merge or consolidate with any
other corporation, provided that immediately after giving effect to
such merger or consolidation (A) the Borrower shall be the
continuing or surviving corporation and (B) no Default or Event of
Default shall exist hereunder; or"
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(w) SECTION 7.5 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.5 ACQUISITIONS. The Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, make, in one or
more transactions, any (a) Acquisition (i) during the fiscal year
ending on December 31, 1997 (excluding the Regency Tender and the
Regency Merger), unless (A) the Acquisition is of a Restricted
Subsidiary or of the assets of a Domestic Entity, (B) the
Acquisition (1) is set forth on SCHEDULE 14 hereto or (2) the
aggregate Acquisition Consideration for all Acquisitions not set
forth on SCHEDULE 14 hereto does not exceed $5,000,000 in principal
amount, and (C) each of such Restricted Subsidiary and its
Restricted Subsidiaries, if any, becomes a party to a Subsidiary
Guaranty and the Intercompany Line of Credit and all the capital
stock of, or other equity interest in, such Restricted Subsidiary
(other than CareerStaff Subsidiaries unless otherwise required by
SECTION 5.11) and its Restricted Subsidiaries, if any, (other than
CareerStaff Subsidiaries unless otherwise required by SECTION 5.11)
shall be pledged pursuant to a Pledge Agreement, or (ii) during any
fiscal year thereafter, unless (A) the Acquisition is set forth on
SCHEDULE 14 hereto or (B)(1) the Acquisition is of a Restricted
Subsidiary or of the assets of a Domestic Entity, (2) the
Acquisition Consideration therefor is less than (y) $75,000,000 or
(z) $100,000,000 if the Leverage Ratio as of the end of any fiscal
quarter during such fiscal year is less than 5.50 to 1, (3) the sum
of the Acquisition Consideration therefor, together with the
Acquisition Consideration given for all other such Acquisitions
during such fiscal year, is less than (y) $125,000,000 or (z)
$200,000,000 if the Leverage Ratio as of the end of any fiscal
quarter during such fiscal year is less than 5.50 to 1, (4) each of
such Restricted Subsidiary and its Restricted Subsidiaries (in each
case other than a Non-Guaranteeing Restricted Subsidiary), if any,
becomes a party to a Subsidiary Guaranty and the Intercompany Line
of Credit and all the capital stock of, or equity interest in, such
Restricted Subsidiary (other than CareerStaff Subsidiaries unless
otherwise required by SECTION 5.11) and its Restricted Subsidiaries,
if any (other than CareerStaff Subsidiaries unless otherwise
required by SECTION 5.11) shall be pledged pursuant to a Pledge
Agreement, and (5) notwithstanding clauses (2) and (3) immediately
above, if the Acquisition is of a Restricted Subsidiary which is a
Non-Guaranteeing Restricted Subsidiary, the aggregate Acquisition
Consideration for all Non-Guaranteeing Restricted Subsidiaries
(other than Sun Financing), together with the aggregate Investments
made pursuant to SECTION 7.3(j)(i)(b) hereof, is less than or equal
to $50,000,000 in aggregate amount at all times; or (b) Acquisition
of a Foreign Subsidiary, during (i) the fiscal year ending December
31, 1997, unless (A) the Acquisition is set forth on SCHEDULE 11
hereto or (B) if the Acquisition Consideration for all Acquisitions
not set forth on SCHEDULE 11 hereto, together with the aggregate
amount of obligations incurred in respect of Guaranties and letters
of credit pursuant to SECTION 7.1(i) hereof and Investments made
pursuant to SECTION 7.3(j) which are in Foreign Entities, does not
exceed $5,000,000, and (C) to the extent such Foreign Subsidiary is
not an Inactive Subsidiary or a
-10-
<PAGE>
Subsidiary of a Foreign Subsidiary, an amount of the capital stock
of such Foreign Subsidiary necessary to cause the Administrative
Agent to have a security interest in, and pledge of, all of the
capital stock of, or other equity interest in, such Foreign
Subsidiary owned by the pledgor or such lesser amount such that in
any case not more than 66% of all of the capital stock of, or other
equity interest in, such Foreign Subsidiary, shall be pledged
pursuant to a Foreign Subsidiary Pledge Agreement, or (ii) any
fiscal year thereafter, unless (A) the Acquisition Consideration for
all such Acquisitions, together with the aggregate amount of
obligations incurred in respect of Guaranties and letters of credit
pursuant to SECTION 7.1(i) and Investments made pursuant to SECTION
7.3(j) which are in Foreign Entities, does not exceed (1)
$60,000,000 or (2) $75,000,000 if the Leverage Ratio as of the end
of any fiscal quarter during such fiscal year is less than 5.50 to
1, (B) the Acquisition Consideration for any single Acquisition or
series of related Acquisitions does not exceed $30,000,000 and (C)
to the extent such Foreign Subsidiary is not an Inactive Subsidiary
or a Subsidiary of a Foreign Subsidiary, an amount of the capital
stock of such Foreign Subsidiary necessary to cause the
Administrative Agent to have a security interest in, and pledge of,
all of the capital stock of, or other equity interest in, such
Foreign Subsidiary owned by the pledgor or such lesser amount such
that in any case not more than 66% of all of the capital stock of,
or other equity interest in, such Foreign Subsidiary, shall be
pledged pursuant to a Foreign Subsidiary Pledge Agreement."
(x) SECTION 7.6 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.6 RESTRICTED PAYMENTS. The Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any Restricted Payment other than Permitted
Restricted Payments; provided, however, that no Permitted Restricted
Payments set forth in clauses (e), (g) and (h) of the definition
thereof shall be made if, immediately after giving effect to any
such payments, a Default or Event of Default would exist hereunder."
(y) ARTICLE 7 of the Credit Agreement is hereby amended by adding the
following SECTION 7.19 thereto to read as follows:
"Section 7.19 SUN FINANCING. Sun Financing shall not, and the
Borrower shall not permit Sun Financing to, transact any business
other than (a) issuing the Sun Financing Preferred Securities, (b)
investing the gross proceeds of the Sun Financing Preferred
Securities in the Borrower's Subordinated Debentures and (c)
engaging in other activities necessary or incidental to those set
items set forth in (a) and (b) immediately preceding.
Notwithstanding anything herein to the contrary, the Borrower shall
not, and shall not permit any Restricted Subsidiary to, make any
Investments in Sun Financing other than the initial capitalization
of Sun Financing through the issuance of the Sun Financing Preferred
Securities and the Borrower's Subordinated Debentures."
-11-
<PAGE>
(z) SECTION 11.1(a)(ii) of the Credit Agreement is hereby amended to
read as follows:
"(ii) If to the Administrative Agent, at:
NationsBank of Texas, N.A.
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attention: F. Scott Singhoff, Senior Vice President"
(aa) The Compliance Certificate is hereby amended to be in the form of
EXHIBIT G hereto.
2. AGREEMENT REGARDING SUN FINANCING PREFERRED SECURITIES AND BORROWER
SUBORDINATED DEBENTURES. The Borrower and the Lenders hereby agree that the
simultaneous issuance of the Sun Financing Preferred Securities and the
Borrower Subordinated Debentures is an issuance of Indebtedness convertible
into Equity of the Borrower and that the application of the Net Cash Proceeds
received by the Borrower as a result thereof is governed by SECTION 2.5(d) of
the Credit Agreement. The Borrower and the Lenders hereby further agree that
for purposes of the PROVISO set forth in SECTION 7.10 of the Credit
Agreement, 50% of the Net Cash Proceeds received from the issuance of the Sun
Financing Preferred Securities and the Borrower Subordinated Debentures shall
be deemed to be Net Cash Proceeds received from the issuance of Equity. The
Lenders hereby approve the terms of the Borrower Subordinated Debentures and
the Sun Financing Preferred Securities.
3. AGREEMENT REGARDING 2008 SENIOR SUBORDINATED NOTES. The Lenders
hereby approve the terms of the Borrower's approximately $100,000,000 Senior
Subordinated Notes due 2008 (the "2008 Senior Subordinated Notes").
Furthermore, provided that the Net Cash Proceeds of the simultaneous issuance
of the Sun Financing Preferred Securities and the Borrower Subordinated
Debentures exceed $300,000,000 and are applied as required pursuant to
SECTION 2.5(d) of the Credit Agreement, the Lenders hereby agree that,
notwithstanding SECTION 2.5(e) of the Credit Agreement, (a) the Net Cash
Proceeds of the 2008 Senior Subordinated Notes (which may be in excess of
$100,000,000 as a result of over-subscription) may be used by the Borrower to
repay Revolving Credit Advances rather than Term Loan Advances and (b) such
repayment of Revolving Credit Advances shall not reduce the Revolving Credit
Commitment.
4. WAIVER. The Lenders hereby waive any restrictions set forth in the
Credit Agreement on the ability of Sunscript L.L.C. to create, assume, incur,
permit or suffer to exist any Lien on any of its assets.
5. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as
of the date hereof and after giving effect to the amendments contemplated by
the foregoing Section 1 and the agreements set forth in the foregoing
Sections 2 and 3:
-12-
<PAGE>
(a) the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct on and as of the
date hereof as if made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default
or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver
this Second Amendment, and the Credit Agreement, as amended hereby, the
execution, delivery and performance of this Second Amendment and the Credit
Agreement, as amended hereby, has been duly authorized by all corporate
action of the Borrower, and this Second Amendment and the Credit Agreement,
as amended hereby, constitute the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable Debtor Relief Laws and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and except as rights to indemnity may be
limited by federal or state securities laws;
(d) neither the execution, delivery and performance of this Second
Amendment or the Credit Agreement, as amended hereby, nor the consummation of
any transactions contemplated herein or therein, will contravene or conflict
with any law, rule or regulation to which the Borrower or any of its
Subsidiaries is subject, or any indenture, agreement or other instrument to
which the Borrower or any of its Subsidiaries or any of their respective
property is subject; and
(e) no authorization, approval, consent, or other action by, notice to,
or filing with, any governmental authority or other Person (including the
Board of Directors of the Borrower or any Guarantor), is required for the (i)
execution, delivery or performance by the Borrower of this Second Amendment
and the Credit Agreement, as amended hereby, or (ii) acknowledgement of this
Second Amendment by each Guarantor.
6. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be
effective as of March 27, 1998, subject to the following:
(a) the Administrative Agent shall have received counterparts of this
Second Amendment executed by the Determining Lenders; provided, however,
notwithstanding this Section 6, the agreement provided for in the second
sentence of Section 3 of this Second Amendment shall not be effective unless
and until Lenders whose Total Specified Percentages aggregate at least
66-2/3% shall have executed counterparts of this Second Amendment;
(b) the Administrative Agent shall have received counterparts of this
Second Amendment executed by the Borrower and acknowledged by each Guarantor;
(c) the representations and warranties set forth in Section 5 of this
Second Amendment shall be true and correct; and
-13-
<PAGE>
(d) the Administrative Agent shall have received, in form and substance
satisfactory to the Administrative Agent and its counsel, such other
documents, certificates and instruments as Administrative Agent shall require.
7. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", or words of like
import shall mean and be a reference to the Credit Agreement, as amended by
this Second Amendment.
(b) The Credit Agreement, as amended by this Second Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
8. GUARANTOR'S ACKNOWLEDGEMENT. By signing below, each of the
Guarantors (a) acknowledges, consents and agrees to the execution, delivery
and performance by the Borrower of this Second Amendment, and (b)
acknowledges and agrees that its obligations in respect of its Subsidiary
Guaranty or any other Loan Documents executed by it are (i) not released,
diminished, waived, modified, impaired or affected in any manner by this
Second Amendment, (ii) hereby ratified and confirmed and (iii) not subject to
any claims, offsets, defenses or counterclaims.
9. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand
all costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this Second Amendment
and the other instruments and documents to be delivered hereunder (including
the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities under the Credit
Agreement, as amended by this Second Amendment).
10. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and
the same instrument.
11. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of Texas
and shall be binding upon the Borrower, the Co-Agents, the Administrative
Agent and each Lender and their respective successors and assigns.
12. HEADINGS. Section headings in this Second Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Second Amendment for any other purpose.
-14-
<PAGE>
13. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as the date first above written.
SUN HEALTHCARE GROUP, INC.
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
NATIONSBANK OF TEXAS, N.A., as Administrative
Agent and as a Lender
By: /s/ F. Scott Singhoff
--------------------------------------------
F. Scott Singhoff
Senior Vice President
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: F. Scott Singhoff
Senior Vice President
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, as a Co-Agent and as a Lender
By: /s/ J. Gregory Selby
--------------------------------------------
Name: J. Gregory Selby
Title: Vice President
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Lucy B. Nixon
-16-
<PAGE>
SCOTIABANC INC., as a Co-Agent and as a Lender
By: /s/ Dana Maloney
--------------------------------------------
Name: Dana Maloney
Title: Relationship Manager
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308-2214
Attn: Dana Maloney
BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as a
Co-Agent and as a Lender
By: /s/ Douglas J. Weir
--------------------------------------------
Name: Douglas J. Weir
Title: Vice President
US Corporate Banking Division
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
Attn: Douglas Weir
CREDIT LYONNAIS NEW YORK BRANCH, as a Co-Agent
and as a Lender
By: /s/ Farboud Tavangar
--------------------------------------------
Farboud Tavangar
First Vice President
1301 Avenue of the Americas, 18th Floor
New York, New York 10019-6022
Attn: Evan S. Wasser
Vice President
-17-
<PAGE>
CREDIT SUISSE FIRST BOSTON, as a Co-Agent and as
a Lender
By: /s/ Robert B. Potter
--------------------------------------------
Name: Robert B. Potter
Title: Vice President
By: /s/ Thomas G. Muoio
--------------------------------------------
Name: Thomas G. Muoio
Title: Vice President
11 Madison Avenue, 20th Floor
New York, New York 10010
Attn: Robert B. Potter
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS
ANGELES AGENCY, as a Co-Agent and as a Lender
By: /s/ T. Morgan Edwards II
--------------------------------------------
Name: T. Morgan Edwards II
Title: Deputy General Manager
350 South Grand Avenue, Suite 3000
Los Angeles, California 90071
Attn: Koji Toriumi
-18-
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Co-Agent and as a Lender
By: /s/ Douglas E. Maher
--------------------------------------------
Douglas E. Maher
Vice President
60 Wall Street, 22nd Floor
New York, New York 10260
Attn: Douglas E. Maher
PNC BANK, NATIONAL ASSOCIATION, as a Co-Agent and
as a Lender
By: /s/ Connie R. Field
--------------------------------------------
Name: Connie R. Field
Title: Assistant Vice President
2 PNC Plaza - 2nd Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attn: Karen George
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a
Co-Agent and as a Lender
By: /s/ J. David Thomas
--------------------------------------------
Name: J. David Thomas
Title: Vice President
-19-
<PAGE>
By: /s/ W. Pieter C. Kodde
--------------------------------------------
Name: W. Pieter C. Kodde
Title: Vice President
245 Park Avenue
New York, New York 10167-0062
Attn: Corporate Services Department
with a copy to:
13355 Noel Road
One Galleria Tower, Suite 1000
Dallas, Texas 75240
Attn: Karl F. Propst
THE SUMITOMO BANK, LIMITED, as a Co-Agent and as
a Lender
By: /s/ Goro Hirai
--------------------------------------------
Name: Goro Hirai
Title: Joint General Manager
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attn: Gary Perkins
-20-
<PAGE>
BANQUE PARIBAS
By: /s/ Glenn Mealey
--------------------------------------------
Glenn Mealey
Director
By: /s/ Larry Robinson
--------------------------------------------
Name: Larry Robinson
Title: Vice President
1200 Smith, Suite 3100
Houston, Texas 77002
Attn: Glenn Mealey
Director
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Dan Dobrjanskyj
--------------------------------------------
Name: Dan Dobrjanskyj
Title: Assistant Vice President
By: /s/ Michael Pellerito
--------------------------------------------
Name: Michael Pellerito
Title: Assistant Treasurer
111 West Ocean Boulevard, Suite 1325
Long Beach, California 90802
Attn: L. John Stewart
Vice President
-21-
<PAGE>
with a copy to:
590 Madison Avenue
New York, New York 10022-2540
Attn: Dan Dobrjanskyj
Assistant Vice President
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND
CAYMAN BRANCH
By: /s/ Charles M. O'Shea
--------------------------------------------
Name: Charles M. O'Shea
Title: Vice President
By: /s/ Felix K. Camacho
--------------------------------------------
Name: Felix K. Camacho
Title: Assistant Treasurer
75 Wall Street, 25th Floor
New York, New York 10005
Attn:
--------------------------------------------
FINOVA
By: /s/ Tina Hughes
--------------------------------------------
Name: Tina Hughes
Title: Vice President
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attn: Brian T. Williamson
-22-
<PAGE>
THE FUJI BANK LIMITED, LOS ANGELES AGENCY
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
333 South Hope Street, Suite 3900
Los Angeles, California 90071
Attn: Richard G. Bushman
Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Takuya Honjo
--------------------------------------------
Name: Takuya Honjo
Title: Senior Vice President
1251 Avenue of the Americas
New York, New York 10020-1104
Attn: Jennifer McNamara
THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS
ANGELES AGENCY
By: /s/ Hiroaki Koseki
--------------------------------------------
Hiroaki Koseki
Deputy General Manager
801 South Figueroa Street, Suite 500
Los Angeles, California 90071
Attn: Dean Kawai
Vice President
-23-
<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ Susan B. Sheffield
--------------------------------------------
Name: Susan B. Sheffield
Title: Vice President
505 Main Street, Suite 300
Fort Worth, Texas 76102
Attn: Susan Sheffield
Vice President
AMSOUTH BANK
By: /s/ Shannon O. Clark
--------------------------------------------
Name: Shannon O. Clark
Title: Assistant Vice President
1900 Fifth Avenue North, AST7FL
Birmingham, Alabama 35203
Attn: Shannon O. Clark
GENERAL ELECTRIC CAPITAL CORPORATION
By:
--------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
3379 Peachtree Road N.E., Suite 560
Atlanta, Georgia 90326
Attn:
--------------------------------------------
-24-
<PAGE>
NATEXIS BANQUE BFCE
By: /s/ Mark A. Harrington
--------------------------------------------
Name: Mark A. Harrington
Title: Vice President and Regional Manager
By: /s/ Paul H. Diouri
--------------------------------------------
Name: Paul H. Diouri
Title: Assistant Treasurer
333 Clay Street, Suite 4340
Houston, Texas 77002
Attn:
--------------------------------------------
with a copy to:
Natexis Banque BFCE, New York Branch
645 Fifth Avenue, 20th Floor
New York, New York 10022
Attn: Joan Rankine
THE ROYAL BANK OF SCOTLAND, plc
By: /s/ David Dougan
--------------------------------------------
David Dougan
Vice President
Wall Street Plaza, 26th Floor
88 Pine Street
New York, New York 10005-1801
Attn: David Dougan
-25-
<PAGE>
THE SANWA BANK, LIMITED, DALLAS AGENCY
By:
--------------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
2200 Ross Avenue, 4100 West
Dallas, Texas 75201
Attn: Matthew G. Patrick
Vice President
SUMMIT BANK
By: /s/ Christina M. Clausen
--------------------------------------------
Christina M. Clausen
Vice President
250 Moore Street, 2nd Floor
Hackensack, New Jersey 07601
Attn: Healthcare Financial Services
TORONTO DOMINION (TEXAS), INC.
By: /s/ Neva Nesbitt
--------------------------------------------
Name: Neva Nesbitt
Title: Vice President
909 Fannin Street, Suite 1700
Houston, Texas 77010
Attn: Frederic B. Hawley
Manager, Credit Administration
-26-
<PAGE>
with a copy to:
31 West 52nd Street, 18th Floor
New York, New York 10019
Attn: David Perlman
Senior Associate
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Kathleen Lynch
--------------------------------------------
Name: Kathleen Lynch
Title: Managing Director
1295 State Street, 1st Floor
Springfield, Massachusetts 01111
Attn: Steven J. Katz
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James Dingler
--------------------------------------------
James Dingler
Director
334 Madison Avenue
Convent Station, New Jersey 07961-0633
Attn: Frank Monfalcone
with a copy to:
Metropolitan Life Insurance Company
1 Madison Avenue, Area 7H
New York, New York 10010
Attn: Bill Ding, Esq.
-27-
<PAGE>
OCTAGON LOAN TRUST
By: Octagon Credit Investors (a unit of The
Chase Manhattan Bank), acting solely as
manager and not in its individual capacity
By: /s/ James P. Ferguson
--------------------------------------------
Name: James P. Ferguson
Title: Managing Director
380 Madison Avenue, 12th Floor
New York, New York 10017
Attn: James P. Ferguson
KZH HOLDING CORPORATION III
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attn: Virginia Conway
PARIBAS CAPITAL FUNDING LLC
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
787 7th Avenue, 32nd Floor
New York, New York 10019
Attn: Francois Gauvin
-28-
<PAGE>
with a copy to:
Richard Wagman
State Street Bank & Trust Co.
Two International Place
Boston, Massachusetts 02110
Telephone: (617) 664-5410
Fax: (617) 664-5366/67/68
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME
TRUST
By: /s/ Jeffrey W. Maillet
--------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
One Parkview Plaza
Oakbrook Terrace, Illinois 60602
Attn: Jeffrey W. Maillet
-29-
<PAGE>
PFL LIFE INSURANCE COMPANY
By: /s/ Gregory W. Theobald
--------------------------------------------
Name: Gregory W. Theobald
Title: Vice President and Assistant
Secretary
c/o AEGON USA Investment Management, Inc.
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-5335
Attn: John Bailey
PEOPLES SECURITY LIFE INSURANCE COMPANY
By: /s/ Frederick B. Howard
--------------------------------------------
Name: Frederick B. Howard
Title: Director - Private Placements
Peoples Security Life Insurance Company
c/o AEGON USA Investment Management, Inc.
400 West Market Street
Louisville, Kentucky 40202
Attn: Securities Department - 10th Floor
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ J. Thomas Christofferson
--------------------------------------------
Name: J. Thomas Christofferson
Title: Its Authorized Representative
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Securities Department
-30-
<PAGE>
ROYALTON COMPANY
By: Pacific Investment Management Company, as
its Investment Advisor
By: PIMCO Management, Inc., a General
Partner
By: /s/ Richard M. Weil
--------------------------------------------
Name: Richard M. Weil
--------------------------------------
Title: Senior Vice President
-------------------------------------
840 Newport Center Drive
Newport Beach, California 92660
Attn: Melissa Fejdasz
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:
-------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
SENIOR HIGH INCOME PORTFOLIO, INC.
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-31-
<PAGE>
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
DEBT STRATEGIES FUND, INC.
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Gilles Marchand
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ William M. Swenson
--------------------------------------------
Name: William M. Swenson
--------------------------------------
Title: Authorized Signatory
-------------------------------------
425 Lexington Avenue
New York, New York 10017
Attn:
--------------------------------------------
BANKBOSTON, N.A.
By: /s/ Todd M. Dahlstrom
--------------------------------------------
Name: Todd M. Dahlstrom
--------------------------------------
Title: Director
-------------------------------------
-32-
<PAGE>
100 Federal Street, Mail Stop: 01-08-05
Boston, Massachusetts 02110
Attn:
--------------------------------------------
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.,
as Attorney-In-Fact and on behalf of FAFLIC
By: /s/ Philip C. Robbins
--------------------------------------------
Name: Philip C. Robbins
--------------------------------------
Title: Vice President
-------------------------------------
125 High Street, 14th Floor
Boston, Massachusetts 02110
Attn: Philip Robbins
with a copy to:
State Street Bank & Trust
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
Attn: John Tavares, for the account of FAFLIC
DEEPROCK & CO.
By: Eaton Vance Management, as Investment Advisor
By: /s/ Scott H. Page
--------------------------------------------
Name: Scott H. Page
--------------------------------------
Title: Vice President
-------------------------------------
24 Federal Street
Boston, Massachusetts 02110
Attn:
--------------------------------------------
-33-
<PAGE>
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
--------------------------------------------
Name: Chauncey Lufkin
--------------------------------------
Title: Vice President
-------------------------------------
777 Mariners Island Boulevard, 7th Floor
San Mateo, California 94404
Attn:
--------------------------------------------
ORIX USA CORPORATION
By: /s/ Hiroyuki Miyauchi
--------------------------------------------
Name: Hiroyuki Miyauchi
--------------------------------------
Title: Executive Vice President
-------------------------------------
780 Third Avenue, 48th Floor
New York, New York 10017-7088
Attn: Kiyomi Kosaka
Vice President
PILGRIM AMERICA PRIME RATE TRUST
By: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /s/ Howard Tiffen
--------------------------------------------
Name: Howard Tiffen
Title: Senior Vice President
c/o Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
Attn:
--------------------------------------------
-34-
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: /s/ James V. Wittich
--------------------------------------------
Name: James V. Wittich
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401
Attn: Tim Warrick
ING HIGH INCOME PRINCIPAL PRESERVATION OFFERING,
L.P.
By: ING Capital Advisors, Inc., as Investment
Advisor
By: /s/ Helen Y. Rhee
--------------------------------------------
Name: Helen Y. Rhee
--------------------------------------
Title: AVP & Portfolio Manager
-------------------------------------
c/o ING Capital Advisors, Inc.
333 South Grand Avenue, Suite 4250
Los Angeles, California 90071
Attn:
--------------------------------------------
ML CLO XII PILGRIM AMERICA (CAYMAN) LTD.
By: Pilgrim America Investments, Inc., as its
Investment Manager
By: /s/ Howard Tiffen
--------------------------------------------
Name: Howard Tiffen
--------------------------------------
Title: Senior Vice President
-------------------------------------
-35-
<PAGE>
c/o Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-3444
with a faxed copy to:
State Street Bank and Trust Company
Corporate Trust Department
Attn: Ray Welliver
Ref: Paramount Company
Fax: (617) 664-5366/5367/5368
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By: /s/ Scott H. Page
--------------------------------------------
Name: Scott H. Page
--------------------------------------
Title: Vice President
-------------------------------------
c/o Boston Management and Research, as Investment
Advisor
24 Federal Street
Boston, Massachusetts 02110
CYPRESSTREE INVESTMENT PARTNERS I, LTD.
By: CypressTree Investment Management Company,
Inc., as Portfolio Manager
By: /s/ Philip C. Robbins
--------------------------------------------
Name: Philip C. Robbins
--------------------------------------
Title: Vice President
-------------------------------------
-36-
<PAGE>
CypressTree Investment Management Company, Inc.
125 High Street, 14th Floor
Boston, Massachusetts 02110
ML CBO IV (CAYMAN) LTD.
By: Protective Asset Management Company, as
Collateral Manager
By: /s/ James Dondero
--------------------------------------------
Name: James Dondero, CFA, CPA
---------------------------------
Title: President
--------------------------------
Protective Asset Management, L.L.C.
1150 Two Galleria Tower
13455 Noel Road, LB #45
Dallas, Texas 75240
Attn: Mark Okada
PAMCO CAYMAN LTD.
By: Protective Asset Management Company, as
Collateral Manager
By: /s/ James Dondero
--------------------------------------------
Name: James Dondero, CFA, CPA
---------------------------------
Title: President
--------------------------------
Protective Asset Management, L.L.C.
1150 Two Galleria Tower
13455 Noel Road, LB #45
Dallas, Texas 75240
Attn: Mark Okada
-37-
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Merrill Lynch Prime Rate Portfolio
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attn: Jill Montanye
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Neil Brisson
--------------------------------------------
Name: Neil Brisson
--------------------------------------
Title: Director
-------------------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
250 Vesey Street
World Financial Center
16th Floor, North Tower
New York, New York 10281
Attn: Janet Hansen
-38-
<PAGE>
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital Luxembourg, as Collateral
Manager
By: /s/ Francoise Berthelot
--------------------------------------------
Name: Francoise Berthelot
--------------------------------------
Title: Authorized Signatory
-------------------------------------
c/o Queensgate Bank & Trust Company Limited
P.O. Box 30464 SMB/South Church Street
Ugland House, 5th Floor
George Town
Grand Cayman, Cayman Islands
British West Indies
with copies to:
Indosuez Capital Funding IIi, Limited
c/o Texas Commerce Bank N.A.
Attn: Joe Elston, Asset Backed Group
A/C 17499
600 Travis Street, 8th Floor
Houston, Texas 77002-8039
and
Indosuez Capital
1211 Avenue of the Americas, 7th Floor
New York, New York 10036-8701
Attn: Francoise Berthelot
-39-
<PAGE>
ARES LEVERAGED INVESTMENT FUND, L.P.
By: /s/ Jeff Moore
--------------------------------------------
Name: Jeff Moore
--------------------------------------
Title: Principal
-------------------------------------
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attn: Jeff Moore
Principal
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc., as Collateral
Manager
By: /s/ Helen Y. Rhee
--------------------------------------------
Name: Helen Y. Rhee
--------------------------------------
Title: AVP & Portfolio Manager
-------------------------------------
c/o ING Capital Advisors, Inc.
333 South Grand Avenue, Suite 4250
Los Angeles, California 90071
Attn:
--------------------------------------------
BANKERS TRUST COMPANY
By: /s/ Rosemary F. Dunne
--------------------------------------------
Name: Rosemary F. Dunne
--------------------------------------
Title: Vice President
-------------------------------------
130 Liberty Street, 37th Floor
New York, New York 10006
Attention: Jeff Dominick
-40-
<PAGE>
with a copy to:
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Attention: Deborah Jacob
BANK POLSKA KASA OPIEKI, S.A.
PEKAO S.A. GROUP, NEW YORK BRANCH
By: /s/ William A. Shea
--------------------------------------------
Name: William A. Shea
Title: Vice President, Senior Lending
Officer
470 Park Avenue South, 15th Floor
New York, New York 10016
ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG -
NEW YORK
By: /s/ John S. Runnion
--------------------------------------------
Name: John S. Runnion
Title: First Vice President
By: /s/ Rima Terradista
--------------------------------------------
Name: Rima Terradista
Title: Vice President
280 Park Avenue
West Building, 32nd Floor
New York, New York 10017
-41-
<PAGE>
ROYAL BANK OF CANADA
By: /s/ Athar Khan
--------------------------------------------
Name: Athar Khan
Title: Senior Manager
One Financial Square
New York, New York 10005-3531
Attention: Linda Swanston
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN AMERICAN CAPITAL MANAGEMENT,
INC.,
as Collateral Manager
By: /s/ Jeffrey W. Maillet
--------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
c/o Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Jeffrey W. Maillet
with a copy to:
Texas Commerce Bank N.A.
Trust Clearing Account
600 Travis, 8th Floor
Houston, Texas 77002
Attention: Jason Nelson
-42-
<PAGE>
BALANCED HIGH-YIELD FUND I LTD.
By: BHF-BANK AKTIENGESELLSCHAFT, acting through
its New York Branch, as attorney-in-fact
By: /s/ Dan Dobrjanskyj
--------------------------------------------
Name: Dan Dobrjanskyj
Title: Assistant Vice President
By: /s/ Michael Pellerito
--------------------------------------------
Name: Michael Pellerito
Title: Assistant Treasurer
c/o State Street Bank & Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Steve O'Brien
with a copy to:
Balanced High-Yield Fund I Ltd.
c/o BHF-Bank Aktiengesellschaft
590 Madison Avenue
New York, New York 10022
Attention: Dan Dobrjanskyj
-43-
<PAGE>
DELANO COMPANY
By: Pacific Investment Management Company, as
its Investment Advisor
By: PIMCO Management Inc., a general
partner
By: /s/ Richard M. Weil
--------------------------------------------
Name: Richard M. Weil
Title: Senior Vice President
c/o Pacific Investment Management Co.
840 Newport Center Drive
Newport Beach, California 92660
with a copy to:
Chase Bank of Texas National Association
601 Travis Street, 8th Floor
Houston, Texas 77002
Attention: Delano Company
MERRILL LYNCH GLOBAL INVESTMENT SERIES: INCOME
STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:
--------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
c/o Merrill Lynch Asset Management
800 Scudders Mill Road - Area 1B
Plainsboro, New Jersey 08536
Attention: Ann Marie Smith - Trade Closing
Colleen Wade - Daily Loan Activity
-44-
<PAGE>
with a copy to:
Sheri Smith
MLAS Accounting
68-70 Boulevard de la Petrruase
L-2320 Luxembourg
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ Stephen B. King
--------------------------------------------
Name: Stephen B. King
Title: Authorized Signatory
c/o Goldman Sachs & Co.
85 Broad Street, 6th Floor
New York, New York 10004
Attention: John Makrinos
-45-
<PAGE>
ACKNOWLEDGED AND AGREED:
Sundance Rehabilitation Corporation, a Connecticut corporation
SunQuest Consulting, Inc., a New Mexico corporation
Sunrise Healthcare Corporation, a New Mexico corporation
SunScript Pharmacy Corporation, a New Mexico corporation
Sunrise Rehab of Colorado, Inc., a Colorado corporation
Sunrise Healthcare of Colorado, Inc., a Colorado corporation
Sunrise Healthcare of Florida, Inc., a Florida corporation
LTC Staffinders, Inc., a Connecticut corporation
SunSpectrum Outpatient Rehabilitation-Concord, Inc., a Massachusetts
corporation
Nursing Home Inc., a Washington corporation
Living Services, Inc., a Washington corporation
Bay Colony Health Service, Inc., a Massachusetts corporation
Bergen Eldercare, Inc., a New Jersey corporation
Community Re-Entry Services of Cortland, Inc., a Delaware corporation
G-WZ of Stamford, Inc., a Connecticut corporation
Manatee Springs Nursing Center, Inc., a Florida corporation
Mediplex Management, Inc., a Massachusetts corporation
Mediplex Management of Palm Beach County, Inc., a Florida corporation
Mediplex Management of Texas, Inc., a Texas corporation
Sun Healthcare Inc., a Colorado corporation
Mediplex of Concord, Inc., a Massachusetts corporation
Mediplex of Connecticut, Inc., a Connecticut corporation
Mediplex of Kentucky, Inc., a Kentucky corporation
Mediplex of Maryland, Inc., a Maryland corporation
Mediplex of Massachusetts, Inc., a Massachusetts corporation
Mediplex of New Hampshire, Inc., a New Hampshire corporation
Mediplex of New Jersey, Inc., a New Jersey corporation
Mediplex of New York, Inc., a New York corporation
Mediplex of Ohio, Inc., an Ohio corporation
Mediplex of Tennessee, Inc., a Tennessee corporation
Mediplex Atlanta Rehabilitation Institute, Inc., a Georgia corporation
Mediplex Rehabilitation of Massachusetts, Inc., a Massachusetts corporation
P.M.N.F. Management, Inc., a New Jersey corporation
Quality Care Holding Corp., a Massachusetts corporation
Quality Nursing Care of Massachusetts, Inc., a Massachusetts corporation
Spofford Land, Inc., a New Hampshire corporation
Sun Care Corp., a Delaware corporation
HSR Management, Inc., a Delaware corporation
CareerStaff Management, Inc., a Delaware corporation
PRI, Inc., a Texas corporation
CareerStaff Unlimited, Inc., a Delaware corporation
-46-
<PAGE>
CareerStaff HSR, Inc., a Delaware corporation
Healthcare Staff Resources, Inc., a Texas corporation
SunBridge, Inc., a New Mexico corporation
SunMark of New Mexico, a New Mexico corporation
SunChoice Medical Supply, Inc., a New Mexico corporation
HTA of New Jersey, Inc., a New Jersey corporation
New Bedford Acquisition Corp., a Massachusetts corporation
New Bedford Nursing Center, Inc., a Massachusetts corporation
Worcester Nursing Center, Inc., a Massachusetts corporation.
Cal-Med, Inc., a California corporation
Clipper Home Affiliates, Inc., a New Hampshire corporation
Clipper Home of North Conway, Inc., a New Hampshire corporation
Clipper Home of Portsmouth, Inc., a New Hampshire corporation
Clipper Home of Rochester, Inc., a New Hampshire corporation
Clipper Home of Wolfeboro, Inc., a New Hampshire corporation
Golan Healthcare Group, Inc., a Massachusetts corporation
Goodwin Nursing Home, Inc., a New Hampshire corporation
HC, Inc., a Kansas corporation
Langdon Place of Dover, Inc., a New Hampshire corporation
Langdon Place of Exeter, Inc., a New Hampshire corporation
Langdon Place of Nashua, Inc., a New Hampshire corporation
Masthead Corporation, a New Mexico corporation
Mediplex of Virginia, Inc., a Virginia corporation
Oakview Treatment Centers of Kansas, Inc., a Kansas corporation
Pharmacy Factors of California, Inc., a California corporation
Pharmacy Factors of Florida, Inc., a Florida corporation
Pharmacy Factors of Texas, Inc., a Texas corporation
PHS Continuing Education, Inc., a Texas corporation
Premier Health Staff, Inc., a Texas corporation
SHG International Holdings, Inc., a Delaware corporation
Special Medical Services, Inc., a Texas corporation
SunAlliance Health care Services, Inc., a Delaware corporation
SunCare Respiratory Services, Inc., an Indiana corporation
SunFactors, Inc., a Florida corporation
Sun Lane Purchase Corporation, a New Mexico corporation
SunSolution, Inc., a Delaware corporation
The Mediplex Group, Inc., a Massachusetts corporation
Hospital Therapy Service of Texas, Inc., a Texas corporation
Regency Health Services, Inc, a Delaware corporation
Braswell Enterprises, Inc., a California corporation
Brittany Rehabilitation Center, Inc., a California corporation
Carmichael Rehabilitation Center, a California corporation
Coalinga Rehabilitation Center, a California corporation
-47-
<PAGE>
Covina Rehabilitation Center, a California corporation
Evergreen Rehabilitation Center, a California corporation
Fairfield Rehabilitation Center, a California corporation
Fullerton Rehabilitation Center, a California corporation
Glendora Rehabilitation Center, a California corporation
Grand Terrace Rehabilitation, a California corporation
Hallmark Health Services, Inc., a California corporation
Harbor View Rehabilitation Center, a California corporation
Hawthorne Rehabilitation Center, a California corporation
Heritage Rehabilitation Center, a California corporation
Huntington Beach Convalescent Hospital, a California corporation
Jackson Rehabilitation Center, Inc., a California corporation
Linda-Mar Rehabilitation Center, a California corporation
Meadowbrook Rehabilitation Center, a California corporation
Newport Beach Rehabilitation Center, a California corporation
North State Home Health Care, Inc., a California corporation
Paradise Rehabilitation Center, Inc., a California corporation
Paso Robles Rehabilitation Center, a California corporation
Regency-North Carolina, Inc., a North Carolina corporation
Regency Rehab Properties, Inc., a California corporation
Regency-Tennessee, Inc., a Tennessee corporation
RHS Management Corporation, a California corporation
Rosewood Rehabilitation Center, Inc., a California corporation
Shandin Hills Rehabilitation Center, a California corporation
Stockton Rehabilitation Center, Inc., a California corporation
Vista Knoll Rehabilitation Center, Inc., a California corporation
Willowview Rehabilitation Center, a California corporation
First Class Pharmacy, Inc., a California corporation
Care Enterprises, Inc., a Delaware corporation
Americare Homecare, Inc., an Ohio corporation
Care Finance, Inc., a California corporation
Circleville Health Care Corp., an Ohio corporation
Glenville Health Care Corp., a West Virginia corporation
Marion Health Care Corp., an Ohio corporation
New Lexington Health Care Corp., an Ohio corporation
Americare of West Virginia, Inc., a West Virginia corporation
Dunbar Health Care Corp., a West Virginia corporation
Beckley Health Care Corp., a West Virginia corporation
Putnam Health Care Corp., a West Virginia corporation
Salem Health Care Corp., a West Virginia corporation
Care Enterprises West, a Utah corporation
Care Home Health Services, a California corporation
SCRS & Communicology Inc., of Ohio, an Ohio corporation
-48-
<PAGE>
Regency Rehab Hospitals, Inc., a California corporation
Orange Rehabilitation Hospital, Inc., a Delaware corporation
San Bernadino Rehabilitation Hospital, Inc., a Delaware corporation
Regency Outpatient Services, Inc., a California corporation
Heritage-Torrance Rehabilitation Center
Oasis Mental Health Treatment Center, Inc.
Regency High School, Inc.
Pacific Beach Physical Therapy, Inc.
Peachwood Physical Therapy, Inc.
Regency Rehabilitation Management and Consulting Services, Inc.
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
Accelerated Care Plus, LLC, a Delaware limited liability company
By: Cal-Med, Inc., a California corporation and HC, Inc., a Kansas corporation,
members
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
Hospital Therapy Service of Michigan, LLC, a Michigan limited liability company
By: SunCare Respiratory Services, Inc., an Indiana corporation, member
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
Therapists Unlimited-Baltimore/Washington, D.C., L.P., a Texas limited
partnership
Therapists Unlimited-Chicago II, L.P., a Texas limited partnership
Therapists Unlimited-Detroit II, L.P., a Texas limited partnership
-49-
<PAGE>
Therapists Unlimited-Fresno, L.P., a Texas limited partnership
Therapists Unlimited-Indianapolis, L.P., a Texas limited partnership
Therapists Unlimited-New Orleans, L.P., a Texas limited partnership
Therapists Unlimited-Philadelphia, L.P., a Texas limited partnership
Therapists Unlimited-San Francisco, L.P., a Texas limited partnership
Therapists Unlimited-Seattle, L.P., a Texas limited partnership
Therapists Unlimited-Travelers, L.P., a Texas limited partnership
HSR Partners, L.P.
By: CareerStaff Management, Inc., a Delaware corporation and the general
partner of the above-listed limited partnership Guarantors
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
West Jersey/Mediplex Rehabilitation, L.P.
By: Mediplex of New Jersey, Inc., a New Jersey corporation and its general
partner
By: /s/ Robert D. Woltil
--------------------------------------------
Robert D. Woltil
Chief Financial Officer
Address for all Guarantors:
101 Sun Lane, N.E.
Albuquerque, New Mexico 87109
Attn: Chief Financial Officer
-50-
<PAGE>
Exhibit 10.2
-----------------------------------------
-----------------------------------------
SUN HEALTHCARE GROUP, INC.
ISSUER,
THE GUARANTORS NAMED HEREIN,
AND
U.S. BANK TRUST NATIONAL ASSOCIATION,
TRUSTEE
-----------------------------------------
INDENTURE
Dated as of May 4, 1998
-----------------------------------------
$125,000,000*
9 3/8% Senior Subordinated Notes due 2008
-----------------------------------------
-----------------------------------------
- ---------------
* Subject to increase to up to $150,000,000 in the event an over-allotment
option is exercised
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Incorporation by Reference of TIA. . . . . . . . . . 18
SECTION 1.3. Rules of Construction. . . . . . . . . . . . . . . . 19
ARTICLE II
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . 20
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . 20
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . 21
SECTION 2.4. Paying Agent to Hold Assets in Trust . . . . . . . . 22
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . 22
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . 22
SECTION 2.7. Replacement Securities . . . . . . . . . . . . . . . 28
SECTION 2.8. Outstanding Securities . . . . . . . . . . . . . . . 29
SECTION 2.9. Treasury Securities. . . . . . . . . . . . . . . . . 29
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . 29
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . 30
SECTION 2.13. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Offer to Purchase by Application of Excess
Proceeds. . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.1. Right of Redemption. . . . . . . . . . . . . . . . . 34
SECTION 3.2. Notices to Trustee . . . . . . . . . . . . . . . . . 34
SECTION 3.3. Selection of Securities to Be Redeemed . . . . . . . 35
SECTION 3.4. Notice of Redemption . . . . . . . . . . . . . . . . 35
SECTION 3.5. Effect of Notice of Redemption . . . . . . . . . . . 36
SECTION 3.6. Deposit of Redemption Price. . . . . . . . . . . . . 36
SECTION 3.7. Securities Redeemed in Part. . . . . . . . . . . . . 37
ARTICLE IV
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.1. Payment of Securities. . . . . . . . . . . . . . . . 37
SECTION 4.2. Maintenance of Office or Agency. . . . . . . . . . . 37
i
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SECTION 4.3. Limitation on Restricted Payments. . . . . . . . . . 38
SECTION 4.4. Corporate and Partnership Existence. . . . . . . . . 40
SECTION 4.5. Payment of Taxes and Other Claims. . . . . . . . . . 40
SECTION 4.6. Maintenance of Properties and Insurance. . . . . . . 40
SECTION 4.7. Compliance Certificate; Notice of Default. . . . . . 41
SECTION 4.8. Reports. . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.9. Limitation on Status as Investment Company . . . . . 42
SECTION 4.10. Limitation on Transactions with Affiliates . . . . . 42
SECTION 4.11. Limitation on Incurrence of Additional
Indebtedness and Issuance of Preferred Stock . . . 43
SECTION 4.12. Limitations on Dividends and Other Payment
Restrictions Affecting Subsidiaries. . . . . . . . 45
SECTION 4.13. Limitations on Layering Indebtedness;
Redeemable Stock; Liens Securing Indebtedness. . . 46
SECTION 4.14. Limitation on Sales of Assets and Subsidiary
Stock. . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.15. Waiver of Stay, Extension or Usury Laws. . . . . . . 48
SECTION 4.16. Rule 144A Information Requirement. . . . . . . . . . 48
SECTION 4.17. Limitations on Lines of Business . . . . . . . . . . 48
ARTICLE V
SUCCESSOR CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.1. Limitation on Merger, Sale or Consolidation. . . . . 49
SECTION 5.2. Successor Corporation Substituted. . . . . . . . . . 50
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . 50
SECTION 6.2. Acceleration of Maturity Date; Rescission
and Annulment. . . . . . . . . . . . . . . . . . . 52
SECTION 6.3. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . 54
SECTION 6.4. Trustee May File Proofs of Claim . . . . . . . . . . 54
SECTION 6.5. Trustee May Enforce Claims Without Possession of
Securities . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.6. Priorities . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.7. Limitation on Suits. . . . . . . . . . . . . . . . . 56
SECTION 6.8. Unconditional Right of Holders to Receive
Principal, Premium and Interest. . . . . . . . . . 56
SECTION 6.9. Rights and Remedies Cumulative . . . . . . . . . . . 57
SECTION 6.10. Delay or Omission Not Waiver . . . . . . . . . . . . 57
ii
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SECTION 6.11. Control by Holders . . . . . . . . . . . . . . . . . 57
SECTION 6.12. Waiver of Existing or Past Default . . . . . . . . . 58
SECTION 6.13. Undertaking for Costs. . . . . . . . . . . . . . . . 58
SECTION 6.14. Restoration of Rights and Remedies . . . . . . . . . 58
ARTICLE VII
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.1. Duties of Trustee. . . . . . . . . . . . . . . . . . 59
SECTION 7.2. Rights of Trustee. . . . . . . . . . . . . . . . . . 60
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . 61
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . 61
SECTION 7.5. Notice of Default. . . . . . . . . . . . . . . . . . 62
SECTION 7.6. Reports by Trustee to Holders. . . . . . . . . . . . 62
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . 62
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . 63
SECTION 7.9. Successor Trustee by Merger, Etc. . . . . . . . . .. 64
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . 64
SECTION 7.11. Preferential Collection of Claims Against Company. . 64
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . 65
SECTION 8.1. Discharge; Option to Effect Legal Defeasance or
Covenant Defeasance. . . . . . . . . . . . . . . . 65
SECTION 8.2. Legal Defeasance and Discharge . . . . . . . . . . . 65
SECTION 8.3. Covenant Defeasance. . . . . . . . . . . . . . . . . 66
SECTION 8.4. Conditions to Legal or Covenant Defeasance . . . . . 66
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions. . . 67
SECTION 8.6. Repayment to the Company . . . . . . . . . . . . . . 68
SECTION 8.7. Reinstatement. . . . . . . . . . . . . . . . . . . . 68
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.1. Supplemental Indentures Without Consent of
Holders. . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.2. Amendments, Supplemental Indentures and Waivers
with Consent of Holders. . . . . . . . . . . . . . 70
SECTION 9.3. Compliance with TIA. . . . . . . . . . . . . . . . . 71
SECTION 9.4. Revocation and Effect of Consents. . . . . . . . . . 71
iii
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SECTION 9.5. Notation on or Exchange of Securities. . . . . . . . 72
SECTION 9.6. Trustee to Sign Amendments, Etc. . . . . . . . . . . 72
SECTION 9.7. Agreement by Representative Under the Credit
Agreement. . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X
RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE. . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.1. Repurchase of Securities at Option of the Holder
Upon a Change of Control . . . . . . . . . . . . . 73
ARTICLE XII
GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 12.1. Guarantee. . . . . . . . . . . . . . . . . . . . . . 76
SECTION 12.2. Execution and Delivery of Guarantee. . . . . . . . . 77
SECTION 12.3. Certain Bankruptcy Events. . . . . . . . . . . . . . 78
SECTION 12.4. Limitation on Merger, Consolidation, Etc. of
Guarantors; Release of Certain Guarantors. . . . . 78
SECTION 12.5. Future Guarantors. . . . . . . . . . . . . . . . . . 78
ARTICLE XIII
SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 13.1. Securities Subordinated to Senior Debt. . . . . . . 79
SECTION 13.2. No Payment on Securities in Certain
Circumstances . . . . . . . . . . . . . . . . . . 80
SECTION 13.3. Securities Subordinated to Prior Payment of All
Senior Debt on Dissolution, Liquidation or
Reorganization. . . . . . . . . . . . . . . . . . 81
SECTION 13.4. Securityholders to Be Subrogated to Rights of
Holders of Senior Debt. . . . . . . . . . . . . . 82
SECTION 13.5. Obligations of the Company and the Guarantors
Unconditional . . . . . . . . . . . . . . . . . . 82
SECTION 13.6. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice . . . . . . . . . 83
SECTION 13.7. Application by Trustee of Assets Deposited with
It. . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.8. Subordination Rights Not Impaired by Acts or
Omissions of the Company, the Guarantors or
Holders of Senior Debt. . . . . . . . . . . . . . 84
iv
<PAGE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 13.9. Securityholders Authorize Trustee to Effectuate
Subordination of Securities . . . . . . . . . . . 84
SECTION 13.10. Right of Trustee to Hold Senior Debt. . . . . . . . 84
SECTION 13.11. Article XIII Not to Prevent Events of Default . . . 85
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of
Senior Debt . . . . . . . . . . . . . . . . . . . 85
ARTICLE XIV
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 14.1. TIA Controls. . . . . . . . . . . . . . . . . . . . 85
SECTION 14.2. Notices . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 14.3. Communications by Holders with Other Holders. . . . 86
SECTION 14.4. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . . . 87
SECTION 14.5. Statements Required in Certificate or Opinion . . . 87
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar . . . . . 87
SECTION 14.7. Legal Holidays. . . . . . . . . . . . . . . . . . . 88
SECTION 14.8. Governing Law . . . . . . . . . . . . . . . . . . . 88
SECTION 14.9. No Adverse Interpretation of Other Agreements . . . 88
SECTION 14.10. No Recourse Against Others. . . . . . . . . . . . . 88
SECTION 14.11. Successors. . . . . . . . . . . . . . . . . . . . . 89
SECTION 14.12. Duplicate Originals . . . . . . . . . . . . . . . . 89
SECTION 14.13. Severability. . . . . . . . . . . . . . . . . . . . 89
SECTION 14.14. Table of Contents, Headings, Etc. . . . . . . . . . 89
SECTION 14.15. Qualification of Indenture. . . . . . . . . . . . . 89
SECTION 14.16. Registration Rights . . . . . . . . . . . . . . . . 90
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
EXHIBIT A
[FORM OF SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
</TABLE>
v
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
- ------- ---------
<S> <C>
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7(a);
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
vi
<PAGE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
- ------- ---------
<S> <C>
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b),
. . . . . . . . . . . . . . . . . . . . . . . . . . . . (c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
316(a)(last sentence). . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12;
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
</TABLE>
__________
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
vii
<PAGE>
INDENTURE, dated as of May 4, 1998, by and among Sun Healthcare Group,
Inc., a Delaware corporation (the "COMPANY"), the Guarantors referred to below
and U.S. Bank Trust National Association, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's
9 3/8% Series A Senior Subordinated Notes due 2008 and the class of 9 3/8%
Series B Senior Subordinated Notes due 2008 to be exchanged for the 9 3/8%
Series A Senior Subordinated Notes due 2008:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"APPROVED JURISDICTION" means the United States of America, Canada,
the United Kingdom and any other member nation of the Organization for Economic
Development and Cooperation.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets, including, without limitation, by way of a sale and
leaseback or by merger or consolidation (PROVIDED that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the Section
5.1 or 11.1 and not by Section 4.14), and (ii) the issuance or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause
<PAGE>
(i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $5 million or (b)
for Net Proceeds in excess of $5 million. Notwithstanding the foregoing: (a)
a transfer of assets by the Company to a Subsidiary or by a Subsidiary to the
Company or to another Subsidiary, (b) an issuance of Equity Interests by a
Subsidiary to the Company or to another Subsidiary, and (c) a Nursing
Facility Swap will not be deemed to be an Asset Sale.
"ASSET SALE OFFER" shall have the meaning specified in Section 4.14.
"ASSET SALE PAYMENT" shall have the meaning specified in Section 4.14.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CAREERSTAFF COMPANY" means (i) CareerStaff Unlimited, Inc., a
Delaware corporation and a Wholly Owned Subsidiary of the Company, and its
direct and indirect Wholly Owned Subsidiaries (collectively, "CareerStaff
Unlimited") so long as such persons conduct no material business except
acquiring, holding or selling equity or other interests in other CareerStaff
Companies or (ii) any Subsidiary of the Company (a) in which CareerStaff
Unlimited is the general partner, (b) which is no less than 5% and no more than
10% owned by persons that are not Affiliates of the Company and (c)
substantially all of whose business consists of temporary therapy staffing.
2
<PAGE>
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the government of an
Approved Jurisdiction or any agency or instrumentality thereof having maturities
of not more than one year from the date of acquisition, (iii) certificates of
deposit with maturities of one year or less from the date of acquisition,
bankers' acceptances (or, with respect to foreign banks, similar instruments)
with maturities not exceeding one year and overnight bank deposits, in each case
with any domestic commercial bank organized under the laws of the United States
of America or any state thereof or the District of Columbia, or any United
States branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $500 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's or
S&P and in each case maturing within one year after the date of acquisition, and
(vi) investments in money market funds which invest substantially all their
assets in securities of the types described in the foregoing clauses (i) through
(v).
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole to any Person or group (as
such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than to a Person or group who, prior to such transaction, held a
majority of the voting power of the voting stock of the Company, (ii) the
acquisition by any Person or group (as defined above) of a direct or indirect
interest in more than 50% of the voting power of the voting stock of the
Company, by way of merger or consolidation or otherwise, or (iii) the first
day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"CHANGE OF CONTROL OFFER" shall have the meaning specified in
Section 11.1.
"CHANGE OF CONTROL PAYMENT" shall have the meaning specified in
Section 11.1.
"CHANGE OF CONTROL PAYMENT DATE" shall have the meaning specified in
Section 11.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMENCEMENT DATE" shall have the meaning specified in Section 2.14.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture, and thereafter means such
successor.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus,
without duplication, the sum of (i) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period,
3
<PAGE>
to the extent such provision for taxes was included in computing such
Consolidated Net Income, (ii) the Fixed Charges of such Person and its
Subsidiaries for such period, to the extent that such Fixed Charges were
deducted in computing such Consolidated Net Income, (iii) depreciation and
amortization (including amortization of goodwill and other intangibles) of
such Person and its Subsidiaries for such period to the extent that such
depreciation and amortization were deducted in computing such Consolidated
Net Income, and (iv) other non-cash items of such Person and its Subsidiaries
for such period to the extent such non-cash items were deducted in computing
such Consolidated Net Income, less the amount of all cash payments made by
such person or any of its Subsidiaries during such period to the extent such
payments relate to non-cash charges that were added back in determining
Consolidated Cash Flow for such period or any prior period, in each case on a
consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, the
depreciation and amortization of, and the other non-cash items of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income
to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis; PROVIDED that (i) the Net Income, if
positive, of any Person that is not a Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Subsidiary thereof, but in any case not in excess of such Person's pro
rata share of such Person's Net Income for such period, (ii) the Net Income, if
positive, of any Subsidiary shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of Preferred Stock (other than Redeemable Stock), less all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made in accordance with
GAAP as a result of the acquisition of such business) subsequent to the date of
this Indenture in the book value of any asset
4
<PAGE>
owned by such Person or a consolidated Subsidiary of such Person, and
excluding the cumulative effect of a change in accounting principles, all as
determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"CORPORATE TRUST OFFICE" means the office of the Trustee in the
Borough of Manhattan, The City of New York.
"COVENANT DEFEASANCE" shall have the meaning specified in Section 8.3.
"CREDIT AGREEMENT" means that certain Credit Agreement, dated as of
October 8, 1997, and as amended by the First Amendment thereto dated November
12, 1997 and the Second Amendment thereto dated March 27, 1997, by and among the
Company and NationsBank of Texas, N.A. and the other banks that are parties
thereto, providing for availability of up to $1.2 billion of loans to the
Company in the following components: (a) a revolving credit facility of up to
$500.0 million and (b) three term loans in the amounts of $200.0 million,
$250.0 million and $250.0 million, respectively, including any related notes,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, increased, modified, extended, renewed,
refunded, replaced or refinanced, in whole or in part, from time to time.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means any event or condition that is or with the passage of
time or the giving of notice or both would be an Event of Default.
"DEFAULTED INTEREST" shall have the meaning specified in Section 2.12.
"DEFEASANCE TRUST" shall have the meaning specified in Section 8.4.
"DEFINITIVE SECURITIES" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 3 and 6 thereof.
"DEPOSITORY" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.3 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
5
<PAGE>
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EVENT OF DEFAULT" shall have the meaning specified in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXCHANGE SECURITIES" means the 9 3/8% Series B Senior Subordinated
Notes due 2008, as supplemented from time to time in accordance with the terms
hereof, to be issued pursuant to this Indenture in connection with the offer to
exchange Securities for the Initial Securities that may be made by the Company
and the Guarantors pursuant to the Registration Rights Agreement that contains
the information referred to in footnotes 1 and 2 to the form of Security
attached hereto as Exhibit A.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture, until such amounts are
repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that such
Person or any of its Subsidiaries incurs, assumes, guarantees, redeems or repays
any Indebtedness (other than revolving credit borrowings) or issues or redeems
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee, redemption or
repayment of Indebtedness, or such issuance or redemption of Preferred Stock, as
if the same had occurred at the beginning of the applicable Reference Period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the Reference Period or subsequent to such Reference Period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the Reference Period, and (ii) the Consolidated Cash Flow and Fixed
Charges attributable to operations or businesses disposed of prior to the
Calculation Date shall be excluded (but in the case of Fixed Charges, only to
the extent that the obligations giving rise to such Fixed Charges would no
longer be obligations contributing to such Person's Fixed Charges subsequent to
the Calculation Date).
"FIXED CHARGES" means, with respect to any Person for any period, the
sum (without duplication and determined in each case in accordance with GAAP) of
(i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of
6
<PAGE>
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit
or bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and
(iii) interest under any guarantee by such Person or any of its Subsidiaries
of Indebtedness of any other Person in the amount of interest attributable to
the Indebtedness guaranteed and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Subsidiary) on any series of Preferred Stock of such Person or any of its
Subsidiaries, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP; PROVIDED that in
the event any cash dividend payment is deductible for federal, state and/or
local tax purposes, the amount of the tax deduction relating to such cash
dividend payment for such period shall be subtracted from the Fixed Charges
for such Person for such period.
"FOREIGN COMPANIES" means any Subsidiary of the Company which (i) is
not organized under the laws of the United States, any state thereof or the
District of Columbia and (ii) conducts substantially all of its business
operations in a country other than the United States of America.
"FUTURE SUBSIDIARY GUARANTOR" shall have the meaning specified in
Section 12.5.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, applied on a consistent basis and as in effect from time to time.
"GLOBAL SECURITY" means a Security that contains the information
referred to in footnotes 3 and 8 to the form of Security attached hereto as
Exhibit A.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTEE" shall have the meaning provided in Section 12.1.
"GUARANTORS" means (i) the Present Subsidiary Guarantors and (ii) any
Future Subsidiary Guarantors that become Guarantors pursuant to the terms of
this Indenture, but excluding (a) any Persons whose Guarantees have been
released pursuant to the terms of this Indenture.
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"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts or currency swap agreements and (iii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency values.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security
is registered on the Registrar's books.
"INCUR" or "INCUR" shall have the meaning specified in Section 4.11 of
this Indenture.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) any Redeemable Stock of such Person, (ii) any liabilities and obligations of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or bankers' acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (iii) all liabilities and
obligations of any other Person secured by a Lien on any asset of such Person,
whether or not such indebtedness is assumed by such Person (the amount thereof
being deemed to equal such asset's fair market value), and (iv) to the extent
not otherwise included, the guarantee by such Person of any liabilities or
obligations of any other Person of the kind described in the preceding clauses
(i)-(iii).
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INITIAL PURCHASERS" means Bear, Stearns & Co. Inc., Donaldson, Lufkin
& Jenrette Securities Corporation, J.P. Morgan Securities Inc., NationsBanc
Montgomery Securities LLC and Schroder & Co Inc., severally, and not jointly.
"INITIAL SECURITIES" means the 9 3/8% Series A Senior Subordinated
Notes due 2008, as supplemented from time to time in accordance with the terms
hereof, issued under this Indenture that contains the information referred to in
footnotes 1, 2, 4, 5, 6, 7 and 9 to the form of Security attached hereto as
Exhibit A.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities.
"INVESTMENT" by any Person in any other Person means (without
duplication) (i) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether
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for cash, property, services, securities or otherwise) of capital stock,
bonds, note s, debentures, partnership or other ownership interests or other
securities, including any options or warrants, of such other Person or any
agreement to make any such acquisition; (ii) the making by such Person of any
deposit with, or advance, loan or other extension of credit to, such other
Person (including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property
to such other Person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable or deposits arising in the
ordinary course of business); and (iii) other than guarantees of Indebtedness
of the Company or any Subsidiary to the extent permitted by Section 4.11, the
entering into by such Person of any guarantee of, or other credit support or
contingent obligation with respect to, Indebtedness or other liability of
such other Person; PROVIDED THAT Investments shall not be deemed to include
extensions of trade credit by such Person or any of its Subsidiaries on
commercially reasonable terms in accordance with normal trade practices of
such Person or such Subsidiary, as the case may be.
"ISSUE DATE" means the date of the first issuance of the Securities
under this Indenture.
"JUNIOR SECURITY" means any Qualified Equity Interests and any
Indebtedness of the Company or a Guarantor, as applicable, that is subordinated
in right of payment to Senior Debt at least to the same extent as the Securities
or the Guarantee, as applicable, and has no scheduled installment of principal
due, by redemption, sinking fund payment or otherwise, on or prior to the
Maturity Date.
"LEGAL DEFEASANCE" shall have the meaning specified in Section 8.2.
"LEGAL HOLIDAY" shall have the meaning specified in Section 13.7.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
given to secure Indebtedness, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction with respect to any such lien, pledge, charge or
security interest).
"LIQUIDATED DAMAGES" means such liquidated damages as defined in the
Registration Rights Agreement.
"MATURITY DATE" means, when used with respect to any Security, the
date specified on such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of this Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Offer to
Purchase).
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"MAXIMUM SENIOR REVOLVING DEBT" means Senior Revolving Debt pursuant
to the Credit Agreement in an aggregate principal amount at any time outstanding
(with letters of credit being deemed to have a principal amount equal to the
maximum potential reimbursement obligation of the Company or any such Subsidiary
with respect thereto), and including any Permitted Refinancing Indebtedness
incurred to extend, renew, refinance, defease or refund any such Indebtedness,
incurred under clause (i)(a) of Section 4.11, not to exceed an amount equal to
$500.0 million.
"MAXIMUM SENIOR TERM DEBT" means loans outstanding with respect to any
term loan facilities contained in the Credit Agreement in an aggregate principal
amount at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential reimbursement obligation of the
Company or any such Subsidiary with respect thereto), and including any
Permitted Refinancing Indebtedness incurred to extend, renew, refinance, defease
or refund any such Indebtedness, incurred under clause (i)(b) of Section 4.11,
not to exceed an amount equal to $400.0 million.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the consolidated
net income (loss) of such Person, determined in accordance with GAAP,
excluding, however, the effect of any extraordinary or other material
non-recurring gain or loss outside the ordinary course of business (including
without limitation any gain from the sale or other disposition of assets
outside of the ordinary course of business or from the issuance or sale of
any Equity Interests), together with any related provision for taxes on such
extraordinary or other material non-recurring gain or loss.
"NET PROCEEDS" means the aggregate cash or Cash Equivalent proceeds
received by the Company or any of its Subsidiaries in respect of any Asset Sale,
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any other expenses incurred or to be incurred by the Company or
a Subsidiary as a direct result of the sale of such assets (including, without
limitation, severance, relocation, lease termination and other similar
expenses), taxes actually paid or due and payable as a result thereof in the
year of sale or the immediately following year (after taking into account the
application of deductions, net operating losses and other tax attributes),
amounts required to be applied to the repayment of Indebtedness (other than
Subordinated Indebtedness) secured by a Lien on the asset or assets that were
the subject of such Asset Sale, any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP and all
distributions and other payments required to be made and actually made to
minority interests holders in Subsidiaries as a result of such Asset Sale;
PROVIDED, that if the instrument or agreement governing such Asset Sale requires
the transferor to maintain a portion of the purchase price in escrow (whether as
a reserve for adjustment of the purchase price or otherwise) or to provide for
indemnification of the transferee for specified liabilities in maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligations shall not be deemed to be Net Proceeds until the escrow terminates
or the transferor ceases to segregate and set aside such funds, in whole or
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in part, and then only to the extent of the proceeds released from escrow to
the transferor or that are no longer segregated and set aside by the
transferor.
"NON-CASH CONSIDERATION" means any non-cash or non-Cash Equivalent
consideration received by the Company or a Subsidiary of the Company in
connection with an Asset Sale and any non-cash or non-Cash Equivalent
consideration received by the Company or any of its Subsidiaries upon
disposition thereof.
"NON-QUALIFIED ASSET SALE" means an Asset Sale in which the Non-Cash
Consideration received by the Company and its Subsidiaries exceeds 20% of the
total consideration received in connection with such Asset Sale calculated in
accordance with clause (x), but not clause (y), of the proviso to the first
sentence of Section 4.14.
"NURSING FACILITY" means a nursing facility, hospital, outpatient
clinic, assisted living center, hospice, long-term care facility, subacute care
facility or other facility that is used or useful in the provision of healthcare
services.
"NURSING FACILITY SWAP" means an exchange of assets by the Company or
one or more Subsidiaries of the Company or of the Equity Interests of a
Subsidiary for one or more Nursing Facilities and/or one or more Related
Businesses or of the Equity Interests of any Person owning one or more Nursing
Facilities and/or one or more Related Businesses.
"OBLIGATIONS" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFER AMOUNT" shall have the meaning specified in Section 2.14.
"OFFER PERIOD" shall have the meaning specified in Section 2.14.
"OFFICER" means, with respect to the Company or any Guarantor, the
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Controller, the Secretary or the Assistant Secretary
of the Company or such Guarantor.
"OFFICERS' CERTIFICATE" means, with respect to the Company or such
Guarantor, a certificate signed by two Officers or by an Officer and an
Assistant Secretary of the Company or such Guarantor and otherwise complying
with the requirements of Sections 14.4 and 14.5.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
14.4 and 14.5.
"PAYING AGENT" shall have the meaning specified in Section 2.3.
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"PAYMENT DEFAULT" means any failure to pay any scheduled installment
of principal on any Indebtedness within the grace period provided for such
payment in the documentation governing such Indebtedness.
"PAYMENT NOTICE" shall have the meaning specified in Section 13.2.
"PERMITTED LIENS" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company, PROVIDED that such Liens were in existence prior to
the contemplation of such merger, consolidation or acquisition and do not extend
to any assets other than those of the Person merged into or consolidated with
the Company or that becomes a Subsidiary of the Company; (iii) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, PROVIDED that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any property other than
that acquired; (iv) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens securing Senior Debt
outstanding under the Credit Agreement, Liens securing Existing Indebtedness,
and Liens on the Equity Interests in or assets of Foreign Companies securing
Indebtedness outstanding under Foreign Company credit agreements; (vi) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) Liens to secure Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was secured by a Lien permitted under
this Indenture and that was incurred in accordance with the provisions of this
Indenture, PROVIDED that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries other than assets or property
securing the Indebtedness so refinanced; (viii) Purchase Money Liens; (ix) any
interest or title of a lessor under any Capital Lease Obligation otherwise
permitted by this Indenture; (x) Liens upon specific items of inventory or
equipment and proceeds of the Company or any Subsidiary securing its obligations
in respect of bankers' acceptances issued or created for its account (whether or
not under the Credit Agreement) to facilitate the purchase, shipment, or storage
of such inventory and equipment; (xi) Liens securing reimbursement obligations
with respect to letters of credit (whether or not issued under the Credit
Agreement) otherwise permitted under this Indenture and issued in connection
with the purchase of inventory or equipment by the Company or any Subsidiary in
the ordinary course of business; (xii) Liens to secure (or encumbering deposits
securing) obligations arising from warranty or contractual service obligations
of the Company or any Subsidiary, including rights of offset and setoff; (xiii)
Liens securing Acquired Debt otherwise permitted by this Indenture, PROVIDED
that (A) the Indebtedness secured shall not exceed the fair market value of the
assets so acquired (such fair market value to be determined in good faith by the
Board of Directors of the Company at the time of such acquisition) and (B) such
Indebtedness shall be incurred, and the Lien securing such Indebtedness shall be
created, within 12 months after such acquisition; (xiv) Liens securing Hedging
Obligations agreements relating to Indebtedness otherwise permitted under this
Indenture; (xv) other Liens on assets of the Company or any of its Subsidiaries
securing Indebtedness that
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is permitted by the terms of this Indenture to be outstanding having an
aggregate principal amount at any one time outstanding not to exceed $5
million; (xvi) Liens on Medicare, Medicaid or other patient accounts
receivable of the Company or its Subsidiaries; (xvii) Liens on real estate
and related personal property (including, but not limited to, sale and
leasebacks of and mortgages on real estate and related personal property) not
to exceed an aggregate amount equal to $60 million per year; (xviii) Liens of
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of business; (xix)
easements, rights-of-way, zoning restrictions, reservations, encroachments
and other similar encumbrances in respect of real property; and (xx) Liens
securing stay and appeal bonds or judgment Liens in connection with any
judgment not giving rise to a Default under this Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries (a) issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace, defease
or refund, in whole or in part, or (b) constituting an amendment, modification
or supplement to, or a deferral or renewal of ((a) and (b) above are,
collectively, a "Refinancing"), other Indebtedness of the Company or any of its
Subsidiaries; PROVIDED that: (i) the principal amount of such Permitted
Refinancing Indebtedness does not exceed the lesser of (A) the principal amount
of the Indebtedness so Refinanced and (B) if such Indebtedness being Refinanced
was issued with original issue discount, the accreted value thereof (determined
in accordance with GAAP) (plus, in each case, the amount of any reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final stated maturity later than the final stated maturity
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being Refinanced); (iii)
if the Indebtedness being Refinanced is Subordinated Indebtedness, such
Permitted Refinancing Indebtedness has a final stated maturity later than the
final stated maturity of, and is subordinated in right of payment to, the
Securities on terms at least as favorable to the Holders as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) if the obligor on the
Indebtedness being Refinanced is a Subsidiary that is not a Guarantor, such
Permitted Refinancing Indebtedness shall only be incurred by such Subsidiary.
"PERSON" or "PERSON" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership, limited
liability company, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"PLAN OF LIQUIDATION" means a plan that provides for, contemplates or
the effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company otherwise
than as an entirety or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of the
Company to holders of Capital Stock of the Company.
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"PREFERRED STOCK" means an Equity Interest of any class or classes of
a Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"PRESENT SUBSIDIARY GUARANTORS" means all the Subsidiaries of the
Company listed on Schedule I to this Indenture.
"PRINCIPAL" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, any applicable premium, if any, on such
Indebtedness.
"PROPERTY" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PURCHASE AGREEMENT" means that certain Purchase Agreement dated April
29, 1998 by and among the Company, the Guarantors and the Initial Purchasers, as
such agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"PURCHASE DATE" shall have the meaning specified in Section 2.14.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness of a Person to
any seller or other Person incurred to finance the acquisition or construction
(including in the case of a Capital Lease Obligation, the lease) of any asset or
property which is incurred within 180 days of such acquisition or completion of
construction and is secured only by the assets so financed.
"PURCHASE MONEY LIEN" means a Lien granted on an asset or property to
secure Purchase Money Indebtedness permitted to be incurred under this Indenture
and incurred solely to finance the acquisition of construction of such asset or
property; PROVIDED that such Lien encumbers only such asset or property and is
granted within 180 days of such acquisition or completion of construction.
"QUALIFIED EQUITY INTERESTS" shall mean all Equity Interests of the
Company other than Redeemable Stock of the Company.
"RECORD DATE" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day, or, if applicable, as specified in
Section 2.12.
"REDEEMABLE STOCK" means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of any event,
matures or is mandatorily redeemable (other than redeemable only for Qualified
Equity Interests of the issuer), pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date on which the Securities mature.
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"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to
Paragraph 5 in the form of Security attached hereto as Exhibit A, which shall
include, without duplication, in each case, accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date.
"REFERENCE PERIOD" with regard to any Person means the four full
fiscal quarters (or such lesser period during which such Person has been in
existence) for which internal financial statements are available ended
immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Securities or this Indenture.
"REGISTRAR" shall have the meaning specified in Section 2.3.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the date hereof by and among the Initial Purchasers,
the Company and the Guarantors, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"RELATED BUSINESS" means the business conducted by the Company and
its Subsidiaries as of the date of this Indenture and any and all healthcare
service businesses that in good faith judgment of the Board of Directors of
the Company are materially related businesses. Without limiting the
generality of the foregoing, Related Business shall include the operation of
Nursing Facilities, long-term and specialty healthcare services, skilled
nursing care, subacute care, rehabilitation programs, pharmaceutical
services, health maintenance organizations, insurance companies, preferred
provider organizations or any other form of managed care business, health
care information services business, distribution of medical supplies,
geriatric care and home healthcare or other businesses which provide
ancillary services to long-term and specialty healthcare facilities.
"REPRESENTATIVE" means NationsBank of Texas, N.A., as
representative of the lenders party to the Credit Agreement, until a
successor replaces it pursuant to the Credit Agreement, and thereafter means
such successor.
"RESTRICTED INVESTMENT" means, in one or a series of related
transactions, any Investment, other than (i) Investments in Cash Equivalents,
(ii) Investments in a Subsidiary of the Company, (iii) Investments in any Person
that as a consequence of such Investment becomes a Subsidiary of the Company,
(iv) Investments existing on the date of this Indenture, (v) accounts
receivable, advances, loans, extensions of credit created or acquired in the
ordinary course of business, (vi) Investments made as a result of the receipt of
Non-Cash Consideration from an Asset Sale that was made pursuant to Section
4.14, (vii) Investments made as the result of the guarantee by the Company or
any of its Subsidiaries of Indebtedness of a Person or Persons other
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than the Company or any Subsidiary of the Company that is secured by Liens on
assets sold or otherwise disposed of by the Company or such Subsidiary to
such Person or Persons, provided that such Indebtedness was in existence
prior to the contemplation of such sale or other disposition and that the
terms of such guarantee permit the Company or such Subsidiary to foreclose on
the pledged or mortgaged assets if the Company or such Subsidiary is required
to perform under such guarantee, and (viii) Investments in any Related
Business.
"RESTRICTED SECURITY" means a Security, unless or until it has been
(i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it or (ii) distributed to
the public pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act; PROVIDED, that in no case shall an Exchange
Security issued in accordance with this Indenture and the terms and
provisions of the Registration Rights Agreement be a Restricted Security.
"S&P" means Standard & Poor's, a division of The McGraw Hill
Companies, and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the Initial Securities and, when
and if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"SECURITIES CUSTODIAN" means the Trustee, as custodian with respect
to the Securities in global form, or any successor entity thereto.
"SECURITYHOLDER" or "HOLDER" means the Person in whose name a
Security is registered on the Registrar's books.
"SENIOR DEBT" of the Company or any Guarantor means Indebtedness
(including any monetary obligation in respect of the Credit Agreement, and
interest, whether or not allowable, accruing on Indebtedness incurred
pursuant to the Credit Agreement after the filing of a petition initiating
any proceeding under any bankruptcy, insolvency or similar law) of the
Company or such Guarantor unless, by the terms of the instrument creating or
evidencing such indebtedness, it is expressly designated not to be senior in
right of payment to the Securities or the applicable Guarantee; PROVIDED that
in no event shall Senior Debt include (i) Indebtedness to any Subsidiary of
the Company or any officer, director or employee of the Company or any
Subsidiary of the Company, (ii) Indebtedness incurred in violation of the
terms of this Indenture, (iii) Indebtedness to trade creditors, (iv)
Redeemable Stock and (v) any liability for taxes owed or owing by the Company
or such Guarantor.
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"SENIOR REVOLVING DEBT" means revolving credit loans and letters of
credit outstanding from time to time under the Credit Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 or Regulation
S-X, promulgated pursuant to the Act, as such Regulation is in effect on the
date of this Indenture.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"STOCKHOLDERS' EQUITY" means, with respect to any Person as of any
date, the stockholders' equity of such Person determined in accordance with
GAAP as of the date of the most recent available internal financial
statements of such Person, and calculated on a pro forma basis to give effect
to any acquisition or disposition by such person consummated or to be
consummated since the date of such financial statements and on or prior to
the date of such calculation.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment to the Securities or such
Subsidiary's Guarantee of the Securities, as applicable.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other Person of which (or in which) more
than 50% of (i) the outstanding capital stock having voting power to elect a
majority of the board of directors of such corporation (irrespective of
whether at the time capital of any other class or classes shall or might have
voting power upon the occurrence of any contingency), (ii) the ownership
interests having voting power to elect persons performing functions similar
to the board of directors, (iii) the interest in the capital or profits of
such partnership or joint venture, (iv) the beneficial interest of such
trust, or (v) the equity interest of such other Person, is at the time
directly or indirectly owned by such Person, by such Person and one or more
of its Subsidiaries or by one or more of such Person's Subsidiaries.
"SUN SYSTEMS, INC." means Sun Systems, Inc., a Delaware
corporation, in which the Company expects to have the right to acquire a
majority of the outstanding Equity Interests.
"TIA" means the Trust Indenture Act of 1939, as amended, (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of the execution of this
Indenture, except as provided in Section 9.3.
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are
required to bear the legend set forth in Section 2.6.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
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"TRUST OFFICER" means any officer within the corporate trust
division (or any successor group) of the Trustee or any other officer of the
Trustee customarily performing functions similar to those performed by the
Persons who at that time shall be such officers, and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to
whom such trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"U.K. CREDIT AGREEMENTS" means (i) that certain Facility Agreement,
dated as of August 30, 1996, between Ashbourne plc, Ashbourne Homes
(Developments) Limited, Ashbourne Homes plc, Larstrike Limited, Sedbury Park
Limited (collectively, the "Ashbourne Group"), The Governor and Company of
the Bank of Scotland, and the other banks and financial institutions that are
parties thereto, providing for L25,000,000 in aggregate principal amount of
revolving credit; (ii) that certain Facility Agreement, dated as of August
30, 1996, between the Ashbourne Group, Midland Bank plc, and the other banks
and financial institutions that are parties thereto, providing for
L25,000,000 in aggregate principal amount of revolving credit and (iii) that
certain Credit Facility Agreement with Lloyds Bank plc in the aggregate
principal amount of up to L14.0 million, including in (i), (ii) and (iii)
above, any related notes, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, increased,
modified, extended, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America
for the payment of which obligation or guarantee the full faith and credit of
the United States of America is pledged.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity, or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
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"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder or a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company, each
Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or other subdivision; and
(7) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
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ARTICLE II
THE SECURITIES
SECTION 2.1. FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto,
which Exhibit is part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company shall approve the form of the Securities and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not
contained in the form of Security attached as Exhibit A hereto shall be
delivered in writing to the Trustee. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby. The Company's seal shall be impressed, affixed, printed
or reproduced on the Securities and may be in facsimile.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Security for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless
and the Company shall nevertheless be bound by the terms of the Securities
and this Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Initial Securities for original
issue in the aggregate principal amount of up to $125,000,000 (or up to
$150,000,000 if the over-allotment option is exercised) and shall
authenticate Exchange Securities for original issue in the aggregate
principal amount of up to $125,000,000 (or up to $150,000,000 if the
over-allotment option is exercised), in each case upon a written order of the
Company in the form of an Officers' Certificate; PROVIDED that such Exchange
Securities shall be issuable only upon the valid surrender for cancellation
of Initial Securities of a like aggregate principal amount in accordance with
the Registration Rights Agreement. The Officers' Certificate shall specify
the amount of Securities to be authenticated and the date on which the
Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $125,000,000 (or
$150,000,000 if the over-
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allotment option is exercised), except as provided in Section 2.7. Upon the
written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Securities in substitution of Securities
originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating Agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating Agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such Agent. An authenticating Agent has
the same rights as an Agent to deal with the Company, any Affiliate of the
Company, or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiples thereof.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("REGISTRAR"), and an office or
agency where Securities may be presented for payment ("PAYING AGENT"), and
where notices and demands to or upon the Company in respect of the Securities
may be served. The Company may act as Registrar or Paying Agent, except
that, for the purposes of Articles III, VIII, XI, and Section 4.14 hereof and
as otherwise specified in this Indenture, neither the Company nor any
Affiliate of the Company shall act as Paying Agent. The Registrar shall keep
a register of the Securities and of their transfer and exchange. The Company
may have one or more co-Registrars and one or more additional Paying Agents.
The term "Registrar" includes any co-registrar and the term "Paying Agent"
includes any additional Paying Agent. The Company hereby initially appoints
the Trustee as Registrar and Paying Agent, and by its acknowledgment and
acceptance on the signature page hereto, the Trustee hereby initially agrees
so to act.
The Company shall enter into an appropriate written agency
agreement with any Agent (including the Paying Agent) not a party to this
Indenture, which agreement shall implement the provisions of this Indenture
that relate to such Agent, and shall furnish a copy of each such agreement to
the Trustee. The Company shall promptly notify the Trustee in writing of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints The Depository Trust Company
("DTC"), to act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
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Upon the occurrence of an Event of Default described in Section
6.1(viii) or (ix) hereof, the Trustee shall, or upon the occurrence of any
other Event of Default by notice to the Company, the Registrar and the Paying
Agent, the Trustee may assume the duties and obligations of the Registrar and
the Paying Agent hereunder.
SECTION 2.4. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Securities
(whether such assets have been distributed to it by the Company or any other
obligor on the Securities), and shall notify the Trustee in writing of any
Default in making any such payment. If either of the Company or a Subsidiary
of the Company acts as Paying Agent, it shall segregate such assets and hold
them as a separate trust fund for the benefit of the Holders or the Trustee.
The Company at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default or any
Event of Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for
any assets distributed. Upon distribution to the Trustee of all assets that
shall have been delivered by the Company to the Paying Agent, the Paying
Agent (if other than the Company) shall have no further liability for such
assets.
SECTION 2.5. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee or any Paying Agent is not the Registrar, the Company shall furnish
to the Trustee on or before the third Business Day preceding each Interest
Payment Date and at such other times as the Trustee or any such Paying Agent
may request in writing a list in such form and as of such date as the Trustee
or any such Paying Agent reasonably may require of the names and addresses of
Holders and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES.
When Definitive Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations,
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the Registrar shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; PROVIDED,
HOWEVER, that the Definitive Securities surrendered for registration of
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that
are Definitive Securities, shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder
to that effect (in substantially the form set forth on the reverse
of the Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (within the
meaning of Rule 144A promulgated under the Securities Act), that is
aware that any sale of Securities to it will be made in reliance on
Rule 144A under the Securities Act and that is acquiring such
Transfer Restricted Security for its own account or for the account
of another such "qualified institutional buyer," a certification
from such Holder to that effect (in substantially the form set
forth on the reverse of the Security); or
(C) if such Transfer Restricted Security is being
transferred pursuant to an exemption from registration in
accordance with Rule 144, or outside the United States in an
offshore transaction in compliance with Rule 904 under the
Securities Act, or pursuant to an effective registration statement
under the Securities Act, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Security); or
(D) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the registration
requirements of the Securities Act and with all applicable
securities laws of the States of the United States, a certification
from such Holder to that effect (in substantially the form set
forth on the reverse of the Security) and an Opinion of Counsel
reasonably acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt
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by the Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the
reverse of the Security, that such Definitive Security is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions directing the Trustee
to make, or to direct the Securities Custodian to make, an endorsement
on the Global Security to reflect an increase in the aggregate principal
amount of the Securities represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased accordingly. If no Global
Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate a new Global Security in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The
transfer and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if any) and
the procedures of the Depositary therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL
SECURITY FOR A DEFINITIVE SECURITY.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Trustee of written
instructions or such other form of instructions as is customary for the
Depositary, from the Depositary or its nominee on behalf of any Person
having a beneficial interest in a Global Security, and upon receipt by
the Trustee of a written instruction or such other form of instructions
as is customary for the Depositary or the Person designated by the
Depositary as having such a beneficial interest in a Transfer Restricted
Security only, the following additional information and documents (all
of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being the beneficial
owner, a certification from the transferor that effect (in
substantially the form set forth on the reverse of the Security); or
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(B) if such beneficial interest is being transferred to
a "qualified institutional buyer" (within the meaning of Rule 144A
promulgated under the Securities Act), that is aware that any sale
of Securities to it will be made in reliance on Rule 144A under the
Securities Act and that is acquiring such beneficial interest in
the Transfer Restricted Security for its own account or the account
of another such "qualified institutional buyer", a certification to
that effect from the transferor (in substantially the form set
forth on the reverse of the Security); or
(C) if such beneficial interest is being transferred
pursuant to an exemption from registration in accordance with Rule
144, or outside the United States in an offshore transaction in
compliance with Rule 904 under the Securities Act, or pursuant to
an effective registration statement under the Securities Act, a
certification from the transferor to that effect (in substantially
the form set forth on the reverse of the Security); or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act and in accordance with all applicable securities
laws of the States of the United States, a certification to that
effect from the transferor (in substantially the form set forth on
the reverse of the Security) or an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and
to the Registrar to the effect that such transfer is in compliance
with the Securities Act,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian,
the aggregate principal amount of the Global Security to be reduced and,
following such reduction, the Company will execute and, upon receipt of
an authentication order in the form of an Officers' Certificate, the
Trustee's authenticating Agent will authenticate and deliver to the
transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Securities to the persons in whose names
such Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
SECURITIES. Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in subsection (f) of this Section 2.6), a
Global Security may not be transferred as a whole except by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
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(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE
OF DEPOSITARY. If at any time:
(i) the Depositary for the Securities notifies the
Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Securities and a successor Depositary for the
Global Securities is not appointed by the Company within ninety days
after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive
Securities, will, or its authenticating Agent will, authenticate and deliver
Definitive Securities, in an aggregate principal amount equal to the
principal amount of the Global Securities, in exchange for such Global
Securities.
(g) LEGENDS.
(i) Except as permitted by the following paragraph (ii),
each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT)(A "QIB"), OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING
THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL
NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING
INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES
ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE
DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLI-
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ANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE STATE SECURITIES LAWS OR (F) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Act or an effective
registration statement under the Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security; and
(B) any such Transfer Restricted Security represented by
a Global Security shall not be subject to the provisions set forth
in (i) above (such sales or transfers being subject only to the
provisions of Section 2.6(c) hereof; PROVIDED, HOWEVER, that with
respect to any request for an exchange of a Transfer Restricted
Security that is represented by a Global Security for a Definitive
Security that does not bear a legend, which request is made in
reliance upon Rule 144, the Holder thereof shall certify in writing
to the Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form set forth
on the reverse of the Security).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY.
At such time as all beneficial interests in a Global Security have either
been exchanged for Definitive Securities, redeemed, repurchased or cancelled,
such Global Security shall be returned to or
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retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged
for Definitive Securities, redeemed, repurchased or cancelled, the principal
amount of Securities represented by such Global Security shall be reduced and
an endorsement shall be made on such Global Security, by the Trustee or the
Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES
OF DEFINITIVE SECURITIES.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee or any authenticating agent of
the Trustee shall authenticate Definitive Securities and Global
Securities at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax, assessments, or
similar governmental charge payable in connection therewith (other than
any such transfer taxes, assessments, or similar governmental charge
payable upon exchanges or transfers pursuant to Section 2.2 (fourth
paragraph), 2.10, 3.7, 2.14 (subparagraph 8), 9.5, or 11.1 hereof.
(iii) The Registrar shall not be required to register the
transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the mailing
of a notice of an offer to repurchase pursuant to Article XI or Section
4.14 hereof or redemption of Securities pursuant to Article III hereof and
ending at the close of business on the day of such mailing.
(iv) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect
to any transfer of any interest in any Security (including any transfers
between or among Depositary participants or beneficial owners of interests
in any Global Security) other than to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to do
so if and when expressly required by the terms of, this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements thereof.
SECTION 2.7. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Trustee, to the Trustee to the effect that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other
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indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. In the case of any lost Security that
will become due and payable within 30 days, the Company can choose to pay
such Security rather than replacing such Security. The Company may charge
such Holder for its reasonable, out-of-pocket expenses in replacing a
Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected
by the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Security, except as provided in
Section 2.9 hereof.
If a Security is replaced pursuant to Section 2.7 hereof (other
than a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a BONA FIDE purchaser. A mutilated Security
ceases to be outstanding upon surrender of such Security and replacement
thereof pursuant to Section 2.7 hereof.
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds cash sufficient
to pay all of the principal and interest and premium, if any, due on the
Securities payable on that date and payment of the Securities called for
redemption is not otherwise prohibited, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, amendment, supplement, waiver
or consent, Securities owned by the Company or Affiliates of the Company
shall be disregarded, except that, for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but
may have variations that the Company reasonably and in good faith consider
appropriate for temporary Securities. Without unreasonable delay, the
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Company shall prepare and the Trustee shall, upon receipt of a written order
of the Company in the form of an Officers' Certificate, authenticate
Definitive Securities in exchange for temporary Securities. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as permanent Securities authenticated and
delivered hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for registration, transfer,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall cancel and, unless directed otherwise, shall
dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. The Trustee shall provide evidence of destruction to the
Company. Subject to Section 2.7 hereof, the Company may not issue new
Securities to replace Securities that have been paid or delivered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or
in exchange for any Securities cancelled as provided in this Section 2.11
hereof, except as expressly permitted in the form of Securities and as
permitted by this Indenture.
SECTION 2.12. DEFAULTED INTEREST.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the
person in whose name that Security (or one or more predecessor Securities) is
registered at the close of business on the Record Date for such interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus any
interest payable on the defaulted interest at the rate and in the manner
provided in Section 4.1 hereof and the Security (herein called "DEFAULTED
INTEREST"), shall forthwith cease to be payable to the registered holder on
the relevant Record Date, or, as applicable, the Special Record Date (as
defined below), and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the Securities (or
their respective predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee and the Paying Agent in writing of the amount
of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit
with the Paying Agent an amount of cash equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Paying Agent for such deposit prior to
the date of the proposed payment, such cash when deposited to be held in
trust for the benefit of the
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persons entitled to such Defaulted Interest as provided in this clause
(1). Thereupon the Paying Agent shall fix a special record date for the
payment of such Defaulted Interest (a "SPECIAL RECORD DATE"), which
shall be not more than 15 days, and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt
by the Paying Agent of the notice of the proposed payment. The Paying
Agent Trustee shall promptly notify the Company and the Trustee of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
register not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the persons in whose names the
Securities (or their respective predecessor Securities) are registered
on such Special Record Date and shall no longer be payable pursuant to
the following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee and the Paying Agent of the proposed payment
pursuant to this clause, such manner shall be deemed practicable by the
Trustee and the Paying Agent.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon the registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; PROVIDED that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.
SECTION 2.14. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that the Company shall commence an Asset Sale Offer
pursuant to Section 4.14 hereof, it shall follow the procedures specified below.
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No later than 10 days following the date on which the aggregate amount
of Excess Proceeds exceeds $25 million, the Company shall notify the Trustee of
such Asset Sale Offer and provide the Trustee with an Officers' Certificate
setting forth, in addition to the information to be included therein pursuant to
Section 4.14 hereof, the calculations used in determining the amount of Net
Proceeds to be applied to the purchase of Securities. The Company shall
commence or cause to be commenced such Asset Sale Offer on a date no later than
20 days after such notice (the "COMMENCEMENT DATE").
The Asset Sale Offer shall remain open for at least 20 Business Days
after the Commencement Date relating to such Asset Sale Offer and shall remain
open for no more than such 20 Business Days, except to the extent required by
applicable law (as so extended, the "OFFER PERIOD"). No later than three
Business Days after the termination of the Offer Period (the "PURCHASE DATE"),
the Company shall purchase the principal amount (the "OFFER AMOUNT") of
Securities required to be purchased in such Asset Sale Offer pursuant to Section
4.14 hereof or, if less than the Offer Amount has been tendered, all Securities
tendered in response to the Asset Sale Offer, in each case for an amount in cash
equal to the Asset Sale Payment (as defined herein).
If the Purchase Date is on or after an interest payment record date
and on or before the related interest payment date, any accrued interest shall
be paid to the Person in whose name a Security is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Securities pursuant to the Asset Sale Offer.
On the Commencement Date of any Asset Sale Offer, the Company shall
send or shall cause to be sent by first class mail, a notice to each of the
Holders at their last registered address, with a copy to the Trustee and the
Paying Agent, offering to repurchase the Securities held by such Holder pursuant
to the procedure specified in such notice. Such notice, which shall govern the
terms of the Asset Sale Offer, shall contain all instructions and materials
necessary to enable the Holders to tender Securities pursuant to the Asset Sale
Offer and shall state:
(1) that the Asset Sale Offer is being made
pursuant to this Section 2.14 and Section
4.14 hereof and the length of time the Asset
Sale Offer shall remain open;
(2) the Offer Amount, the Asset Sale Payment and
the Purchase Date;
(3) that any Security not tendered or accepted
for payment shall continue to accrue
interest;
(4) that, unless the Company defaults in the
payment of the Purchase Price, any Security
accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest
after the Purchase Date;
(5) that Holders electing to have a Security
purchased pursuant to any Asset Sale Offer
shall be required to surrender the Security,
with the form
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entitled "Option of Holder to
Elect Purchase" on the reverse of the
Security completed, to the Company, a
depositary, if appointed by the Company, or a
Paying Agent at the address specified in the
notice prior to the close of business on the
Business Day next preceding the Purchase
Date;
(6) that Holders shall be entitled to withdraw
their election if the Company, depositary or
Paying Agent, as the case may be, receives,
not later than the close of business on the
Business Day next preceding the termination
of the Offer Period, a facsimile transmission
or letter setting forth the name of the
Holder, the principal amount of the Security
the Holder delivered for purchase and a
statement that such Holder is withdrawing his
election to have such Security purchased;
(7) that, if the aggregate principal amount of
Securities surrendered by Holders exceeds the
Offer Amount, the Trustee shall select the
Securities to be purchased on a PRO RATA
basis (with such adjustments as may be deemed
appropriate by the Trustee so that only
Securities in denominations of $1,000, or
integral multiples thereof, shall be
purchased); and
(8) that Holders whose Securities were purchased
only in part shall be issued new Securities
equal in principal amount to the unpurchased
portion of the Securities surrendered.
On the Purchase Date, the Company shall, to the extent lawful, (i)
accept for payment, on a PRO RATA basis to the extent necessary, an aggregate
principal amount equal to the Offer Amount of Securities and other Indebtedness
ranking on a parity with the Securities whose provisions require the Company to
make an offer to purchase or redeem such Indebtedness with proceeds from any
asset sales tendered pursuant to the Asset Sale Offer, or if less than the Offer
Amount has been tendered, all Securities and other Indebtedness or portions
thereof so tendered, (ii) deposit with the Paying Agent an amount equal to the
Purchase Price in respect of all Securities and other Indebtedness or portions
thereof so tendered but which does not exceed the Offer Amount and (iii) deliver
or cause to be delivered to the Trustee the Securities and other Indebtedness so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Securities and other Indebtedness or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to each Holder of
Securities so tendered payment in an amount equal to the Purchase Price for such
Securities and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) a new Security to such Holder equal in principal
amount to any unpurchased portion of the Securities surrendered, if any;
PROVIDED that each such new Security shall be in a principal amount of $1,000 or
an integral multiple thereof. The Company shall publicly announce the results
of the Asset Sale Offer on or as soon as practicable after the Purchase Date.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and
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regulations are applicable in connection with the purchase
of Securities and other Indebtedness as a result of the Asset Sale Offer. To
the extent the provisions of any such rule conflict with the provisions of this
Indenture relating to an Asset Sale Offer, the Company shall comply with the
provisions of such rule and be deemed not to have breached its obligations
relating to the Asset Sale Offer by virtue thereof.
ARTICLE III
REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION.
Redemption of Securities, as permitted by the provisions of this
Indenture, shall be made in accordance with such provisions and this Article
III. The Company will not have the right to redeem any Securities prior to May
1, 2003. On or after May 1, 2003, the Company will have the right to redeem all
or any part of the Securities pursuant to paragraph 5 thereof, in each case
(subject to the right of Holders of record on a Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Redemption Date, and
subject to the provisions set forth in Section 3.5), including accrued and
unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date.
Except as provided in this paragraph and paragraph 5 of the
Securities, the Securities may not otherwise be redeemed at the option of the
Company.
SECTION 3.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Paying Agent to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee and
the Paying Agent for cancellation, it shall so notify the Trustee, in the form
of an Officers' Certificate, and the Paying Agent of the amount of the reduction
and deliver such Securities with such notice.
The Company shall give each notice to the Trustee and the Paying Agent
provided for in this Section 3.2 at least 40 days before the Redemption Date
(unless a shorter notice shall be satisfactory to the Trustee and the Paying
Agent). Any such notice may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
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SECTION 3.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a
PRO RATA basis, by lot or by such other method as the Trustee shall determine to
be appropriate and fair and in such manner as complies with any applicable
Depositary, legal and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
and the Paying Agent in writing of the Securities selected for redemption and,
in the case of any Security selected for partial redemption, the principal
amount thereof to be redeemed. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.4. NOTICE OF REDEMPTION.
At least 30 days, but not more than 60 days prior to the Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee, the Paying Agent and each Holder whose Securities are
to be redeemed. At the Company's request, the Paying Agent shall give the
notice of redemption in the Company's name and at the Company's expense. Each
notice for redemption shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest and Liquidated Damages, if any, to be paid upon such
redemption;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such notice to
collect the Redemption Price;
(5) that, unless (a) the Company defaults in its obligation
to deposit with the Paying Agent cash which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms
will provide the amount to fund the Redemption Price in accordance with
Section 3.6 hereof or (b) such redemption payment is prohibited, interest
on Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including accrued
and unpaid interest to the Redemption Date, upon surrender to the Paying
Agent of the Securities called for redemption and to be redeemed;
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(6) if any Security is being redeemed in part, the portion
of the principal amount, equal to $1,000 or any integral multiple thereof,
of such Security to be redeemed and that, after the Redemption Date, and
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the optional redemption provisions of Paragraph 5 of
the Securities.
SECTION 3.5. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4
hereof, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price, including accrued and unpaid
interest to the Redemption Date. Upon surrender to the Trustee or Paying Agent,
such Securities called for redemption shall be paid at the Redemption Price,
including interest, if any, accrued and unpaid to the Redemption Date; PROVIDED
that if the Redemption Date is after a regular Record Date and on or prior to
the Interest Payment Date, to which such Record Date relates, the accrued
interest shall be payable to the Holder of the redeemed Securities registered on
the relevant Record Date; and PROVIDED, FURTHER, that if a Redemption Date is a
Legal Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
SECTION 3.6. DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) cash
sufficient to pay the Redemption Price of all Securities to be redeemed on such
Redemption Date (other than Securities or portions thereof called for redemption
on that date that have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any cash
so deposited which is not required for that purpose upon the written request of
the Company.
If the Company complies with the preceding paragraph and payment of
the Securities called for redemption is not prohibited for any reason, interest
on the Securities to be redeemed will cease to accrue on the applicable
Redemption Date, whether or not such Securities are presented for payment.
Notwithstanding anything herein to the contrary, if any Security surrendered for
redemption in the manner provided in the Securities shall not be so paid upon
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surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall continue to accrue and be paid from the
Redemption Date until such payment is made on the unpaid principal, and, to the
extent lawful, on any interest not paid on such unpaid principal, in each case
at the rate and in the manner provided in Section 4.1 hereof and the Security.
SECTION 3.7. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest (and Liquidated
Damages, if any) on the Securities on the dates and in the manner provided
herein and in the Securities. An installment of principal of or interest (and
Liquidated Damages, if any) on the Securities shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds for the benefit of the Holders, (on or before
10:00 a.m. New York City time to the extent necessary to provide the funds to
the Depository in accordance with the Depository's procedures) on that date cash
deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest (and Liquidated Damages, if any) at the rate specified
in the Securities compounded semi-annually, to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company and the Guarantors shall maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company and the Guarantors in respect of the Securities and this Indenture
may be served. The Company and the Guarantors shall give prompt written notice
to the Trustee and the Paying Agent of the location, and any change in the
location, of such office or agency. If at any time the Company and the
Guarantors shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee and the Paying Agent with the address thereof,
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such presentations, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 14.2 hereof.
The Company and the Guarantors may also from time to time designate
one or more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company and the Guarantors of their obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company and the Guarantors shall give prompt written
notice to the Trustee and the Paying Agent of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company and the Guarantors hereby initially designates the Corporate Trust
Office of the Trustee as such office.
SECTION 4.3. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on account of the Equity Interests of the Company or any of its
Subsidiaries (other than (x) dividends or distributions to the extent payable in
Qualified Equity Interests of the Company, (y) dividends or distributions to the
extent payable to the Company or any Subsidiary of the Company, and
(z) dividends or distributions by any Wholly Owned Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company, or any of its Subsidiaries; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Subordinated Indebtedness, except at the original final stated
maturity date thereof; or (iv) make any Restricted Investment (all such payments
and other actions set forth in clauses (i) through (iv) above being collectively
referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving
effect to such Restricted Payment (the amount of any such Restricted Payment, if
other than cash or Cash Equivalents, shall be the fair market value (as
reasonably determined and evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee prior to the
making of such Restricted Payment) of the asset(s) proposed to be transferred by
the Company or such Subsidiary, as the case may be, pursuant to such Restricted
Payment):
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the Reference
Period immediately preceding the date of such Restricted Payment,
have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.11; and
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(c) such Restricted Payment, together with the aggregate
of all other Restricted Payments made by the Company and its
Subsidiaries after March 31, 1997 (excluding Restricted Payments
permitted by clauses (x), (y) and (z) of the next succeeding
paragraph), is less than the sum (without duplication) of (i) 50%
of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after March 31, 1997 to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate
net cash proceeds received by the Company from the issue or sale
(other than to a Subsidiary of the Company) since March 31, 1997 of
(A) Qualified Equity Interests of the Company or (B) debt securities
of the Company or any of its Subsidiaries that were issued after
March 31, 1997 and have been converted into or exchanged for
Qualified Equity Interests of the Company, plus (iii) to the extent
that any Restricted Investment that was made after July 8, 1997 is
sold for cash or otherwise liquidated or repaid for cash, the lesser
of (A) the cash return to the Company and its Subsidiaries of capital
with respect to such Restricted Investment (net of taxes and the
cost of disposition, if any) or (B) the initial amount of such
Restricted Investment.
The immediately preceding paragraph will not prohibit the following
Restricted Payments: (u) dividends or distributions paid by any Subsidiary of
the Company to holders of Capital Stock of such Subsidiary other than the
Company or another Subsidiary of the Company, PROVIDED that such dividends
and distributions are paid (1) on a PRO RATA basis to each holder of Capital
Stock of such Subsidiary or (2) in the case of payment by a Career Staff
Company, in accordance with the partnership agreement thereof; (v) the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have otherwise complied
with the provisions of this Indenture; (w) the payment of up to an aggregate
of $22.5 million for the redemption or other acquisition of any of the
outstanding 6-1/2% Convertible Subordinated Debentures due 2003; (x) the
redemption, repurchase, retirement or other acquisition of any Equity
Interests of the Company issued after July 8, 1997 in exchange for, or out of
the net cash proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of Qualified Equity Interests of the Company,
PROVIDED that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (y) the defeasance,
redemption or repurchase of Subordinated Indebtedness issued after July 8,
1997 with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or in exchange for or out of the net cash proceeds from the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Qualified Equity Interests of the Company, PROVIDED that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; and (z) any purchase or defeasance of Subordinated
Indebtedness to the extent required upon a change of control (as defined
therein) by the indenture or other agreement or instrument pursuant to which
such Subordinated Indebtedness was issued, but only if the Company has
complied with its obligations
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under the provisions of Section 11.1 hereof; PROVIDED that in the case of
each of clauses (u), (v), (w), (x), (y) and (z) of this paragraph no Default
or Event of Default shall have occurred or be continuing at the time of such
Restricted Payment or would occur as a consequence thereof.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by this Section 4.3 were computed.
SECTION 4.4. CORPORATE AND PARTNERSHIP EXISTENCE.
Subject to Article V, the Company and the Guarantors shall do or
cause to be done all things necessary to preserve and keep in full force and
effect their respective corporate or partnership existence, as the case may
be, and the corporate or partnership existence, as the case may be, of each
of their Subsidiaries in accordance with the respective organizational
documents of each of them and the rights (charter and statutory) and
corporate franchises of the Company, the Guarantors and each of their
respective Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any
Guarantor shall be required to preserve, with respect to themselves, any
right or franchise, and with respect to any of their respective Subsidiaries,
any such existence, right or franchise, if (a) the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and (b) the loss thereof is not adverse in any
material respect to the Holders.
SECTION 4.5. PAYMENT OF TAXES AND OTHER CLAIMS.
Except with respect to immaterial items, the Company and the
Guarantors shall, and shall cause each of their Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to taxes) levied
or imposed upon the Company, any Guarantor or any of their Subsidiaries or
any of their respective properties and assets and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property and assets of the Company, any Guarantor or any of their
Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any Guarantor
shall be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for which
disputed amounts adequate reserves have been established in accordance with
GAAP.
SECTION 4.6. MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company and the Guarantors shall cause all material properties,
in the good faith opinion of the Company, used or useful to the conduct of
their business and the business of each of their Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable
wear and tear excepted) and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof,
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all as in their reasonable judgment may be necessary, so that the business
carried on in connection therewith may be properly conducted at all times;
PROVIDED, HOWEVER, that nothing in this Section 4.6 shall prevent the Company
or any Guarantor from discontinuing any operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is (a), in the judgment of the Board of Directors of the Company,
desirable in the conduct of the business of the Company and (b) not adverse
in any material respect to the Holders.
The Company and the Guarantors shall provide, or cause to be
provided, for themselves and each of their Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
reasonable, good faith opinion of the Company is adequate and appropriate for
the conduct of the business of the Company, the Guarantors and such
Subsidiaries in a prudent manner, with (except for self-insurance) reputable
insurers or with the government of the United States of America or an agency
or instrumentality thereof, in such amounts, with such deductibles, and by
such methods as shall be customary, in the reasonable, good faith opinion of
the Company and adequate and appropriate for the conduct of the business of
the Company, the Guarantors and such Subsidiaries in a prudent manner for
entities similarly situated in the industry, unless the Company determines
that failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition
or results of operations of the Company, such Guarantors or such Subsidiary.
SECTION 4.7. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee within 120
days after the end of its fiscal year an Officers' Certificate, one of the
signers of which shall be the principal executive, principal financial or
principal accounting officer of the Company, complying with Section 314(a)(4)
of the TIA and stating that a review of its activities and the activities of
its Subsidiaries, if any, during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining
whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture (without regard to notice requirements or
grace periods) and further stating, as to each such Officer signing such
certificate, whether or not the signer knows of any failure by the Company,
any Guarantor or any Subsidiary of the Company to comply with any conditions
or covenants in this Indenture and, if such signer does know of such a
failure to comply, the certificate shall describe such failure with
particularity. The Officers' Certificate shall also notify the Trustee
should the relevant fiscal year end on any date other than the current fiscal
year end date.
(b) The Company shall, so long as any of the Securities
are outstanding, deliver to the Trustee, promptly upon becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto. The Trustee shall not be deemed to have knowledge of
any Default, any Event of Default or any such fact unless one of its Trust
Officers receives written notice thereof from the Company or any of the
Holders.
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SECTION 4.8. REPORTS.
Whether or not the Company is required by the rules and regulations
of the Commission, so long as any Securities are outstanding, the Company
will furnish to the Trustee and all Holders, within 15 days after it is or
would have been required to file such with the Commission, all quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants. In addition, whether or not required by the rules
and regulations of the Commission but only to the extent permitted thereby,
the Company will file a copy of all such information and reports with the
Commission for public availability and make such information available to
securities analysts and prospective investors upon request. Notwithstanding
anything contrary herein the Trustee shall have no duty to review such
documents for purposes of determining compliance with any provisions of this
Indenture.
SECTION 4.9. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company and the Guarantors shall not and shall not permit any
of their Subsidiaries to become an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended), or otherwise
become subject to regulation under the Investment Company Act.
SECTION 4.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries
to sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION"), or any series of related Affiliate Transactions, unless (i)
such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that could have been obtained
in a comparable transaction by the Company or such Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to an Affiliate Transaction, or any series of related Affiliate
Transactions, involving aggregate consideration in excess of $2.5 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to an
Affiliate Transaction, or any series of related Affiliate Transactions,
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Company or such Subsidiary of such Affiliate Transaction
from a financial point of view issued by an investment banking firm of
national standing; PROVIDED that the following shall not be deemed to be
Affiliate Transactions: (w) transactions or payments pursuant to any
employment arrangements, director or officer indemnification agreements or
employee or director benefit plans entered into by the Company or any of its
Subsidiaries in the ordinary course of
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business of the Company or such Subsidiary, (x) transactions between or among
the Company and/or any of its Subsidiaries, (y) any transaction or series of
related transactions pursuant to terms entered into prior to the date of this
Indenture and (z) Restricted Payments by the Company which are permitted by
Section 4.3 and are made on a PRO RATA basis to each stockholder of the
Company.
SECTION 4.11. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (individually and collectively, "INCUR") after the date of
this Indenture any Indebtedness (including Acquired Debt), and the Company
will not permit any of its Subsidiaries to issue any shares of Preferred
Stock; PROVIDED that the Company and its Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue Preferred Stock if (a) no Default or Event
of Default shall have occurred and be continuing at the time of, or would
occur after giving effect on a pro forma basis to, such incurrence of
Indebtedness or issuance of Preferred Stock and (b) the Fixed Charge Coverage
Ratio for the Reference Period immediately preceding the date on which such
additional Indebtedness is incurred or such Preferred Stock is issued would
have been at least 2.0 to 1 for incurrences on or prior to June 30, 1999,
2.25 to 1 for incurrences after June 30, 1999 and on or prior to June 30,
2000 and 2.5 to 1 thereafter, in each case determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Preferred Stock issued at
the beginning of such Reference Period. Indebtedness consisting of
reimbursement obligations in respect of a letter of credit will be deemed to
be incurred when the letter of credit is first issued.
The foregoing paragraph will not prevent:
(i) the incurrence under this clause (i) by the Company or any of
its Subsidiaries (other than the Foreign Companies) of (a) Maximum Senior
Revolving Debt, less the aggregate amount of all Net Proceeds of Asset
Sales applied to permanently reduce the commitments with respect to such
Indebtedness pursuant to Section 4.14 hereof after the Issue Date and (b)
Maximum Senior Term Debt less the aggregate amount of all principal
payments made with respect to such Senior Maximum Term Debt;
(ii) the incurrence by the Foreign Companies of Senior Revolving Debt
pursuant to the U.K. Credit Agreements in an aggregate principal amount at
any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential reimbursement obligation of
the Foreign Companies with respect thereto and including any Permitted
Refinancing Indebtedness incurred under this clause (ii) to extend, renew,
refinance, defense, or refund any such Indebtedness) not to exceed an
amount equal to L75.0 million (or the equivalent amount thereof, at the
time of incurrence, in other foreign currencies), less the aggregate
amount of all Net Proceeds of
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Assets Sales applied to permanently reduce the commitments with respect
to such Indebtedness pursuant to Section 4.14 hereof after the Issue Date;
(iii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Securities (including the over-allotment
option to purchase up to an additional $25,000,000 principal amount of the
Securities);
(iv) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred
(including, without limitation, Existing Indebtedness);
(v) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and/or any
Subsidiaries; PROVIDED that in the case of such Indebtedness of the
Company or the Guarantors, such obligations shall be unsecured and
subordinated in all respects to the Company's and the Guarantors'
obligations pursuant to the Securities and the Guarantees and a new
incurrence shall be deemed to occur for purposes of this covenant
upon any such Subsidiary ceasing to be a Subsidiary such that such
Indebtedness is no longer intercompany Indebtedness between or among
the Company and/or any Subsidiaries;
(vi) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate or currency risk with respect to any fixed or floating rate
Indebtedness that is permitted by this Indenture to be outstanding or any
receivable or liability the payment of which is determined by reference to
a foreign currency; PROVIDED that the notional principal amount of any
such Hedging Obligation does not exceed the principal amount of the
Indebtedness or the amount of such receivable or liability to which such
Hedging Obligation relates;
(vii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by performance bonds, warranty or contractual
service obligations, standby letters of credit or appeal bonds, in each
case to the extent incurred in the ordinary course of business of the
Company or such Subsidiary in accordance with customary industry
practices, in amounts and for the purposes customary in the Company's
industry; and
(viii) the incurrence by the Company or any of the Guarantors or
the Foreign Companies of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate principal
amount at any time outstanding (including any Indebtedness issued to
extend, refinance, replace, defease or refund such Indebtedness) not to
exceed $75.0 million (or the equivalent amount thereof, at the time of
incurrence, in other foreign currencies).
For purposes of determining any particular amount of Indebtedness
under this covenant and so as to avoid duplication, guarantees, Liens or
obligations with respect to letters
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of credit supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included. For purposes of determining
compliance with this covenant, (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness permitted by
the second paragraph of this covenant, except as specifically stated
otherwise and only at the time of such incurrence the Company, such Guarantor
or such Subsidiary shall classify such item of Indebtedness, and only be
required to include the amount and type of such Indebtedness as being
incurred in one of the categories of permitted Indebtedness described above
and (ii) the outstanding principal amount on any date of any Indebtedness
issued with original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of such
Indebtedness on such date.
SECTION 4.12. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of
any Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to or on behalf of the Company or
any of its Subsidiaries or (iii) transfer any of its properties or assets to
or on behalf of the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of this Indenture, (b) this Indenture
or any indenture or similar instrument governing Indebtedness ranking on a
parity with the Securities, PROVIDED that such restrictions are no more
restrictive than those contained in this Indenture, (c) applicable law, (d)
any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Subsidiaries as in effect at the time of such
acquisition or merger (except to the extent incurred in connection with or in
contemplation of such acquisition or merger or in violation of Section 4.11,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired or merged, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business, (f)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii)
above solely on the property so acquired, (g) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive
than those contained in and do not apply to any other assets or person than
was covered by the agreements governing the Indebtedness being refinanced, or
(h) the Credit Agreement, the U.K. Credit Agreements and future Foreign
Company credit agreements, including related documentation as the same is in
effect on July 8, 1997 and as amended or replaced from time to time (and
Senior Debt under other credit agreements with lender banks or other
financial institutions that are no more restrictive than the Credit
Agreement), PROVIDED that no such future Foreign Company credit agreement and
no such amendment or replacement is more restrictive as to the matters
enumerated above than the Credit Agreement, the U.K. Credit Agreements (in
the case of amendments or replacements thereof) and
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related documentation as in effect on July 8, 1997. Nothing contained in
this Section 4.12 shall prevent the Company or any Subsidiary of the Company
from creating, incurring, assuming or suffering to exist any Permitted Liens
or entering into agreements in connection therewith that impose restrictions
on the transfer or disposition of the property or assets subject to such
Permitted Liens.
SECTION 4.13. LIMITATIONS ON LAYERING INDEBTEDNESS; REDEEMABLE STOCK;
LIENS SECURING INDEBTEDNESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist (a) any
(i) Redeemable Stock, or (ii) Indebtedness that is subordinate in right of
payment to any other Indebtedness of the Company or a Guarantor (other than
Existing Indebtedness, Acquired Debt (except to the extent incurred in
connection with or in contemplation of such acquisition or merger or in
violation of Section 4.11) and Indebtedness incurred in compliance with
clause (v) of Section 4.11) unless, by its terms, such Redeemable Stock or
Indebtedness (A) has an original final stated maturity subsequent to the
Maturity Date and a Weighted Average Life to Maturity longer than that of the
Securities and (B) is subordinate in right of payment to, or ranks PARI PASSU
with, the Securities or the Guarantee, as applicable, or (b) any Lien (except
Permitted Liens) on any asset now owned or hereafter acquired, or on any
income or profits therefrom or assign or convey any right to receive income
therefrom securing any Indebtedness of the Company or any of its Subsidiaries
unless all payments due under this Indenture, the Securities and the
Guarantees (as applicable) are secured on an equal and ratable basis with the
Obligations so secured (or, if the Obligations so secured constitute
Subordinated Indebtedness, on a senior basis) until such time as such
Obligations are no longer secured by a Lien.
SECTION 4.14. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, in one or a series of related transactions, consummate an Asset Sale
unless (i) the Company (or the Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value (as reasonably determined and evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 80% of the consideration therefor received by
the Company or such Subsidiary is in the form of cash or Cash Equivalents,
PROVIDED that for purposes of this provision, (x) the amount of (A) any
liabilities (as shown on the most recent balance sheet of the Company or such
Subsidiary or in the notes thereto) of the Company or such Subsidiary that
are assumed by the transferee of any such assets (other than liabilities that
are by their terms PARI PASSU with or subordinated to the Securities or the
guarantee of the Guarantors, as applicable) and (B) any securities or other
obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash or Cash Equivalents (or as to which the Company or such Subsidiary
has received at or prior to the consummation of the Asset Sale a commitment
(which may be subject to customary conditions) from a nationally recognized
investment, merchant or commercial
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bank to convert into cash or Cash Equivalents within 90 days of the
consummation of such Asset Sale and which are thereafter actually converted
into cash or Cash Equivalents within such 90-day period) will be deemed to be
cash or Cash Equivalents (and shall be deemed to be Net Proceeds for purposes
of the following provisions as and when reduced to cash or Cash Equivalents)
to the extent of the net cash or Cash Equivalents realized thereon and (y)
the fair market value of any Non-Cash Consideration received by the Company
or a Subsidiary in any Non-Qualified Asset Sale shall be deemed to be cash to
the extent that the aggregate fair market value (as reasonably determined and
evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of all Non-Cash Consideration (measured
at the time received and without giving effect to any subsequent changes in
value) received by the Company or any of its Subsidiaries since the date of
this Indenture in all Non-Qualified Asset Sales does not exceed 5% of
Stockholders' Equity as of the date of such consummation. Notwithstanding the
foregoing, to the extent the Company or any of its Subsidiaries receives
Non-Cash Consideration as proceeds of an Asset Sale, such Non-Cash
Consideration shall be deemed to be Net Proceeds for purposes of (and shall
be applied in accordance with) the following provisions when the Company or
such Subsidiary receives cash or Cash Equivalents from a sale, repayment,
exchange, redemption or retirement of or extraordinary dividend or return of
capital on such Non-Cash Consideration.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or such Subsidiary may apply such Net Proceeds (i) to
purchase one or more Nursing Facilities or Related Businesses and/or a
controlling interest in the Capital Stock of a Person owning one or more
Nursing Facilities and/or one or more Related Businesses (and no other
material assets), (ii) to make a capital expenditure or to acquire other
tangible assets, in each case, that are used or useful in any business in
which the Company is permitted to be engaged pursuant to Section 4.17 hereof
or (iii) to permanently reduce Senior Debt (including, in the case of Senior
Revolving Debt, to correspondingly reduce commitments with respect thereto).
Pending the final application of any such Net Proceeds, the Company or such
Subsidiary may temporarily reduce Senior Revolving Debt. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $25 million, the Company
shall make an offer to all Holders and holders of any other Indebtedness of
the Company ranking senior to or on a parity with the Securities from time to
time outstanding with similar provisions requiring the Company to make an
offer to purchase or to redeem such Indebtedness with the proceeds from any
Asset Sales, pro rata in proportion to the respective principal amounts (or,
if applicable, accreted values of Indebtedness issued with an original issue
discount) of Securities and such other Indebtedness then outstanding
(collectively, an "ASSET SALE OFFER") to purchase the maximum principal
amount (or, if applicable, accreted values of Indebtedness issued with an
original discount) of the Securities and such other Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash equal to 100%
of the principal amount thereof plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the date of purchase (the "ASSET SALE
PAYMENT"), in accordance with the procedures set forth in Section 2.14. To
the extent that the aggregate amount of (or, if applicable, accreted values
of Indebtedness issued with an original issue discount) Securities and such
other Indebtedness tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for
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general corporate purposes not prohibited at the time under this Indenture.
If the aggregate principal amount of Securities and such other Indebtedness
surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Securities and such other Indebtedness will be purchased on a pro rata basis.
Upon completion of an Asset Sale Offer, the amount of Excess Proceeds shall
be reset at zero.
SECTION 4.15. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any
stay or extension law or any usury law or other law which would prohibit or
forgive the Company or any Guarantor from paying all or any portion of the
principal of, premium of, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) each of the Company and the Guarantors hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
SECTION 4.16. RULE 144A INFORMATION REQUIREMENT.
The Company shall furnish to the Holders of the Securities,
securities analysts, and prospective purchasers of Securities designated by
the Holders of Transfer Restricted Securities, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as either the Company has concluded an offer
to exchange the Exchange Securities for the Initial Securities or a
registration statement relating to resales of the Securities has become
effective under the Securities Act. The Company shall also furnish such
information during the pendency of any suspension of effectiveness of such
resale registration statement.
SECTION 4.17. LIMITATIONS ON LINES OF BUSINESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage to any material extent in any business other than the ownership,
operation and management of Nursing Facilities and Related Businesses.
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ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or, directly or indirectly,
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another Person or group of affiliated Persons or adopt a
Plan of Liquidation unless (i) the Company is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made or (in
the case of a Plan of Liquidation) the Person which receives the greatest
value from the Plan of Liquidation is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person
to which such sale, assignment, transfer, conveyance or other disposition
shall have been made or (in the case of a Plan of Liquidation) the Person
which receives the greatest value from the Plan of Liquidation assumes all
the obligations of the Company under the Securities and this Indenture
pursuant to a supplemental Indenture in form reasonably satisfactory to the
Trustee; (iii) immediately after giving effect to such transaction on a pro
forma basis, no Default or Event of Default exists; and (iv) the Company or
the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made or (in the case
of a Plan of Liquidation) the Person which receives the greatest value from
the Plan of Liquidation (A) will have Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated Net Worth of
the Company immediately preceding the transaction and (B) will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the Reference Period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.11.
Upon any consolidation or merger or any such sale, assignment,
transfer, conveyance or other disposition (but not lease) or consummation of
a Plan of Liquidation in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made or, in the case or a Plan of Liquidation,
the entity which receives the greatest value from such Plan of Liquidation
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named therein as the Company, and the Company
shall be released from the obligations under the Securities and this
Indenture except with respect to any obligations that arise from, or are
related to, such transaction.
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For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets
of one or more Subsidiaries, the Company's interest in which constitutes all
or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor corporation formed by such consolidation or into which
the Company is merged or to which such transfer is made, shall succeed to,
and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor
corporation had been named herein as the Company, and when a successor
corporation duly assumes all of the obligations of the Company pursuant
hereto and pursuant to the Securities, the Company shall be released from
such obligations (except with respect to any obligations that arise from, or
are related to, such transaction).
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
"EVENT OF DEFAULT," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be caused voluntarily or involuntarily or effected, without
limitation, by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) failure by the Company to pay any installment of
interest upon the Securities as and when the same becomes due and
payable, and the continuance of any such failure for a period of 30 days
(whether or not such payment is prohibited by Article XII or otherwise);
(ii) failure by the Company to pay all or any part of
the principal of or premium, if any, on the Securities when and as the
same becomes due and payable at maturity, upon redemption, by
acceleration, or otherwise, including, without limitation, default in
the payment of the Change of Control Payment in accordance with Article
XI or the Asset Sale Payment in accordance with Section 4.14 or
otherwise;
(iii) failure by the Company or any Guarantor for 30
days after written notice to comply with the provisions of Section 4.3
or 4.11 hereof;
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(iv) failure by the Company or any Guarantor to observe
or perform any other covenant or agreement contained in the Securities
or this Indenture (other than as specifically dealt with in paragraph
(i), (ii) or (iii) of this Section 6.1) and the continuance of such
failure for a period of 60 days after written notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Securities
outstanding, specifying such default or breach, requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
(v) any default occurs under any mortgage, indenture
or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries), whether such Indebtedness or
guarantee exists on the date of this Indenture or is thereafter created,
which default (a) constitutes a Payment Default or (b) results in the
acceleration of such Indebtedness prior to its final stated maturity
and, in each case, the principal amount of any Indebtedness, together
with the principal amount of any other such Indebtedness under which
there has been a Payment Default or that has been so accelerated,
aggregates in excess of $20 million;
(vi) final unsatisfied judgments not covered by
insurance for the payment of money, or the issuance of any warrant of
attachment against any portion of the property or assets of the Company
or any of its Subsidiaries, aggregating in excess of $20 million, at any
one time shall be rendered against the Company or any of its
Subsidiaries and not be stayed, bonded or discharged for a period
(during which execution shall not be effectively stayed) of 60 days (or,
in the case of any such final judgment which provides for payment over
time, which shall so remain unstayed, unbonded or undischarged beyond
any applicable payment date provided therein);
(vii) any Guarantee by a Guarantor which is a
Significant Subsidiary shall cease for any reason not permitted by this
Indenture to be in full force and effect, or any such Guarantor, or any
person acting on behalf of any such Guarantor, shall deny or disaffirm
its obligations under its Guarantee;
(viii) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudicating the Company
or any of its Significant Subsidiaries as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Company or any of its Significant Subsidiaries under any bankruptcy or
similar law, and such decree or order shall have continued undischarged
and unstayed for a period of 60 days, PROVIDED, HOWEVER, that if the
entry of such order or decree is appealed and dismissed on appeal then
the Event of Default hereunder by reason of the entry of such judgment
or decree shall be deemed to have been cured; or a decree, judgment or
order of a court of competent jurisdiction appointing a receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency for the
Company, any of its Significant
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Subsidiaries, or any substantial part of the property of any such
Person, or for the winding up or liquidation of the affairs of any such
Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of
60 days; PROVIDED, HOWEVER, that if the entry of such order or decree is
appealed and dismissed on appeal then the Event of Default hereunder by
reason of the entry of such judgment or decree shall be deemed to have
been cured; or
(ix) the Company or any of its Significant Subsidiaries
shall institute proceedings to be adjudicated a voluntary bankrupt, or
shall consent to the filing of a bankruptcy proceeding against it, or
shall file a petition or answer or consent seeking reorganization under
any bankruptcy or similar law or similar statute, or shall consent to
the filing of any such petition, or shall consent to the appointment of
a Custodian, receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of it or any substantial part of its assets or property, or
shall make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become
due, fail generally to pay its debts as they become due, or take any
corporate action in furtherance of any of the foregoing.
If a Default occurs and is continuing, the Trustee must, within 90
days after the occurrence of such default, give to the Holders notice of such
default.
SECTION 6.2. ACCELERATION OF MATURITY DATE; RESCISSION AND
ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 6.1(viii) or (ix) above relating to the Company or any of its
Significant Subsidiaries) occurs and is continuing, then, and in every such
case, unless the principal of all of the Securities shall have already become
due and payable, either the Trustee or the Holders of at least 25% in
aggregate principal amount of then outstanding Securities, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"ACCELERATION NOTICE"), may declare all of the principal of the Securities,
determined as set forth below, including in each case accrued interest
thereon, to be due and payable immediately; PROVIDED that so long as at least
$15 million of Senior Debt is outstanding under the Credit Agreement, no
acceleration of the maturity of the Securities shall be effective until the
earlier of (i) five days after notice of acceleration is received by the
Representative under the Credit Agreement (unless such Event of Default is
cured or waived prior thereto) and (ii) the date on which any Senior Debt
under the Credit Agreement is accelerated. In the event a declaration of
acceleration resulting from an Event of Default described in Section 6.1(v)
above has occurred and is continuing, such declaration of acceleration shall
be automatically annulled if such default is cured or waived or the holders
of the Indebtedness which is the subject of such default have rescinded their
declaration of acceleration in respect of such Indebtedness within sixty days
thereof and the Trustee has received written notice of such cure, waiver or
rescission and no other Event of Default described in Section 6.1(v) above
has occurred that has not been cured or waived, or as to which the
declaration has not been rescinded, within sixty days of the declaration of
such acceleration in respect of such Indebtedness. If an Event of Default
specified in Section 6.1(viii) or (ix) above relating to the Company or any
Significant
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Subsidiary occurs, all principal and accrued interest thereon will be
immediately due and payable on all outstanding Securities without any
declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written notice to the Company and the Trustee, may rescind, on
behalf of all Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee cash
sufficient to pay:
(A) all overdue interest and Liquidated Damages, if any,
on all Securities,
(B) the principal of (and premium, if any, applicable
to) any Securities which would become due other than by reason of
such declaration of acceleration, and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the
Securities,
(D) all sums paid or advanced by the Trustee hereunder
and the compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, and all other amounts due the
Trustee under Section 7.7 and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 6.12 hereof.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with
notice or lapse of time or both would be an Event of Default with respect to
(i) any covenant or provision which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected thereby, unless
all such affected Holders agree, in writing, to waive such Event of Default
or other event and (ii) any provision requiring supermajority approval to
amend, unless such default has been waived by such a supermajority. No such
waiver shall cure or waive any subsequent default or impair any right
consequent thereon.
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SECTION 6.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (i) or (ii) of Section 6.1
hereof occurs and is continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, the
whole amount then due and payable on such Securities for principal, premium
(if any), and interest, and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal (and premium,
if any), and on any overdue interest, at the rate borne by the Securities,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including compensation to, and
expenses, disbursements and advances of the Trustee and its agents and
counsel and all other amounts due the Trustee under Section 7.7.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust in
favor of the Holders, may institute a judicial proceeding for the collection
of the sums so due and unpaid, may prosecute such proceeding to judgment or
final decree and may enforce the same against the Company or any other
obligor upon the Securities and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Company or
any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor
upon the Securities or the property of the Company or of such other obligor
or their creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal, premium,
if any (and Liquidated Damages, if any), or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including
(1) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements
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and advances of the Trustee and its agent and counsel and all other
amounts due the Trustee under Section 7.7) and of the Holders allowed
in such judicial proceeding, and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and its
agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust in
favor of the Holders, and any recovery of judgment shall, after provision for
the payment of compensation to, and expenses, disbursements and advances of
the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 7.7, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 6.6. PRIORITIES.
Any money collected by the Trustee pursuant to this Article VI
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of
principal, premium (if any), or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7 hereof;
SECOND: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any), and interest on, the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind,
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according to the amounts due and payable on such Securities for principal,
premium (if any), and interest, respectively; and
THIRD: To the Company, the Guarantors or such other Person as may
be lawfully entitled thereto, the remainder, if any, each as their respective
interests may appear.
The Trustee may, but shall not be obligated to, fix a record date
and payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct
the Trustee to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 6.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of,
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and premium (if any), and interest on, such Security on the Maturity Dates of
such payments as expressed in such Security (in the case of redemption, the
Redemption Price on the applicable Redemption Date, in the case of the Change
of Control Payment, on the applicable Change of Control Payment Date, and in
the case of the Asset Sale Payment, on the Purchase Date) and to institute
suit for the enforcement of any such payment after such respective dates, and
such rights shall not be impaired without the consent of such Holder.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7
hereof, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 6.10. DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event of Default
shall impair the exercise of any such right or remedy or constitute a waiver
of any such Event of Default. Every right and remedy given by this Article
VI or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 6.11. CONTROL BY HOLDERS.
The Holder or Holders of a majority in aggregate principal amount
of then outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred upon the Trustee,
PROVIDED, that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking part in
such direction, and
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
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SECTION 6.12. WAIVER OF EXISTING OR PAST DEFAULT.
Subject to Section 6.8 and 9.2 hereof, the Holder or Holders of not
less than a majority in aggregate principal amount of the outstanding
Securities may, on behalf of all Holders, waive any existing or past Default
or Event of Default hereunder and its consequences under this Indenture,
except a default
(A) in the payment of the principal of, premium, if any, or
interest on, any Security as specified in clauses (i) and (ii) of Section
6.1 hereof and not yet cured, or
(B) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent of the Holder
of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair the exercise of any right arising
therefrom.
SECTION 6.13. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that in
any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken, suffered or omitted to
be taken by it as Trustee, any court may in its discretion require the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant
in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 6.13
shall not apply to any suit instituted by the Company, to any suit instituted
by the Trustee, to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in aggregate principal amount of the
outstanding Securities, or to any suit instituted by any Holder for
enforcement of the payment of principal of, or premium (if any), or interest
on, any Security on or after the respective Maturity Date expressed in such
Security (including, in the case of redemption, on or after the Redemption
Date).
SECTION 6.14. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and
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thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed,
subject to the terms hereof.
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and
is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee, and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1,
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts, and
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(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11 hereof.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or to take or
omit to take any action under this Indenture or at the request, order or
direction of the Holders or in the exercise of any of its rights or powers if
it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it.
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of
this Section 7.1.
(f) The Trustee shall not be liable for interest on any
assets received by it except as the Trustee may agree in writing with the
Company (including without limitation to the extent the Trustee receives
funds prior to the interest payment date in order to comply with the
provisions of Section 4.1). Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(a) The Trustee may rely on any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in such document.
(b) Before the Trustee acts or refrains from acting, it
may consult with counsel and may require an Officers' Certificate or an
Opinion of Counsel, which shall conform to Sections 14.4 and 14.5 hereof.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it or
its agent takes or omits to take in good faith which it believes to be
authorized or within its rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the Trustee,
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in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders, pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or such
Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Guarantor's covenants in Article IV
hereof or as to the performance by any Agent of its duties hereunder. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to
Sections 6.1(i), 6.1(ii) and 4.1 hereof, or (ii) any Default or Event of
Default of which the Trustee shall have received written notification or
obtained actual knowledge.
(i) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and
7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication, or the use or application of any funds
received by a Paying Agent other than the Trustee.
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SECTION 7.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an
Event of Default in payment of principal (or premium, if any), of, or
interest on, any Security (including the payment of the Change of Control
Purchase Price on the Change of Control Payment Date, the payment of the
Redemption Price on the Redemption Date and the payment of the Offer Price on
the Purchase Date), the Trustee may withhold the notice if and so long as a
Trust Officer in good faith determines that withholding the notice is in the
interest of the Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock
exchange, if any, on which the Securities are listed.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company and the Guarantors jointly and severally agree to pay
to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of
a trustee of an express trust. The Company and the Guarantors shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it in accordance with this Indenture. Such
expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents, accountants, experts and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee (in its capacity as Trustee) and each of its officers,
directors, attorneys-in-fact and agents for, and hold it harmless against,
any claim, demand, expense (including but not limited to reasonable
compensation, disbursements and expenses of the Trustee's agents and
counsel), loss or liability incurred by it without negligence or bad faith on
the part of the Trustee, arising out of or in connection with the
administration of this trust and its rights or duties hereunder, including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The
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Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company and the Guarantors
shall defend the claim and the Trustee shall provide reasonable cooperation
at the Company's and the Guarantors' expense in the defense. The Trustee may
have separate counsel and the Company and the Guarantors shall pay the
reasonable fees and expenses of such counsel; PROVIDED, that the Company and
the Guarantors will not be required to pay such fees and expenses if they
assume the Trustee's defense and there is no conflict of interest between the
Company and the Guarantors and the Trustee in connection with such defense.
The Company and the Guarantors need not pay for any settlement made without
their written consent. The Company and the Guarantors need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by
the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's and the Guarantors' payment obligations in
this Section 7.7, the Trustee shall have a lien prior to the Securities on
all assets held or collected by the Trustee, in its capacity as Trustee,
except assets held in trust to pay principal and premium, if any, of or
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(viii) or (ix) of this Indenture occurs,
the expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations under this Section
7.7 and any lien arising hereunder shall survive the resignation or removal
of the Trustee, the discharge of the Company's and the Guarantors'
obligations pursuant to Article VIII of this Indenture and any rejection or
termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may remove the Trustee by so notifying the Company and
the Trustee in writing and may appoint a successor trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after
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the successor Trustee takes office, the Holder or Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that and provided that all sums owing to the retiring Trustee provided for in
Section 7.7 hereof have been paid, the retiring Trustee shall transfer all
property held by it as trustee to the successor Trustee, subject to the lien
provided in Section 7.7 hereof, the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holder or Holders of at least 10% in principal amount of the
outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's and the Guarantors' obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the resulting, surviving or transferee corporation
without any further act shall, if such resulting, surviving or transferee
corporation is otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA
Section 310(a)(1), (2) and (5). The Trustee shall have a combined capital
and surplus of at least $25,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
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ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. DISCHARGE; OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
This Indenture shall cease to be of further effect (except that the
Company's and the Guarantors' obligations under Section 7.7 and the Trustee's
and the Paying Agent's obligations under Sections 8.6 and 8.7 shall survive)
when all outstanding Securities theretofore authenticated and issued have been
delivered (other than destroyed, lost or stolen Securities that have been
replaced or paid) to the Trustee for cancellation and the Company or the
Guarantors have paid all sums payable hereunder. In addition, the Company may
elect to have Section 8.2, at the Company's option and at any time within one
year of the Maturity Date of the Securities, or Section 8.3, at the Company's
option at any time, of this Indenture applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented and this Indenture shall cease to be of further effect
as to all outstanding Securities and Guarantees, except as to be deemed to be
"outstanding" only for the purposes of Section 8.5 hereof and the other Sections
of this Indenture referred to in (a) and (b) below, and the Company and the
Guarantors shall be deemed to have satisfied all other of their respective
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Securities to receive payments in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due from
the trust described in Section 8.5, (b) the Company's obligations with respect
to such Securities under Sections 2.3, 2.4, 2.6, 2.7, 2.10, 5.2, 8.5, 8.6 and
8.7 hereof and (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's and the Guarantors' obligations in
connection therewith. Subject to compliance with this Article VIII, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 hereof with respect to the Securities.
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SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.6, 4.7, 4.8, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.17, Article V and
Article XI hereof with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Securities, neither the Company nor any Guarantor need comply with
and shall have any liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document (and
Section 6.1(iii) hereof shall not apply to any such covenant), but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.1
hereof of the option applicable to this Section 8.3, Sections 6.1(v) and 6.1(vi)
hereof shall not constitute Events of Default with respect to the Securities.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Securities:
(a) (1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article VIII applicable to it), in trust, for the benefit
of the Holders of the Securities, cash, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such outstanding Securities on
their Maturity Date (the "Defeasance Trust"); (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders of such
outstanding Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States confirming that the
Holders of such outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of
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such Covenant Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance
or Covenant Defeasance will not result in a breach or violation of, or
constitute a default under any material agreement or instrument (other than
this Indenture) to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound (other than a
breach, violation or default resulting from the borrowing of funds to be
applied to such deposit); (vi) the Company must have delivered to the Trustee
an opinion of counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of such Securities over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding other creditors of the Company; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that the conditions precedent provided for in, in the case of
the Officers' Certificate, (i) through (vi) and, in the case of the opinion
of counsel, clauses (i), (with respect to the validity and perfection of the
security interest) (ii), (iii) and (v) of this paragraph, have been complied
with.
If the funds deposited with the Trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of premium, if any,
and interest on the Securities when due, then the obligations of the Company and
the Guarantors under this Indenture, the Securities and the Guarantees will be
revived and no such defeasance will be deemed to have occurred.
SECTION 8.5. DEPOSITED CASH AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"PAYING AGENT") pursuant to Section 8.4 hereof in respect of the outstanding
Securities shall be held in trust and applied by the Paying Agent, in accordance
with the provisions of such Securities and this Indenture, to the payment,
either directly or through any other Paying Agent as the Trustee may determine,
to the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
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SECTION 8.6. REPAYMENT TO THE COMPANY.
(a) Anything in this Article VIII to the contrary
notwithstanding, the Trustee or the Paying Agent shall deliver or pay to the
Company from time to time upon the request of the Company any cash or U.S.
Government Obligations held by it as provided in Section 8.4 hereof which in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.4(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
(b) Any cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the NEW YORK TIMES and THE WALL STREET
JOURNAL (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case
may be, of this Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as
the Trustee or Paying Agent is permitted to apply such money in accordance with
Sections 8.2 and 8.3 hereof, as the case may be; PROVIDED, HOWEVER, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Security following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the cash or U.S. Government Obligations held by the Trustee or
Paying Agent.
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ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company or any Guarantor, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided such action pursuant to this clause (1) shall not adversely affect the
interests of any Holder in any material respect;
(2) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(3) to add to the covenants of the Company or the Guarantors for
the benefit of the Holders, or to surrender any right or power herein conferred
upon the Company or the Guarantors;
(4) to provide for collateral for or additional Guarantors of
the Securities;
(5) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the obligations of the Company,
herein and in the Securities in accordance with Article V;
(6) to comply with the TIA;
(7) to evidence the succession of another corporation to any
Guarantor and assumption by any such successor of the Guarantee of such
Guarantor (as set forth in Section 12.4) in accordance with Article XII;
(8) to evidence the release of any Guarantor in accordance with
Article XII;
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
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(10) in any other case where a supplemental indenture is required
or permitted to be entered into pursuant to the provisions of this Indenture
without the consent of any Holder; or
(11) to provide for the issuance and authorization of the
Exchange Securities.
SECTION 9.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH
CONSENT OF HOLDERS.
Subject to Section 6.8 hereof, with the consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for such Securities), by written act of said Holders delivered to the Company
and the Trustee, the Company or any Guarantor, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Securities or of modifying in any
manner the rights of the Holders under this Indenture or the Securities.
Subject to Section 6.8, the Holder or Holders of not less than a majority in
aggregate principal amount of then outstanding Securities may waive compliance
by the Company or any Guarantor with any provision of this Indenture or the
Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall, without the consent of the Holder of
each outstanding Security affected thereby:
(1) change the Maturity Date on any Security, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest thereon
or any premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Security or any premium or
the interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Maturity Date thereof (or in the
case of redemption, on or after the Redemption Date), or reduce the Change of
Control Purchase Price or the Asset Sale Offer Price or alter the provisions
(including the defined terms used herein) regarding the right of the Company to
redeem the Securities in a manner adverse the Holders; or
(2) reduce the percentage in principal amount of the outstanding
Securities, the consent of whose Holders is required for any such amendment,
supplemental indenture or wavier provided for in this Indenture;
(3) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provision of this Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby; or
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(4) make the Securities subordinated in right of payment to any
extent or under any circumstances to any other indebtedness, except to the
extent no less favorable to the Holders than would be consistent with Article
XII hereof as in effect on the Issue Date.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
After an amendment, supplement or waiver under this Section 9.2 or
under Section 9.4 hereof becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the Company as the Person to whom consents
should be sent if such revocation is received by the Company or such Person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding
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paragraph, those Persons who were Holders at such record date, and only those
Persons (or their duly designated proxies), shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than ninety days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (4) of Section 9.2 hereof, in which case, the amendment, supplement
or waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; PROVIDED, that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Security, on or after the respective
dates set for such amounts to become due and payable expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; PROVIDED, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
SECTION 9.7. AGREEMENT BY REPRESENTATIVE UNDER THE CREDIT AGREEMENT.
Notwithstanding any of the above, however, so long as any Senior Debt
is outstanding under the Credit Agreement, no such modification, supplement or
waiver of any of the terms or provisions of Article XIII shall be effective
unless expressly agreed to in writing by the Representative under the Credit
Agreement. So long as any Senior Debt is outstanding under the Credit
Agreement, the Trustee shall deliver written notice of any modification or
supplement
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to the Securities or this Indenture to the Representative under the Credit
Agreement no less than five business days before the effective date of any
such modification or supplement.
ARTICLE X
RESERVED
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A
CHANGE OF CONTROL.
(a) In the event that a Change of Control occurs, each
Holder shall have the right, at such Holder's option, subject to the terms and
conditions of this Indenture, to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to an irrevocable and unconditional offer, as described
below (the "CHANGE OF CONTROL OFFER"), at an offer price in cash (the "CHANGE OF
CONTROL PURCHASE PRICE") equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to and
including the date of purchase (the "CHANGE OF CONTROL PAYMENT") on a date that
is not more than 90 days after the occurrence of such Change of Control (the
"CHANGE OF CONTROL PAYMENT DATE").
(b) In the event of a Change of Control, the Company shall
follow the procedures set forth in this Section 11.1 as follows:
(i) the Change of Control Offer shall commence within 45
days following the occurrence of a Change of Control;
(ii) the Change of Control Offer shall remain open for at
least 20 Business Days following its commencement except to the extent that
a longer period is required by applicable law (but in any case not more
than 40 Business Days following its commencement);
(iii) within three Business Days following the expiration
of a Change of Control Offer, the Company shall purchase all of the
tendered Securities at the Change of Control Purchase Price;
(iv) if the Change of Control is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest (and Liquidated Damages, if any) will be paid to the
Person in whose name a Security is
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registered at the close of business on such record date, and no additional
interest will be payable to Securityholders who tender Securities pursuant
to the Change of Control Offer;
(v) the Company shall provide the Trustee and the Paying
Agent with written notice of the Change of Control Offer at least three
Business Days before the commencement of any Change of Control Offer; and
(vi) on or before the commencement of any Change of Control
Offer, the Company or the Trustee (upon the request and at the expense of
the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(A) that the Change of Control Offer is
being made pursuant to this Section 11.1 and that all
Securities, or portions thereof, tendered will be accepted
for payment;
(B) the Change of Control Purchase
Price (including the amount of accrued but unpaid interest
(and Liquidated Damages, if any)) and the Change of Control
Payment Date;
(C) that any Security, or portion
thereof, not tendered or accepted for payment will continue
to accrue interest;
(D) that, unless the Company defaults
in depositing cash with the Paying Agent in accordance with
the last paragraph of this subsection (b), or such payment
is prevented for any reason, any Security, or portion
thereof, accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the
Change of Control Purchase Date;
(E) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a Change
of Control Offer will be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying
Agent (which may not for purposes of this Section 11.1,
notwithstanding anything in this Indenture to the contrary,
be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the expiration of
the Change of Control Offer;
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(F) that Holders will be entitled to
withdraw their election, in whole or in part, if the Paying
Agent receives, prior to the expiration of the Change of
Control Offer, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Securities the Holder is withdrawing and a statement
containing a facsimile signature and stating that such
Holder is withdrawing his election to have such principal
amount of Securities purchased;
(G) that Holders whose Securities are
purchased only in part will be issued new Securities equal
in principal amount to the unpurchased portion of the
Securities surrendered; and
(H) a brief description of the events
resulting in such Change of Control.
On or before the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Securities or portions thereof
properly tendered and not withdrawn pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount in cash equal to the Change of Control
Payment in respect of all Securities or portions thereof so tendered and (3)
deliver or cause to be delivered to the Trustee the Securities so accepted
together with an Officers' Certificate listing the Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder so tendered the Change of Control Payment for such Securities, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Security equal in principal amount to any
unpurchased portion of the Securities surrendered, if any, PROVIDED that each
such new Security will be in a principal amount of $1,000 or an integral
multiple thereof. Any Securities improperly tendered or withdrawn will be
delivered promptly by the Company to the Holder thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Any such Change of Control Offer shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Securities as a result of a Change of Control.
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ARTICLE XII
GUARANTEE
SECTION 12.1. GUARANTEE.
(a) In consideration of good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, to the fullest
extent permitted by applicable law, each of the Guarantors hereby irrevocably
and unconditionally guarantees (the "GUARANTEE") to the Trustee and its
successors and assigns, irrespective of the validity and enforceability
against the Company and the other Guarantors of this Indenture, the
Securities or the obligations of the Company under this Indenture or the
Securities, that: (x) the principal of and premium (if any), and interest on
the Securities will be paid in full when due, whether at the Maturity Date or
Interest Payment Date, by acceleration, call for redemption, upon a Change of
Control, an Asset Sale Offer or otherwise; (y) all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full or performed, all in accordance with the terms
of this Indenture and the Securities; and (z) in case of any extension of
time of payment or renewal of any Securities or any of such other
obligations, they will be paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at maturity, by
acceleration, call for redemption, upon a Change of Control, an Offer to
Purchase or otherwise. Failing payment when due of any amount so guaranteed
for whatever reason, each Guarantor shall be obligated to pay the same before
failure so to pay becomes an Event of Default.
If the Company or a Guarantor defaults in the payment of the
principal of, premium, if any, or interest on, the Securities when and as the
same shall become due, whether upon maturity, acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise, without the necessity of action by the Trustee or any Holder, each
Guarantor shall be required, jointly and severally, to promptly make such
payment in full.
(b) Each Guarantor hereby agrees to the fullest extent
permitted by applicable law, that its obligations with regard to this
Guarantee shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company or right to require the prior disposition of the assets of the
Company to meet its obligations, protest, notice and all demands whatsoever
and covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities and this
Indenture.
(c) If any Holder or the Trustee is required by any
court or otherwise to return to either the Company or any Guarantor, or any
Custodian or similar official
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acting in relation to either the Company or such Guarantor, any amount paid
by either the Company or such Guarantor to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that it will not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between such Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Section
6.2 hereof for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the
Company of the obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of those obligations as provided in Section 6.2
hereof, those obligations (whether or not due and payable) will forthwith
become due and payable by each of the Guarantors for the purpose of this
Guarantee.
(d) It is the intention of each Guarantor and the
Company that the obligations of each Guarantor hereunder shall be in, but not
in excess of, the maximum amount permitted by applicable law. Accordingly,
if the obligations in respect of the Guarantee would be annulled, avoided or
subordinated to the creditors of any Guarantor by a court of competent
jurisdiction in a proceeding actually pending before such court as a result
of a determination both that such Guarantee was made by such Guarantor
without fair consideration and, immediately after giving effect thereto, such
Guarantor was insolvent or unable to pay its debts as they mature or left
with an unreasonably small capital, then the obligations of such Guarantor
under such Guarantee shall be reduced by such court if and to the extent such
reduction would result in the avoidance of such annulment, avoidance or
subordination; PROVIDED, HOWEVER, that any reduction pursuant to this
paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. For purposes of this paragraph, "fair consideration",
"insolvency", "unable to pay its debts as they mature", "unreasonably small
capital" and the effective times of reductions, if any, required by this
paragraph shall be determined in accordance with applicable law.
SECTION 12.2. EXECUTION AND DELIVERY OF GUARANTEE.
Each Guarantor shall, by virtue of such Guarantor's execution and
delivery of this Indenture or such Guarantor's execution and delivery of an
indenture supplement pursuant to Section 12.3 hereof, be deemed to have
signed on each Security issued hereunder the notation of guarantee set forth
on the form of the Securities attached hereto as Exhibit A to the same extent
as if the signature of such Guarantor appeared on such Security.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
guarantee set forth in Section 12.1 on behalf of each Guarantor. The
notation of a guarantee set forth on any Security shall be null and void and
of no further effect with respect to the guarantee of any Guarantor which,
pursuant to Section 12.4 or Section 12.5, is released from such Guarantee.
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SECTION 12.3. CERTAIN BANKRUPTCY EVENTS.
Each Guarantor hereby covenants and agrees, to the fullest extent
that it may do so under applicable law, that in the event of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, such
Guarantor shall not file (or join in any filing of), or otherwise seek to
participate in the filing of, any motion or request seeking to stay or to
prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under
Section 362 or 105 of the United States Bankruptcy Code or otherwise.
SECTION 12.4. LIMITATION ON MERGER, CONSOLIDATION, ETC. OF
GUARANTORS; RELEASE OF CERTAIN GUARANTORS.
No Guarantor shall consolidate or merge with or into (whether or
not such Guarantor is the surviving person) another person unless (i) subject
to the provisions of the following paragraph, the person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture in form reasonably satisfactory to the Trustee, pursuant to which
such person shall unconditionally guarantee, on a senior subordinated basis,
all of such Guarantor's obligations under such Guarantor's Guarantee and the
Indenture on the terms set forth in the Indenture; and (ii) immediately
before and immediately after giving effect to such transaction on a PRO FORMA
basis, no Default or Event of Default shall have occurred or be continuing.
Notwithstanding the foregoing, upon the (i) sale or disposition
(whether by merger, stock purchase, asset sale or otherwise) of a Guarantor
(or all of its assets) to an entity which is not a Subsidiary of the Company
or upon the dissolution of any Guarantors which sale, disposition or
dissolution is otherwise in compliance with this Indenture, or (ii) the
release of any Guarantor from its obligations as a guarantor under the Credit
Agreement, so long as (a) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect in a PRO
FORMA basis to, such release, (b) the Company is permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
Test set forth in Section 4.11 on the date when such release occurs, and (c)
the amount of Indebtedness outstanding under the Credit Agreement for at
least 30 days prior to the time of such release is at least $250 million,
such Guarantor will be deemed released from its obligations under its
Guarantee of the Securities; PROVIDED, HOWEVER, that any such termination
shall occur only to the extent that all obligations of such Guarantor under
all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, any Indebtedness of the Company shall also
terminate upon such sale, disposition or dissolution.
SECTION 12.5. FUTURE GUARANTORS.
Upon (i) the acquisition by the Company or Guarantor of the Capital
Stock of any Person, if, as a result of such acquisition, such Person becomes
a Subsidiary of the Company or any Guarantor or (ii) the last day of any
fiscal quarter during which any Subsidiary of the
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Company that is not a Guarantor as of such date and has not previously been
released as a Guarantor pursuant to Section 12.4 hereof becomes a Subsidiary,
such Subsidiary (any such Subsidiary, hereinafter being called a "FUTURE
SUBSIDIARY GUARANTOR") shall unconditionally guarantee the obligations of the
Company with respect to payment and performance of the Securities and the
other obligations of the Company under this Indenture to the same extent that
such obligations are guaranteed by the other Guarantors pursuant to Section
12.1 hereof; and, within ten Business Days of the date of such occurrence,
such Future Subsidiary Guarantor shall execute and deliver to the Trustee a
supplemental indenture, which shall be in a form satisfactory to the Trustee,
making such Future Subsidiary Guarantor a party to this Indenture; PROVIDED,
HOWEVER, that the foregoing provisions of this Section 12.5 shall not apply
to (A) (x) Subsidiaries of the Company or any Guarantor having total assets
with a book value of less than $500,000 and that do not guarantee any Senior
Debt and (y) any Subsidiary which is not then either a Guarantor or a
guarantor under the Credit Agreement or other Indebtedness under any
agreement or instrument to which the Company is a party or by which the
Company is bound, if (i) such Subsidiary is not required by the terms of the
Credit Agreement or such other agreement or instrument to become a guarantor
under the Credit Agreement or such other agreement or instrument and (ii) the
conditions for releasing a Guarantor from its obligations as a Guarantor of
the Notes specified in clause (ii) in the second paragraph of Section 12.4
are then satisfied) and (B) Sun Systems, Inc. and each CareerStaff Company
and each Foreign Company, if such person does not (i) guarantee or otherwise
becomes liable for Indebtedness of the Company or any Guarantor (other than,
in the case of CareerStaff Companies, Indebtedness under the Credit
Agreement), and (ii) does not cause more than two-thirds of its Equity
Interests to be pledged to secure Indebtedness of the Company or any
Guarantor (other than, in the case of CareerStaff Companies, Indebtedness
under the Credit Agreement).
ARTICLE XIII
SUBORDINATION
SECTION 13.1. SECURITIES SUBORDINATED TO SENIOR DEBT.
The Company and the Guarantors and each Holder, by its acceptance
of Securities, agree that (a) the payment of the principal of and interest on
the Securities and (b) any other payment in respect of the Securities,
including on account of the acquisition or redemption of the Securities by
the Company and the Guarantors (including, without limitation, pursuant to
Section 4.14, 11.1, or Article XII) is subordinated, to the extent and in the
manner provided in this Article XIII, to the prior payment in full in cash or
Cash Equivalents of all Senior Debt of the Company and the Guarantors and
that these subordination provisions are for the benefit of the holders of
Senior Debt.
This Article XIII shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold, Senior Debt, and such provisions
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are made for the benefit of the holders of Senior Debts and such holders are
made obligees hereunder and any one or more of them may enforce such
provisions.
SECTION 13.2. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No payment (by set-off or otherwise) shall be made
by or on behalf of the Company or a Guarantor, as applicable, on account of
the principal of, premium, if any, or interest on the Securities (including
any repurchases of Securities), or on account of the redemption provisions of
the Securities, for cash or property (other than Junior Securities or from a
Defeasance Trust), (i) upon the maturity of any Senior Debt of the Company or
such Guarantor, as applicable, by lapse of time, acceleration (unless waived)
or otherwise, unless and until all principal of, premium, if any, and the
interest on such Senior Debt are first paid in full in cash or Cash
Equivalents (or such payment is duly provided for) or otherwise to the extent
holders accept satisfaction of amounts due by settlement in other than cash
or Cash Equivalents, or (ii) in the event of default in the payment of any
principal of, premium, if any, or interest on Senior Debt of the Company or
such Guarantor when it becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise (a "PAYMENT
DEFAULT"), unless and until (in the case of both (i) and (ii)) such Payment
Default has been cured or waived or otherwise has ceased to exist.
(b) Upon (i) the happening of an event of default (other
than a Payment Default) that permits the holder of Senior Debt to declare
such Senior Debt to be due and payable and (ii) written notice of such event
of default given to the Company and the Trustee by the Representative under
the Credit Agreement or the holders of an aggregate of at least $50 million
principal amount outstanding of any other Senior Debt or their representative
(a "PAYMENT NOTICE"), then, unless and until such event of default has been
cured or waived or otherwise has ceased to exist, no payment (by set-off or
otherwise) may be made by or on behalf of the Company or any Guarantor which
is an obligor under such Senior Debt on account of the principal of, premium,
if any, or interest on the Securities (including any repurchases of any of
the Securities), or on account of the redemption provisions of the
Securities, in any such case, other than payments made with Junior Securities
or from a Defeasance Trust. Notwithstanding the foregoing, unless the Senior
Debt in respect of which such event of default exists has been declared due
and payable in its entirety within 179 days after the Payment Notice is
delivered as set forth above (the "PAYMENT BLOCKAGE PERIOD") (and such
declaration has not been rescinded or waived), at the end of the Payment
Blockage Period, the Company and the Guarantors shall be required to pay all
sums not paid to the Holders of the Securities during the Payment Blockage
Period due to the foregoing prohibitions and to resume all other payments as
and when due on the Securities. Any number of Payment Notices may be given;
PROVIDED that (i) not more than one Payment Notice shall be given within a
period of any 360 consecutive days, and (ii) no default that existed upon the
date of such Payment Notice or the commencement of such Payment Blockage
Period (whether or not such event of default is on the same issue of Senior
Debt) shall be made the basis for the commencement of any other Payment
Blockage Period unless such other Payment Blockage Period is commenced by a
Payment Notice from the Representative under the Credit
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Agreement and such event of default shall have been cured or waived for a
period of at least 90 consecutive days.
(c) Upon any distribution of assets of the Company or
any Guarantor upon any dissolution, winding up, total or partial liquidation
or reorganization of the Company or a Guarantor, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or a similar proceeding
or upon assignment for the benefit of creditors or any marshalling of assets
or liabilities, the provisions of Section 13.3 of this Indenture shall apply.
The subordination provisions hereof shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any
Senior Debt is rescinded or must otherwise be returned by any holder of such
Senior Debt upon the insolvency, bankruptcy or reorganization of the Company,
any Guarantor or otherwise, all as though such payment has not been made.
SECTION 13.3. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL
SENIOR DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Upon any distribution of assets of the Company or any Guarantor or
upon any dissolution, winding up, total or partial liquidation or
reorganization of the Company or a Guarantor, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or a similar proceeding
or upon assignment for the benefit of creditors or any marshalling of assets
or liabilities:
(a) the holders of all Senior Debt of the Company or
such Guarantor, as applicable, will first be entitled to receive payment in
full in cash or Cash Equivalents (or have such payment duly provided for to
the satisfaction of such holders) or otherwise to the extent holders accept
satisfaction of amounts due by settlement in other than cash or Cash
Equivalents before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, and interest on the Securities or any
Obligation in respect of the Securities (other than Junior Securities or from
a Defeasance Trust);
(b) any payment or distribution of assets of the Company
or such Guarantor of any kind or character from any source, whether in cash,
property or securities (other than Junior Securities or from a Defeasance
Trust) to which the Holders or the Trustee on behalf of the Holders would be
entitled (by set-off or otherwise), except for the provisions of this Article
XIII, shall be paid by the liquidating trustee or agent or other person
making such a payment or distribution directly to the holders of such Senior
Debt or their representative to the extent necessary to make payment in full
(or have such payment duly provided for) on all such Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt; and
(c) in the event that, notwithstanding the foregoing,
any payment or distribution of assets of the Company or any Guarantor (other
than Junior Securities or from a Defeasance Trust) shall be received by the
Trustee or the Holders at a time when such payment
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or distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders,
as the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Debt may have been issued, ratably according to
the aggregate principal amounts remaining unpaid on account of such Senior
Debt held or represented by each, for application to the payment of all such
Senior Debt remaining unpaid, to the extent necessary to pay or to provide
for the payment of all such Senior Debt in full in cash or Cash Equivalents
or otherwise to the extent holders accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
SECTION 13.4. SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS
OF SENIOR DEBT.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt of the Company or any Guarantor as provided herein, the Holders
of Securities shall be subrogated to the rights of the holders of such Senior
Debt to receive payments or distributions of assets of the Company applicable
to the Senior Debt until all amounts owing on the Securities shall be paid in
full, and for the purpose of such subrogation no such payments or
distributions to the holders of such Senior Debt by or on behalf of the
Company or any Guarantor, or by or on behalf of the Holders by virtue of this
Article XIII, which otherwise would have been made to the Holders shall, as
between the Company or any Guarantor and the Holders, be deemed to be payment
by the Company or any Guarantor or on account of such Senior Debt, it being
understood that the provisions of this Article XIII are and are intended
solely for the purpose of defining the relative rights of the Holders, on the
one hand, and the holders of such Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article XIII shall have
been applied, pursuant to the provisions of this Article XIII, to the payment
of amounts payable under Senior Debt of the Company or any Guarantor, then
the Holders shall be entitled to receive from the holders of such Senior Debt
any payments or distributions received by such holders of Senior Debt in
excess of the amount sufficient to pay all amounts payable under or in
respect of such Senior Debt in full in cash or Cash Equivalents.
SECTION 13.5. OBLIGATIONS OF THE COMPANY AND THE GUARANTORS
UNCONDITIONAL.
Nothing contained in this Article XIII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company and any Guarantors and the Holders, the obligation of each such
Person, which is absolute and unconditional, to pay to the Holders the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors
of the Company and the Guarantors other than the holders of the Senior Debt,
nor shall anything herein or therein prevent the Trustee or any Holder
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from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this
Article XIII, of the holders of Senior Debt in respect of cash, property or
securities of the Company and the Guarantors received upon the exercise of
any such remedy. Notwithstanding anything to the contrary in this Article
XIII or elsewhere in this Indenture or in the Securities, upon any
distribution of assets of the Company and the Guarantors referred to in this
Article XIII, the Trustee, subject to the provisions of Sections 7.1 and 7.2,
and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of
the liquidating Trustee or agent or other Person making any distribution to
the Trustee or to the Holders for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other Indebtedness of the Company or any Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article XIII so long as such court
has been apprised of the provisions of, or the order, decree or certificate
makes reference to, the provisions of this Article XIII. Nothing in this
Section 13.5 shall apply to the claims of, or payments to, the Trustee under
or pursuant to Section 7.7.
SECTION 13.6. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED
IN ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than one Business Day prior to such
payment written notice thereof from the Company or from one or more holders
of Senior Debt or from any representative therefor and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, shall be entitled in all respects conclusively to
assume that no such fact exists.
SECTION 13.7. APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent (i) the making of such deposit by the Company shall not be
in contravention of any term or provision of the Credit Agreement and (ii)
allocated for the payment of Securities, shall not be subject to the
subordination provisions of this Article XIII. Otherwise, any deposit of
assets with the Trustee or the Agent (whether or not in trust) for the
payment of principal of or interest on any Securities shall be subject to the
provisions of Sections 13.1, 13.2, 13.3 and 13.4; PROVIDED that, if prior to
one Business Day preceding the date on which by the terms of this Indenture
any such assets may become distributable for any purpose (including without
limitation, the payment of either principal of or interest on any Security)
the Trustee or such Paying Agent shall not have received with respect to such
assets the written notice provided for in Section 13.6, then the Trustee or
such Paying Agent shall have full power and authority to receive such assets
and to apply the same to the purpose for which they were received, and shall
not be affected by any notice to the contrary which may be received by it on
or after such date.
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SECTION 13.8. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF THE COMPANY, THE GUARANTORS OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to
enforce subordination provisions contained in this Article XIII shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or any Guarantor or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company or any
Guarantor with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The
holders of Senior Debt may extend, renew, modify or amend the terms of the
Senior Debt or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company and the Guarantors, all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders.
SECTION 13.9. SECURITYHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article XIII and to protect the rights of the Holders pursuant to
this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation
or reorganization of the Company or any Guarantor (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit
of creditors or any other marshalling of assets and liabilities of the
Company or any Guarantor), the immediate filing of a claim for the unpaid
balance of his Securities in the form required in said proceedings and cause
said claim to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then the holders of
the Senior Debt or their representative are or is hereby authorized to have
the right to file and are or is hereby authorized to file an appropriate
claim for and on behalf of the Holders of said Securities. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of Senior
Debt or their representative to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any
Holder thereof, or to authorize the Trustee or the holders of Senior Debt or
their representative to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 13.10. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT.
The Trustee shall be entitled to all of the rights set forth in
this Article XIII in respect of any Senior Debt at any time held by it to the
same extent as any other holder of Senior Debt, and nothing in this Indenture
shall be construed to deprive the Trustee of any of its rights as such holder.
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SECTION 13.11. ARTICLE XIII NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium,
if any, or interest on the Securities by reason of any provision of this
Article XIII shall not be construed as preventing the occurrence of a Default
or an Event of Default under Section 6.1 or in any way limit the rights of
the Trustee or any Holder to pursue any other rights or remedies with respect
to the Securities.
SECTION 13.12. NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR
DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders (other
than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the
Company, any Guarantor or any other Person, cash, property or securities to
which any holders of Senior Debt shall be entitled by virtue of this
Article XIII or otherwise. Nothing in this Section 13.12 shall affect the
obligation of any other such Person to hold such payment for the benefit of,
and to pay such payment over to, the holders of Senior Debt or their
representative. In the event of any conflict between the fiduciary duty of
the Trustee to the Holders of Securities and to the holders of Senior Debt,
the Trustee is expressly authorized to resolve such conflict in favor of the
Holders.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 14.2. NOTICES.
Any notices or other communications to the Company or any Guarantor
or the Trustee required or permitted hereunder shall be in writing, and shall
be sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Guarantor:
Sun Healthcare Group, Inc.
101 Sun Avenue NE
Albuquerque, New Mexico 87109
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Attention: Chief Financial Officer
Telecopy: (505) 821-9532
with a copy to:
Shearman & Sterling
555 California, Suite 2000
San Francisco, California 94123
Attention: William Hinman
Telecopy: (415) 616-1199
if to the Trustee:
U.S. Bank Trust National Association
U.S. Bank Trust Center
180 East Fifth Street, Suite 200
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration
Telecopy: (612) 244-0711
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or
made as of the date so delivered, if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five
Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 14.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
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<PAGE>
SECTION 14.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, such Person shall
furnish to the Trustee:
(1) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been met; and
(2) an Opinion of Counsel (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of
such counsel, all such conditions precedent have been met.
SECTION 14.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been met; and
(4) a statement as to whether or not, in the opinion of
each such Person, such condition or covenant has been met; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 14.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Paying Agent or Registrar may make reasonable rules
for its functions.
87
<PAGE>
SECTION 14.7. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close. If a payment date is a Legal Holiday at such
place, payment may be made at such place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 14.8. GOVERNING LAW.
THIS INDENTURE, THE GUARANTEES AND THE SECURITIES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. EACH
OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES,
AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE
COMPANY AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY AND THE
GUARANTORS IN ANY OTHER JURISDICTION.
SECTION 14.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any Guarantor or any of their respective
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 14.10. NO RECOURSE AGAINST OTHERS.
No partner, incorporator, direct or indirect stockholder, director,
officer or employee, as such, past, present or future, of the Company or any
Guarantor, or any successor entity, shall have any personal liability in
respect of the obligations of the Company and the Guarantors under the
Securities, this Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation by reason of his, her or its
status as such partner,
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<PAGE>
incorporator, stockholder, director, officer or employee. Each Securityholder
by accepting a Security waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Securities.
SECTION 14.11. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture
and the Securities shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 14.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 14.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
SECTION 14.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 14.15. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all costs and expenses (including attorneys' fees for the
Company and the Trustee) incurred in connection therewith, including, but not
limited to, costs and expenses of qualification of this Indenture and the
Securities and printing this Indenture and the Securities. The Trustee shall
be entitled to receive from the Company any such Officers' Certificates,
Opinions of Counsel or other documentation as it may reasonably request in
connection with any such qualification of this Indenture under the TIA.
89
<PAGE>
SECTION 14.16. REGISTRATION RIGHTS.
Certain Holders of the Securities may be entitled to certain
registration rights with respect to such Securities pursuant to, and subject
to the terms of, the Registration Rights Agreement.
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
SUN HEALTHCARE GROUP, INC.,
a Delaware corporation
By: /s/ Robert D. Woltil
-------------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
U.S. BANK TRUST NATIONAL
ASSOCIATION,
as Trustee
By: /s/ Richard H. Prokosch
-------------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
GUARANTORS, as listed on Schedule I
hereto
By: /s/ Robert D. Woltil
-------------------------------------
Name: Robert D. Woltil
Title: Senior Vice President and
Chief Financial Officer of
the Guarantors except for
Accelerated Care Plus, LLC
and Hospital Therapy
Service of Michigan, LLC of
which he is Senior Vice
President and Chief
Executive Officer of each
of their members HC, Inc.
and Cal-Med, Inc. and
SunCare Respitory Services,
Inc., respectively
<PAGE>
SCHEDULE I
GUARANTORS
Accelerated Care Plus, LLC
Americare Homecare, Inc.
Americare of West Virginia, Inc.
Bay Colony Health Service, Inc.
Beckley Health Care Corp.
Bergen Eldercare, Inc.
Braswell Enterprises, Inc.
Brittany Rehabilitation Center, Inc.
Cal-Med, Inc.
Care Enterprises, Inc.
Care Enterprises West
Care Home Health Services
Carmichael Rehabilitation Center
Circleville Health Care Corp.
Clipper Home of North Conway, Inc.
Clipper Home of Portsmouth, Inc.
Clipper Home of Rochester, Inc.
Clipper Home of Wolfeboro, Inc.
Coalinga Rehabilitation Center
Community Re-Entry Services of Cortland, Inc.
Covina Rehabilitation Center
Dunbar Health Care Corp.
Evergreen Rehabilitation Center
Executive Pharmacy Services, Inc.
Fairfield Rehabilitation Center
First Class Pharmacy, Inc.
Fullerton Rehabilitation Center
Glendora Rehabilitation Center
Glenville Health Care, Inc.
Golan Healthcare Group, Inc.
Goodwin Nursing Home, Inc.
Grand Terrace Rehabilitation Center
G-WZ of Stamford, Inc.
Hallmark Health Services, Inc.
Harbor View Rehabilitation Center
Hawthorne Rehabilitation Center
HC, Inc.
Heritage Rehabilitation Center
Heritage-Torrance Rehabilitation Center
HTA of New Jersey, Inc.
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<PAGE>
Huntington Beach Convalescent Hospital
Jackson Rehabilitation Center, Inc.
Linda-Mar Rehabilitation Center
Living Services, Inc.
LTC Staffinders, Inc.
Manatee Springs Nursing Center, Inc.
Marion Health Care Corp.
Masthead Corporation
Meadowbrook Rehabilitation Center
Mediplex Atlanta Rehabilitation Institute, Inc.
Mediplex Management, Inc.
Mediplex Management of Palm Beach County, Inc.
Mediplex Management of Port St. Lucie, Inc.
Mediplex Management of Texas, Inc.
Mediplex of Concord, Inc.
Mediplex of Connecticut, Inc.
Mediplex of Kentucky, Inc.
Mediplex of Maryland, Inc.
Mediplex of Massachusetts, Inc.
Mediplex of New Hampshire, Inc.
Mediplex of New Jersey, Inc.
Mediplex of New York, Inc.
Mediplex of Ohio, Inc.
Mediplex of Tennessee, Inc.
Mediplex of Virginia, Inc.
Mediplex Rehabilitation of Massachusetts, Inc.
New Bedford Nursing Center, Inc.
New Lexington Health Care Corp.
Newport Beach Rehabilitation Center
Nursing Home, Inc.
Oakview Treatment Centers of Kansas, Inc.
Oasis Mental Health Treatment Center, Inc.
Orange Rehabilitation Hospital, Inc.
Pacific Beach Physical Therapy, Inc.
Paradise Rehabilitation Center, Inc.
Paso Robles Rehabilitation Center
Peachwood Physical Therapy, Inc.
Pharmacy Factors of California, Inc.
Pharmacy Factors of Florida, Inc.
Pharmacy Factors of Texas, Inc.
P.M.N.F. Management, Inc.
Putnam Health Care Corp.
Quality Care Holding Corporation
Quality Nursing Care of Massachusetts, Inc.
I-2
<PAGE>
Regency Health Services, Inc.
Regency High School, Inc.
Regency - North Carolina, Inc.
Regency Outpatient Services, Inc.
Regency Rehab Hospitals, Inc.
Regency Rehab Properties, Inc.
Regency Rehabilitation Management & Consulting Services, Inc.
Regency - Tennessee, Inc.
RHS Management Corporation
Rosewood Rehabilitation Center, Inc.
Salem Health Care Corp.
San Bernardino Rehabilitation Hospital, Inc.
Savannas Hospital Limited Partnership
Shandin Hills Rehabilitation Center
SHG International Holdings, Inc.
Special Medical Services, Inc.
Spofford Land, Inc.
Stockton Rehabilitation Center, Inc.
SunAlliance Healthcare Services, Inc.
SunBridge, Inc.
Sun Care Corp.
SunCare Respiratory Services, Inc.
SunChoice Medical Supply, Inc.
SunDance Rehabilitation Corporation
SunFactors, Inc.
Sun Healthcare (Europe) LLC
Sun Healthcare, Inc.
Sun Lane Purchase Corporation
Sunmark of New Mexico, Inc.
SunPlus Home Health Services, Inc.
SunQuest Consulting, Inc.
Sunrise Healthcare Corporation
Sunrise Healthcare of Colorado, Inc.
Sunrise Healthcare of Florida, Inc.
Sunrise Rehab of Colorado, Inc.
SunScript Pharmacy Corporation
SunSolution, Inc.
Sunspectrum Outpatient Rehabilitation-Concord, Inc.
The Mediplex Group, Inc.
Vista Knoll Rehabilitation Center, Inc.
West Jersey/Mediplex Rehabilitation L.P.
Willowview Rehabilitation Center
Worcester Nursing Center, Inc.
I-3
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
SUN HEALTHCARE GROUP, INC.
9 3/8% SERIES A(1) SENIOR SUBORDINATED NOTE DUE 2008
CUSIP No. ______________
No. $
Sun Healthcare Group, Inc., a Delaware corporation (hereinafter
called the "COMPANY", which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____, or registered assigns, the principal sum of _____ Dollars, on May 1,
2008.
Interest Payment Dates: May 1 and November 1, commencing November 1,
1998.
Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:
SUN HEALTHCARE GROUP, INC.,
a Delaware corporation
By:
-------------------------------------
Name:
Title:
Attest:
----------------------
Name:
Title:
- ---------------------
(1) Series A should be replaced with Series B in the Exchange Securities.
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By
----------------------------------
Authorized Signatory
Dated:
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<PAGE>
SUN HEALTHCARE GROUP, INC.
9 3/8% SERIES A(2) SENIOR SUBORDINATED NOTE DUE 2008
Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.(3)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT)(A "QIB"), OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING
THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS
IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO
- ----------------------
(2) Series A should be replaced with Series B in the Exchange Security.
(3) This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
STATE SECURITIES LAWS OR (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) AND, IN EACH CASE, IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS.(4)
1. INTEREST.
Sun Healthcare Group, Inc., a Delaware corporation (hereinafter
called the "COMPANY," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of 9 3/8% per annum. To the extent it is lawful,
the Company promises to pay interest on any interest payment due but unpaid
on such principal amount at a rate of 9 3/8% per annum compounded
semi-annually.
The Company will pay interest semi-annually on May 1 and November 1
of each year (each, an "INTEREST PAYMENT DATE"), commencing November 1, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Securities,
from the date of the original issuance. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
- ----------------------
(4) This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Except as provided below, the Company shall pay principal and
interest in such coin or currency of the United States of America as at the
time of payment shall be legal tender for payment of public and private debts
("CASH"). The Securities will be payable as to principal, premium and
interest at the office or agency of the Company maintained for such purpose
within the Borough of Manhattan, the City and State of New York or, at the
option of the Company, payment of principal, premium and interest may be made
by check mailed to the Holders at their addresses set forth in the register
of Holders, and PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest
and premium on all Global Securities and all other Securities the Holders of
which shall have provided wire transfer instructions to the Company or the
Paying Agent at least 5 Business Days prior to the relevant record date.
3. PAYING AGENT AND REGISTRAR.
Initially, First Trust National Association (the "TRUSTEE"), will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any
of its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
May 4, 1998 (the "INDENTURE"), among the Company, the Guarantors named
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the
Indenture. The Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of
them. The Securities are senior subordinated obligations of the Company
limited in aggregate principal amount to $125,000,000 (or up to $150,000,000
if the over-allotment option is exercised). The Securities are, to the extent
and in the manner provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Debt of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his behalf to take such action as may be provided
in the Indenture and (c) appoints the Trustee his attorney-
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<PAGE>
in-fact for such purpose. The Securities are guaranteed on a senior
subordinated basis by the Guarantors.
5. REDEMPTION.
The Securities may be redeemed in whole or from time to time in
part at any time on and after May 1, 2003, at the option of the Company, at
the Redemption Price (expressed as a percentage of principal amount) set
forth below with respect to the indicated Redemption Date, in each case
(subject to the right of Holders of record on a Record Date that is on or
prior to such Redemption Date to receive interest due on the Interest Payment
Date to which such Record Date relates), plus any accrued but unpaid interest
to the Redemption Date. The Securities may not be so redeemed prior to May
1, 2003.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
commencing May 1, Redemption Price
------------------------ --------------------
<S> <C>
2003 . . . . . . . . . . . . . . . . . 104.688%
2004 . . . . . . . . . . . . . . . . . 103.126
2005 . . . . . . . . . . . . . . . . . 101.563
2006 and thereafter . . . . . . . . . 100.0000%
</TABLE>
Any such redemption will comply with Article III of the Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the registry books of the Registrar. Securities may be redeemed in part in
multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption
shall have been deposited with the Paying Agent on such Redemption Date, the
Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price, plus any accrued and unpaid interest to the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may
register the transfer of, or
A-6
<PAGE>
exchange Securities in accordance with, the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer of or
exchange any Securities (a) selected for redemption except the unredeemed
portion of any Security being redeemed in part or (b) for a period beginning
15 Business Days before the mailing of a notice of an offer to repurchase or
redemption and ending at the close of business on the day of such mailing.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of
it for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee
and such Paying Agent(s) with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, cash,
U.S. Government Obligations or a combination thereof, in such amounts as will
be sufficient in the opinion of a nationally recognized firm of independent
public accountants selected by the Trustee, to pay the principal of, premium,
if any, and interest on the Securities to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the Company will
be discharged from certain provisions of the Indenture and the Securities
(including the financial covenants, but excluding their obligation to pay the
principal of, premium, if any, and interest on the Securities). Upon
satisfaction of certain additional conditions set forth in the Indenture, the
Company may elect to have its obligations discharged with respect to
outstanding Securities.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may under certain
circumstances amend or supplement the Indenture or the Securities to, among
other things,
A-7
<PAGE>
cure any ambiguity, defect or inconsistency, or make any other change that
does not adversely affect the rights of any Holder of a Security.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the
Company and the Guarantors to, among other things, Incur additional
Indebtedness and issue Preferred Stock, pay dividends or make certain other
Restricted Payments, enter into certain transactions with Affiliates, incur
Liens, sell assets and subsidiary stock, merge or consolidate with any other
Person or transfer (by lease, assignment or otherwise) substantially all of
the properties and assets of the Company. The limitations are subject to a
number of important qualifications and exceptions. The Company must
periodically report to the Trustee on compliance with such limitations.
13. RANKING.
Payment of principal, premium, if any, and interest on the
Securities is subordinated, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Debt.
14. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required
to offer to purchase on the Change of Control Payment Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Payment
Date. Holders of Securities will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Securities purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of
the Company, the Guarantors or any of their respective Subsidiaries to sell
assets and subsidiary stock. In the event the proceeds from a permitted
Asset Sale exceed certain amounts, as specified in the Indenture, the Company
will be required either to reinvest the proceeds of such Asset Sale in a
Related Business, repay certain Indebtedness or to make an offer to purchase
each Holder's Securities at 100% of the principal amount thereof, plus
accrued interest, if any, to the purchase date.
15. NOTATION OF GUARANTEE.
As set forth more fully in the Indenture, the Persons constituting
Guarantors from time to time, in accordance with the provisions of the
Indenture, unconditionally and jointly and severally guarantee, in accordance
with Section 12.1 of the Indenture, to the
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<PAGE>
Holder and to the Trustee and its successors and assigns, that (i) the
principal of and interest on the Security will be paid, whether at the
Maturity Date or Interest Payment Dates, by acceleration, call for redemption
upon a Change of Control Offer, upon an Asset Sale Offer or otherwise, and
all other obligations of the Company to the Holder or the Trustee under the
Indenture or this Security will be promptly paid in full or performed, all in
accordance with the terms of the Indenture and this Security, and (ii) in the
case of any extension of payment or renewal of this Security or any of such
other obligations, they will be paid in full when due or performed in
accordance with the terms of such extension or renewal, whether at the
Maturity Date, as so extended, by acceleration, call for redemption, upon a
Change of Control Offer, upon an Asset Sale Offer or otherwise. Such
guarantees shall cease to apply, and shall be null and void, with respect to
any Guarantor who, pursuant to Article XII of the Indenture, is released from
its guarantees, or whose guarantees otherwise cease to be applicable pursuant
to the terms of the Indenture.
When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.
16. DEFAULTS AND REMEDIES.
If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately; PROVIDED that so long as at least $15 million of Senior Debt is
outstanding under the Credit Agreement, no acceleration of the maturity of
the Securities shall be effective until the earlier of (i) five days after
notice of acceleration is received by the Representative under the Credit
Agreement (unless such Event of Default is cured or waived prior thereto) and
(ii) the date on which any Senior Debt under the Credit Agreement is
accelerated. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect
to the Company or any of its Significant Subsidiaries, all outstanding
Securities will become due and payable without further action or notice.
Securityholders may not enforce the Indenture, the Securities or the
Guarantees except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for
the Company any
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<PAGE>
Guarantor, any of their Subsidiaries or any of their respective Affiliates,
and may otherwise deal with such Persons as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No partner, incorporator, direct or indirect stockholder, partner,
director, officer or employee, as such, past, present or future, of the
Company or any Guarantor, or any successor entity, shall have any personal
liability in respect of the obligations of the Company and the Guarantors
under the Securities or the Indenture by reason of his, her or its status as
such partner, incorporator, stockholder, director, officer or employee. Each
Holder of a Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or
authenticating Agent signs the certificate of authentication on the other
side of this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers
as printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.(5)
In addition to the rights provided to Holders of Securities under
the Indenture, Holders of Securities shall have all the rights set forth in
the Registration Rights Agreement.
23. GOVERNING LAW.
___________________
(5) This paragraph should be included only for the Initial Securities.
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<PAGE>
The Indenture and the Securities shall be governed by and construed
in accordance with the internal laws of the State of New York.
A-11
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
- ---------------------------------
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities act of 1933, as amended (the "Securities Act")
covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) July 1, 1999, the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that:
[Check One]
/ / (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by Rule 144A
thereunder.
/ / (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and
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<PAGE>
until the conditions to any such transfer or registration set forth herein
and in Section 2.6 of the Indenture shall have been satisfied.(6)
Dated: Signed:
---------------------------- ----------------------------------
- ------------------------------------------------------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee (*)
The undersigned represents and warrants that it is purchasing this Security for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.(7)
Dated:
-------------------- -----------------------------------
NOTICE: To be executed
by an executive officer
______________________
(6) This paragraph should be included only for the Initial Securities.
NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(I) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to the Trustee.
(7) This paragraph should be included only for the Initial Securities.
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article XI of the Indenture, check the appropriate
box: / / Section 4.14 / / Article XI.
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.14 or Article XI of the Indenture, as the case
may be, state the amount you want to be purchased: $________.
Date: Signature:
--------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee**
____________________________
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(I) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to the Trustee.
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES (8)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Principal Security officer of
Date of Amount Amount following Trustee or
Exchange of this Global of this such decrease Securities
Security Global or increase) Custodian
Security
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
______________________________
(8) This schedule should only be added if the Security is issued in global
form.
A-15
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED SECURITIES (9)
Re: 9 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 OF SUN HEALTHCARE GROUP,
INC.
This Certificate relates to $______ principal amount of Securities held in
(check applicable space) _____ book-entry or ______ definitive form by
_________________ (the "TRANSFEROR").
The Transferor (check applicable box):
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a Security
or Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above-captioned Securities and as provided in Section
2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because:
/ / Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
/ / Such Security is being transferred to a "qualified institutional
buyer" (within the meaning of Rule 144A promulgated under the Securities Act),
that is aware that any sale of Securities to it will be made in reliance on Rule
144A under the Securities Act and that is acquiring such Transfer Restricted
Security for its own account, or for the account of another such "qualified
institutional buyer" (in satisfaction of Section 2.06(a)(ii)(B) or Section 2.06
(d)(i)(B) of the Indenture).
/ / Such Security is being transferred pursuant to an exemption from
registration in accordance with Rule 144, or outside the United States in an
Offshore Transaction in compliance with Rule 904 under the Securities Act, or
pursuant to an
________________________________________
(9) This Certificate shall be included only for Initial Securities.
A-16
<PAGE>
effective registration statement under the Securities Act (in satisfaction of
Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
/ / Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act and
in accordance with applicable securities laws of the states of the United
States, other than as provided in the immediately preceding paragraph. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.6(a)(ii)(D) or Section 2.6(d)(i)(D) of the Indenture).
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:
-----------------------------------
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<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SECURITIES (10)
Re: 9 3/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2008 OF SUN HEALTHCARE GROUP, INC.
This Certificate relates to $______
principal amount of Securities held in (check applicable box) _____
book-entry or ______ definitive form by _____ (the "TRANSFEROR").
The Transferor (check applicable box):
/ / has requested the Trustee by written
order to deliver in exchange for its beneficial interest in the Global Security
held by the Depositary a Security or Securities in definitive, registered form
of authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Security (or the portion thereof indicated
above); or
/ / has requested the Registrar by written
order to exchange or register the transfer of a Security or Securities.
______________________________
(10) This certificate shall be included only for
the Exchange Securities.
A-18
<PAGE>
Exhibit 10.3
-------------------
-------------------
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SUN FINANCING I
DATED AS OF MAY 4, 1998
-------------------
-------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT; REPORTS, NOTICES AND COMPLIANCE CERTIFICATES. . . . . . . . . 13
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . . . 13
SECTION 2.2 Lists of Holders of Trust Securities . . . . . . . . . . . . . 14
SECTION 2.3 Reports by the Property Trustee. . . . . . . . . . . . . . . . 14
SECTION 2.4 Periodic Reports to Property Trustee . . . . . . . . . . . . . 15
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . . . 15
SECTION 2.6 Events of Default; Waiver. . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . . . 17
ARTICLE III
ORGANIZATION OF TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.4 Prohibition of Actions by the Trust and the Issuer
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.5 General Authority of the Issuer Trustees . . . . . . . . . . . 20
SECTION 3.6 Title to Property of the Trust . . . . . . . . . . . . . . . . 20
SECTION 3.7 Not Responsible for Recitals or Issuance of
Trust Securities . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.8 Duration of Trust. . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.9 Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.10 Termination of Trust . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV
SPONSOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.1 Sponsor's Purchase of Common Securities. . . . . . . . . . . . 23
SECTION 4.2 Responsibilities of the Sponsor. . . . . . . . . . . . . . . . 24
i
<PAGE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
ISSUER TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.1 Number of Issuer Trustees. . . . . . . . . . . . . . . . . . . 25
SECTION 5.2 Delaware Trustee; Eligibility. . . . . . . . . . . . . . . . . 25
SECTION 5.3 Property Trustee; Eligibility. . . . . . . . . . . . . . . . . 26
SECTION 5.4 Qualifications of Administrative Trustees and Trustee
Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.5 Initial Trustees . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.6 Appointment, Removal and Resignation of Trustees . . . . . . . 27
SECTION 5.7 Vacancies among Trustees . . . . . . . . . . . . . . . . . . . 29
SECTION 5.8 Merger, Conversion, Consolidation or Succession to
Business of an Issuer Trustee. . . . . . . . . . . . . . . . . 29
SECTION 5.9 Authority, Powers and Duties of the Administrative
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.10 Delegation of Powers and Duties of the Administrative
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.11 Powers and Duties of the Property Trustee. . . . . . . . . . . 34
SECTION 5.12 Certain Duties and Responsibilities of the Property
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.13 Certain Rights of Property Trustee . . . . . . . . . . . . . . 38
SECTION 5.14 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.15 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
THE TRUST SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.1 Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.2 General Provisions Regarding the Trust Securities. . . . . . . 44
SECTION 7.3 General Form of Certificates . . . . . . . . . . . . . . . . . 44
SECTION 7.4 Form of Convertible Preferred Securities Certificates;
Global Certificates. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.5 Execution and Dating of Certificates . . . . . . . . . . . . . 46
SECTION 7.6 Global Securities; Non-Global Securities; Common
Securities Certificate . . . . . . . . . . . . . . . . . . . . 46
ii
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 7.7 Definitive Convertible Preferred Security Certificates . . . . 48
SECTION 7.8 Restrictive Legends. . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.9 Temporary Certificates . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.10 Registrar, Paying Agent and Conversion Agent . . . . . . . . . 51
SECTION 7.11 Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . 51
SECTION 7.12 Outstanding Convertible Preferred Securities . . . . . . . . . 52
SECTION 7.13 Convertible Preferred Securities in Treasury . . . . . . . . . 52
SECTION 7.14 Notices to Clearing Agency . . . . . . . . . . . . . . . . . . 53
SECTION 7.15 Appointment of Successor Clearing Agency . . . . . . . . . . . 53
SECTION 7.16 Deemed Security Holders. . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS OF TRUST SECURITIES . . . . . . . . . . . . 53
SECTION 8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.2 Certain Transfers and Exchanges. . . . . . . . . . . . . . . . 55
SECTION 8.3 Mutilated, Destroyed, Lost or Stolen Certificates;
Replacement Securities . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.4 Cancellation of Convertible Preferred Security Certificates. . 60
ARTICLE IX
LIMITATION OF LIABILITY OF HOLDERS OF TRUST SECURITIES, TRUSTEES AND OTHERS . . . . 61
SECTION 9.1 Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.2 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.5 Outside Businesses . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE X
ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.1 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.2 Certain Accounting Matters . . . . . . . . . . . . . . . . . . 67
SECTION 10.3 Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.4 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . 68
iii
<PAGE>
<CAPTION>
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----
<S> <C>
ARTICLE XI
AMENDMENTS AND MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.2 Meetings of the Holders of Trust Securities; Action by
Written Consent. . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE . . . . . . . . . . . . . 72
SECTION 12.1 Representations and Warranties of Property Trustee . . . . . . 72
SECTION 12.2 Representations and Warranties of Delaware Trustee . . . . . . 73
ARTICLE XIII
CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 13.1 Conversion Rights. . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 13.2 Conversion Procedures. . . . . . . . . . . . . . . . . . . . . 75
SECTION 13.3 Conversion Price Adjustments . . . . . . . . . . . . . . . . . 78
SECTION 13.4 Fundamental Change . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.5 Notice of Adjustments of Conversion Price. . . . . . . . . . . 85
SECTION 13.6 Prior Notice of Certain Events . . . . . . . . . . . . . . . . 86
SECTION 13.7 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 87
SECTION 13.8 Dividend or Interest Reinvestment Plans. . . . . . . . . . . . 87
SECTION 13.9 Certain Additional Rights. . . . . . . . . . . . . . . . . . . 88
SECTION 13.10 Restrictions on Sun Common Stock Issuable Upon
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 13.11 Trustee Not Responsible for Determining Conversion Price
or Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE XIV
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 14.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 14.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 14.3 Intention of the Parties . . . . . . . . . . . . . . . . . . . 92
SECTION 14.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 14.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 92
SECTION 14.6 Partial Enforceability . . . . . . . . . . . . . . . . . . . . 93
SECTION 14.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 93
iv
<PAGE>
<CAPTION>
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<S> <C>
ARTICLE XV
REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 15.1 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 93
ANNEX I Terms of 7% Convertible Preferred Securities and 7%
Convertible Common Securities
Exhibit A-1 Form of Preferred Security
Exhibit A-2 Form of Common Security
Exhibit B Form of Unrestricted Securities Certificate
</TABLE>
v
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Trust Agreement
- ------------------- ---------------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(c)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
310 - 317. . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4, 5.9(d)(xiii)
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(b)-(e)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.12(a)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6, Annex I
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9(d)(v)
</TABLE>
_______________
* This Cross-Reference Table does not constitute part of the Trust Agreement
and shall not affect the interpretation of any of its terms or provisions.
vi
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SUN FINANCING I
MAY 4, 1998
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of May 4, 1998, by the undersigned trustees (together with all
other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), Sun
Healthcare Group, Inc., a corporation, as trust sponsor (the "Sponsor"), and
by the holders, from time to time, of undivided beneficial interests in the
assets of the Trust issued pursuant to this Declaration;
WHEREAS, certain of the Trustees and the Sponsor established Sun
Financing I (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a Declaration of Trust, dated as of November 7, 1997, as
amended by an Amended and Restated Declaration of Trust, dated as of April
27, 1998, (the "Original Declaration") and a Certificate of Trust filed with
the Secretary of State of the State of Delaware on November 7, 1997 for the
sole purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain Convertible Debentures (as defined herein) of the Company
(as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original
Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitutes the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or amended
from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections and Annexes
and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) a reference to the masculine includes the feminine and
vice versa.
"ADDITIONAL INTEREST" means if the Trust is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
taxing authority, such amounts as shall be required so that the net amounts
received and retained by the Trust after paying such taxes, duties,
assessments and governmental charges will not be less than the amounts the
Trust would have received had no such taxes, duties, assessments or
governmental charges been imposed.
"ADMINISTRATIVE TRUSTEE" means any Trustee other than the
Property Trustee and the Delaware Trustee.
2
<PAGE>
"AFFILIATE" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
"AGENT" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"APPLICABLE PRICE" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of the Sun Common Stock receive only
cash, the amount of cash received by the holder of one share of Sun Common
Stock and (ii) in the event of any other Non-Stock Fundamental Change or any
Common Stock Fundamental Change, the average of the Closing Prices for the
Sun Common Stock during the ten trading days prior to the record date for the
determination of the holders of Sun Common Stock entitled to receive such
securities, cash, or other property in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no such
record date, the date upon which the holders of the Sun Common Stock shall
have the right to receive such securities, cash, or other property (such
record date or distribution date being hereinafter referred to as the
"Entitlement Date").
"APPLICABLE PROCEDURES" means, with respect to any transfer or
transaction involving a Global Certificate or beneficial interest therein,
the rules and procedures of Euroclear and Cedel, and of the Clearing Agency
for such security, in each case to the extent applicable to such transaction
and as in effect from time to time.
"AUTHORIZED OFFICER" of a Person means any Person that is
authorized to bind such Person.
"BOARD OF DIRECTORS" means either the board of directors of
the Company or any duly authorized committee of that board.
"BOARD RESOLUTION" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"BOOK ENTRY INTEREST" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 8.2.
3
<PAGE>
"BUSINESS DAY" means any day other than a day on which banking
institutions in the City of New York or in Wilmington, Delaware are authorized
or required by law to close.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware
Code, 12 DEL. CODE Section 3801 ET SEQ., as it may be amended from time to time,
or any successor legislation.
"CERTIFICATE" means a certificate in global or definitive form
representing a Common Security or a Convertible Preferred Security.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement among the
Trust, the Sponsor and The Depositary Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the global Convertible
Preferred Security Certificates, substantially in the form attached as Exhibit
D, as the same may be amended and supplemented from time to time.
"CLEARING AGENCY" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Convertible Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Convertible
Preferred Securities.
"CLOSING DATE" means May 4, 1998.
"CLOSING PRICE" has the meaning specified in Section 13.7.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SECURITIES" has the meaning specified in Section 7.1.
"COMMON SECURITIES GUARANTEE" means the guarantee agreement dated
as of May 4, 1998, of the Sponsor in respect of the Common Securities.
4
<PAGE>
"COMMON SECURITY PURCHASE AGREEMENT" means the purchase agreement
relating to the Common Securities dated as of May 4, 1998, by and between the
Trust and the Sponsor.
"COMMON SECURITY CERTIFICATE" means a definitive certificate in
fully registered form representing a Common Security substantially in the form
of Exhibit A-2.
"COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Sun Common
Stock consists of common stock that for each of the ten consecutive trading days
prior to the Entitlement Date has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the NASDAQ National Market; provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding Convertible Preferred Securities continue to exist as
outstanding Convertible Preferred Securities or (ii) not later than the
occurrence of such Fundamental Change, the outstanding Convertible Preferred
Securities are converted into or exchanged for shares of convertible preferred
stock or debentures of an entity succeeding to the business of the Company or a
subsidiary thereof, which convertible preferred stock (or debentures, as the
case may be) has powers, preferences, and relative, participating, optional, or
other rights, and qualifications, limitations, and restrictions, substantially
similar to those of the Convertible Preferred Securities.
"COMPANY" means the Sponsor in its capacity as issuer of the
Convertible Debentures.
"COMPANY INDEMNIFIED PERSON" means (i) any Administrative
Trustee; (ii) any Affiliate of any Administrative Trustee; (iii) any officer,
director, shareholder, member, partner, employee, representative or agent of any
Administrative Trustee; or (iv) any officer, employee or agent of the Trust or
its Affiliates.
"COMPOUNDED INTEREST" means interest compounded quarterly at the
rate specified for the Convertible Debentures to the extent permitted by
applicable law upon interest accrued and unpaid (including Additional Interest)
at the end of each Extension Period.
"CONVERSION AGENT" has the meaning set forth in Section 7.10.
5
<PAGE>
"CONVERSION NOTICE" has the meaning set forth in Section 13.2.
"CONVERSION PRICE" has the meaning set forth in Section 13.1.
"CONVERTIBLE DEBENTURE PURCHASE AGREEMENT" means the purchase
agreement relating to the Convertible Debentures dated as of May 4, 1998 by and
between the Company and the Trust.
"COVERED PERSON" means (a) any officer, director, stockholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Trust Securities.
"CONVERTIBLE DEBENTURES" means the Convertible Debentures to be
issued by the Company under the Indenture and to be held by the Property
Trustee.
"CONVERTIBLE PREFERRED SECURITIES" has the meaning specified in
Section 7.1.
"CONVERTIBLE PREFERRED SECURITY CERTIFICATE" means a certificate
representing a Convertible Preferred Security substantially in the form of
Exhibit A-1.
"CONVERTIBLE PREFERRED SECURITIES GUARANTEE" means the Guarantee
Agreement dated as of May 4, 1998 of the Sponsor in respect of the Convertible
Preferred Securities.
"CONVERTIBLE PREFERRED SECURITY BENEFICIAL OWNER" means, with
respect to a Book Entry Interest, a Person who is the beneficial owner of such
Book Entry Interest, as reflected on the books of the Depositary, or on the
books of a Person maintaining an account with such Depositary (directly as a
participant or as an indirect participant, in each case in accordance with the
rules of such Depositary).
"DEFINITIVE CONVERTIBLE PREFERRED SECURITY CERTIFICATES" has the
meaning set forth in Section 7.4(a).
"DELAWARE TRUSTEE" has the meaning set forth in Section 5.2.
"DEPOSITARY" means The Depository Trust Company, the initial
Clearing Agency, until a successor shall be appointed pursuant to Section 7.15,
and thereafter means such successor Depositary.
6
<PAGE>
"DISTRIBUTION" means a distribution payable to Holders of Trust
Securities in accordance with Section 6.1.
"EVENT OF DEFAULT" in respect of the Trust Securities means an
Event of Default (as defined in the Indenture) has occurred and is continuing in
respect of the Convertible Debentures.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder,
or any successor legislation.
"EXTENSION PERIOD" has the meaning set forth in Annex I hereto.
"FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in
Section 9.4(b).
"FUNDAMENTAL CHANGE" means the occurrence of any Transaction or
event in connection with a plan pursuant to which all or substantially all of
the Sun Common Stock shall be exchanged for, converted into, acquired for, or
constitute solely the right to receive securities, cash, or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that, in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the Sun Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the consideration that a holder of Sun Common
Stock received in such Transaction or event as a result of which more than 50%
of the Sun Common Stock shall have been exchanged for, converted into, or
acquired for or constitute solely the right to receive securities, cash, or
other property.
"GLOBAL CERTIFICATE" has the meaning set forth in Section 8.2(a).
"HOLDER" means a Person in whose name a Certificate representing
a Trust Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
7
<PAGE>
"INDENTURE" means the Indenture dated as of May 4, 1998, between
the Company and the Indenture Trustee, as it may be amended from time to time.
"INDENTURE TRUSTEE" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"INVESTMENT COMPANY" means an investment company as defined in
the Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, as amended from time to time, and the rules and regulations promulgated
thereunder, or any successor legislation.
"ISSUER TRUSTEE" or "ISSUER TRUSTEES" means each Person who has
signed this Declaration as a trustee, so long as such Person shall continue in
office in accordance with the terms hereof, and all other Persons who may from
time to time be duly appointed, qualified and serving as Issuer Trustees in
accordance with the provisions hereof, and references herein to a Issuer Trustee
or the Issuer Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
"LEGAL ACTION" has the meaning set forth in Section 5.9(d)(x).
"LIQUIDATED DAMAGES" has the meaning specified in the Indenture.
"MAJORITY IN LIQUIDATION AMOUNT OF THE COMMON SECURITIES" means,
except as provided in the terms of the Common Securities or by the Trust
Indenture Act, Holders of outstanding Common Securities voting together as a
single class who are the record owners of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Common Securities of the relevant class.
"MAJORITY IN LIQUIDATION AMOUNT OF THE TRUST SECURITIES" means,
except as provided in the terms of the Convertible Preferred Securities or by
the Trust Indenture Act, Holders of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding
Convertible Preferred Securities or Holders of outstanding Common Securities
voting separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would
8
<PAGE>
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
of all outstanding Trust Securities of the relevant class.
"MINISTERIAL ACTION" has the meaning set forth in the terms of
the Trust Securities as set forth in Annex I hereto.
"NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other
than a Common Stock Fundamental Change.
"NYSE" means the New York Stock Exchange.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(i) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(iii) a statement that each such officer has made such
examination or investigation as, in such officer's
opinion, is necessary to enable such officer to express an
informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied
with.
"OFFERING MEMORANDUM" means the final offering memorandum issued
by the Company, dated as of April 29,1998.
"PAYING AGENT" has the meaning specified in Section 7.10.
"PERSON" means any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company,
9
<PAGE>
trust, unincorporated organization or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"PROPERTY TRUSTEE" means the Issuer Trustee meeting the
eligibility requirements set forth in Section 5.3.
"PROPERTY ACCOUNT" has the meaning set forth in Section 5.11(c).
"PURCHASE AGREEMENT" means the Purchase Agreement dated as of
April , 1998, between the Sponsor and the initial purchasers named therein,
relating to the Convertible Preferred Securities.
"PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date.
"QUORUM" means a majority of the Administrative Trustees.
"REFERENCE MARKET PRICE" shall initially mean $11.00 (which is an
amount equal to 66 2/3% of the reported last sales price for Sun Common Stock on
the NYSE Consolidated Transactions Tape on April 28, 1998) and in the event of
any adjustment of the conversion price other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial conversion price of the
Convertible Preferred Securities.
"REGISTRAR" has the meaning set forth in Section 7.10.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated May 4, 1998, among the Sponsor, the Trust, and the initial
purchasers named in the Purchase Agreement.
"RELATED PARTY" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
10
<PAGE>
"RESPONSIBLE OFFICER" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"RESTRICTED GLOBAL CERTIFICATE" has the meaning set forth in
Section 7.4(a).
"RESTRICTED SECURITIES" means all Convertible Preferred
Securities required pursuant to Section 7.8 to bear any Restricted Securities
Legend. Such term includes the Restricted Global Certificate.
"RESTRICTED SECURITIES CERTIFICATE" means a certificate
substantially in the form set forth in Exhibit B.
"RESTRICTED SECURITIES LEGEND" has the meaning specified in
Section 7.8.
"RULE 3a-5" means Rule 3a-5 under the Investment Company Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
"SECURITIES ACT LEGEND" means a Restricted Securities Legend.
"SECURITIES GUARANTEE" means the Common Securities Guarantee and
the Convertible Preferred Securities Guarantee.
"SHELF REGISTRATION STATEMENT" means the Registration Statement
including any amendments thereto relating to, among other securities, the
Convertible Preferred Securities, as defined in the Registration Rights
Agreement.
"SPECIAL EVENT" has the meaning set forth in Annex I hereto.
"SPONSOR" means Sun Healthcare Group, Inc., a Delaware
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.
11
<PAGE>
"SUCCESSOR ENTITY" has the meaning set forth in
Section 3.9(b)(i).
"SUCCESSOR SECURITIES" has the meaning set forth in
Section 3.9(b)(i)(B).
"SUN COMMON STOCK" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Annex 1, shares issuable on conversion of Trust
Securities shall include only shares of the class designated as Sun Common Stock
of the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; PROVIDED, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable on conversion shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"SUPER MAJORITY" has the meaning set forth in Section 2.6(a)(ii).
"TAX EVENT" has the meaning set forth in Annex I hereto.
"10% IN LIQUIDATION AMOUNT OF THE TRUST SECURITIES" means, except
as provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holders of outstanding Trust Securities voting together as a
single class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities, voting
separately as a class, who are the record owners of 10% or more of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Trust Securities of the relevant class.
"TRADING DAY" has the meaning set forth in Section 13.7.
"TRANSACTION" has the meaning set forth in Section 13.4.
"TREASURY REGULATIONS" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States
12
<PAGE>
Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUST SECURITIES" means the Common Securities and the
Convertible Preferred Securities.
"TRUST SECURITIES CERTIFICATE" means any one of the Common
Securities Certificates, the Global Certificates or the Convertible Preferred
Securities Certificates.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended from time to time, and the rules and regulations promulgated thereunder,
or any successor legislation.
"UNRESTRICTED SECURITIES CERTIFICATE" means a certificate
substantially in the form set forth in Exhibit C.
ARTICLE II
TRUST INDENTURE ACT; REPORTS, NOTICES AND COMPLIANCE CERTIFICATES
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Issuer Trustee that
is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
13
<PAGE>
SECTION 2.2 LISTS OF HOLDERS OF TRUST SECURITIES.
(a) Each of the Sponsor and the Administrative Trustees on
behalf of the Trust shall provide the Property Trustee (i) within 14 days after
each record date for payment of Distributions, a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Holders of the Trust Securities ("List of Holders") as of such record date,
PROVIDED that neither the Sponsor nor the Administrative Trustees on behalf of
the Trust shall be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Property Trustee (or otherwise held by it) by the Sponsor and the
Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in any List of
Holders given to or held by it or which it receives in the capacity as Paying
Agent (if acting in such capacity), PROVIDED that the Property Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Property Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE.
(a) Within 30 days after May 15 of each year, commencing May
15, 1999 (unless a report is required to be transmitted before such date by the
TIA, in which case before such date so as to comply with the TIA), the Property
Trustee shall transmit by mail to Holders such reports concerning the Property
Trustee and its actions under this Declaration as may be required pursuant to
the Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each stock
exchange upon which the Trust Securities are listed, with the Commission and
with the Company. The Trust will notify the Property Trustee when the Trust
Securities are listed on any stock exchange.
14
<PAGE>
SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE.
Each of the Sponsor and the Trust shall file with the Property
Trustee and the Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act (including Section 3.14 thereof) at the times and in the
manner provided pursuant to such Act; PROVIDED, that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Property Trustee
within 15 days after the same is so required to be filed with the Commission.
Delivery of such reports, information and documents to the
Property Trustee is for informational purposes only and the Property Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Trust's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
Each of the Sponsor and the Trust shall also provide to the
Property Trustee on a timely basis such information as the Property Trustee
requires to enable the Property Trustee to prepare and file any form required to
be submitted by the Company with the Internal Revenue Service and the Holders of
the Trust Securities relating to original issue discount, if any, including,
without limitation, Form 1099-OID or any successor form.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent, if any, provided for in this Declaration that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in Liquidation Amount of
Convertible Preferred Securities may, by vote, on behalf of the Holders of all
of the Convertible Preferred Securities, waive any past Event of Default in
respect of the Convertible Preferred Securities and its consequences, PROVIDED
that, if the underlying Event of Default under the Indenture:
15
<PAGE>
(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Convertible Debentures
(a "Super Majority") to be waived under the Indenture, the Event of Default
under the Declaration may only be waived by the vote of the Holders of at
least the proportion in liquidation amount of the Convertible Preferred
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Convertible Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu
of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Declaration and the Trust Securities, as permitted by the Trust Indenture Act.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Convertible Preferred Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or an Event of
Default with respect to the Convertible Preferred Securities or impair any right
consequent thereon. Any waiver by the Holders of the Convertible Preferred
Securities of an Event of Default with respect to the Convertible Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, PROVIDED that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section 2.6(b),
the Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority
to be waived, except where the Holders of the Common Securities are deemed
to have waived such Event of Default under the Declaration as provided
below in this Section 2.6(b), the Event of Default under the Declaration
may only be waived by the vote of the
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Holders of at least the proportion in liquidation amount of the Common
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Convertible Debentures outstanding;
PROVIDED FURTHER, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Convertible Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Convertible Preferred Securities and only the
Holders of the Convertible Preferred Securities will have the right to direct
the Property Trustee in accordance with the terms of the Convertible Preferred
Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of
Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such
Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby
expressly excluded from this Declaration and the Trust Securities, as permitted
by the Trust Indenture Act. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such default shall cease to exist and any Event of
Default with respect to the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration, but no such waiver
shall extend to any subsequent or other default or Event of Default with respect
to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Convertible Preferred
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such
Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded
from this Declaration and the Trust Securities, as permitted by the Trust
Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Trust Securities, the Administrative Trustees and
the Sponsor, notices of all Events of Default with respect to the Trust
Securities actually known to a Responsible Officer of the Property Trustee,
unless such defaults have been cured or waived before the giving of such notice;
PROVIDED that, except in the case of default in the payment of the principal of,
premium, if any, or interest on any of the Convertible Debentures or Convertible
Preferred Securities, the Property Trustee shall be protected in withholding
such notice if and so long as a trust
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committee of directors and/or Responsible Officers of the Property Trustee in
good faith determine that the withholding of such notice is in the interests
of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge
of any default except:
(i) a default under Sections 501(1) and 501(2) of the
Indenture; or
(ii) any default as to which the Property Trustee shall
have received written notice or of which a Responsible Officer of the
Property Trustee charged with the administration of the Declaration shall
have actual knowledge.
ARTICLE III
ORGANIZATION OF TRUST
SECTION 3.1 NAME.
The Trust is named "Sun Financing I," as such name may be
modified from time to time by the Administrative Trustees following 10 Business
Days written notice to the Holders of Trust Securities. The Trust's activities
may be conducted under the name of the Trust or any other name deemed advisable
by the Administrative Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o Sun
Healthcare Group, Inc., 101 Sun Avenue NE, Albuquerque, New Mexico 87109,
Attention: Robert F. Murphy, Esq., Senior Vice President, General Counsel and
Secretary. On 10 Business Days written notice to the Holders of Trust
Securities, the Administrative Trustees may designate another principal office.
SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Trust Securities and use the proceeds from such sale to acquire
the Convertible Debentures, and (b) except as otherwise limited herein, to
engage in only those other activities necessary or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
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undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 3.4 PROHIBITION OF ACTIONS BY THE TRUST AND THE ISSUER TRUSTEES.
The Trust shall not, and the Issuer Trustees (including the
Property Trustee) shall not, engage in any activity other than as required or
authorized by this Declaration. In particular, the Trust shall not and the
Issuer Trustees (including the Property Trustee) shall not cause the Trust to:
(a) invest any proceeds received by the Trust from holding the
Convertible Debentures, but shall distribute all such proceeds to Holders of
Trust Securities pursuant to the terms of this Declaration and of the Trust
Securities;
(b) acquire any assets other than as expressly provided
herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than loans
represented by the Convertible Debentures;
(e) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Trust Securities in any way whatsoever
(other than pursuant to Article XI hereto);
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Trust
Securities; or
(g) other than as provided in this Declaration or Annex I
hereto, (a) direct the time, method and place of exercising any trust or power
conferred upon the Indenture Trustee with respect to the Convertible Debentures,
(b) waive any past default that is waivable under the Indenture, (c) exercise
any right to rescind or annul any declaration that the principal of all the
Convertible Debentures shall be due and payable, or (d) consent to any
amendment, modification or termination of the Indenture or the Convertible
Debentures where such consent shall be required unless the Trust shall have
received an opinion of counsel to the effect that such amendment or modification
will not cause more than an insubstantial risk that (i) the Trust will be deemed
an Investment Company required to be registered under the Investment Company
Act, or (ii) for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
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SECTION 3.5 GENERAL AUTHORITY OF THE ISSUER TRUSTEES.
In dealing with the Issuer Trustees acting on behalf of the
Trust, no person shall be required to inquire into the authority of the Issuer
Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Issuer Trustees as set forth in
this Declaration.
SECTION 3.6 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 5.11 with respect to the
Convertible Debentures and the Property Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.7 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF TRUST SECURITIES.
The recitals contained in this Declaration and the Trust
Securities shall be taken as the statements of the Sponsor, and the Issuer
Trustees do not assume any responsibility for their correctness. The Issuer
Trustees make no representations as to the value or condition of the property of
the Trust or any part thereof. The Issuer Trustees make no representations as
to the validity or sufficiency of this Declaration or the Trust Securities.
SECTION 3.8 DURATION OF TRUST.
The Trust, unless dissolved pursuant to the provisions of Section
3.10 hereof, shall exist until November 7, 2052.
SECTION 3.9 MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any Person, except as described in Sections
3.9(b) and 3.9(c) of this Declaration or in Annex I.
(b) The Trust may, with the consent of the majority of the
Administrative Trustees, and without the consent of the Holders of the Trust
Securities, the Delaware Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state of the United States; PROVIDED that:
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(i) if the Trust is not the survivor, such successor
entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of
the Trust under the Trust Securities; or
(B) substitutes for the Convertible Preferred
Securities other securities having substantially the same
terms as the Convertible Preferred Securities (the
"Successor Securities") so long as the Successor
Securities rank the same as the Convertible Preferred
Securities with respect to Distributions, assets and
payments upon liquidation or otherwise;
(ii) the Company expressly acknowledges a trustee of
the Successor Entity that possesses the same powers and duties as the
Property Trustee as the holder of the Convertible Debentures;
(iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or with
another organization on which the Convertible Preferred Securities are then
listed or quoted (if any);
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Convertible Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Convertible Preferred Securities
(including any Successor Securities) in any material respect (other than
with respect to any dilution of the Holders' interest in the new entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Convertible Preferred Securities Guarantee; and
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(viii) prior to such merger, consolidation, amalgamation
or replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust reasonably acceptable to the
Property Trustee and experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences and
privileges of the Holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new
entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the Successor
Entity will be required to register as an Investment Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor Entity)
will be treated as a grantor trust for United States federal
income tax purposes.
(c) Notwithstanding Section 3.9(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the Common
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
SECTION 3.10 TERMINATION OF TRUST.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
its equivalent with respect to the Sponsor, or upon the consent of at least
a Majority in Liquidation Amount of the Trust Securities, voting together
as a single class, to dissolve the Trust, or the revocation of the
Certificate of Incorporation of the Sponsor and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
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(iii) upon the entry of a decree of judicial dissolution
of the Sponsor or the Trust;
(iv) upon the redemption, conversion or exchange of all
of the Trust Securities and the amounts necessary for redemption,
conversion or exchange thereof, including any Additional Interest,
Liquidated Damages, if any, and Compounded Interest, shall have been paid
to the Holders in accordance with the terms of the Trust Securities;
(v) upon the distribution of all of the Convertible
Debentures upon the occurrence of a Special Event, except in the case of a
Tax Event that has occurred and is continuing following which the Sponsor
has elected to pay any additional sums such that the net amount received by
holders of Convertible Preferred Securities in respect of Distributions is
not reduced as a result of such Tax Event and the Sponsor has not revoked
any such election or failed to make such payments; or
(vi) the expiration of the term of the Trust on
November 7, 2052.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 3.10(a), the Administrative Trustees shall pay (or make
provision for the payment of) all claims against the Trust and, after winding up
the affairs of the Trust, and shall execute and file a certificate of
cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Article IX shall survive the termination
of the Trust.
ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
On the Closing Date and on any other date Convertible Preferred
Securities and Common Securities are sold pursuant to the over-allotment option
granted in the Purchase Agreement, the Sponsor will purchase all of the Common
Securities issued by the Trust, in an aggregate amount equal to at least 3% of
the capital of the Trust, at the same time as the Convertible Preferred
Securities are sold.
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SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR.
In connection with the issue and sale of the Convertible
Preferred Securities, the Sponsor shall have the exclusive right and
responsibility to engage in the following activities:
(a) to prepare and execute, if necessary, an Offering
Memorandum (the "Offering Memorandum") in preliminary and final form in relation
to the offering and sale of Convertible Preferred Securities to qualified
institutional buyers in reliance on Rule 144A and to Institutional "Accredited
Investors" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and to prepare for filing with the Commission, any shelf
registration statement, including, in each case, any amendments thereto required
to be filed in connection with the Registration Rights Agreement;
(b) to determine the states and foreign jurisdictions, if any,
in which to take appropriate action to qualify or register for sale all or part
of the Convertible Preferred Securities and to do any and all such acts, other
than actions that must be taken by the Trust, and advise the Trust of actions it
must take, and prepare for execution and filing any documents to be executed and
filed by the Trust, as the Sponsor deems necessary or advisable in order to
comply with the applicable laws of any such states and foreign jurisdictions;
(c) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Convertible Preferred Securities under Section 12(b) of the Exchange Act,
including any amendments thereto in connection with the requirements of the
Registration Rights Agreement;
(d) to negotiate the terms of the Purchase Agreement,
Registration Rights Agreement and other agreements, documents and instruments
providing for the sale of the Convertible Preferred Securities;
(e) prepare an application to permit the Convertible
Preferred Securities to trade or be quoted or listed in or on the Private
Offerings, Resales and Trading through Automated Linkages (the "PORTAL Market")
PORTAL Market or any other securities exchange quotation system or the Nasdaq
Stock Market's National Market; and
(f) prepare letters, documents or instruments to be delivered
to The Depository Trust Company and other clearing agencies relating to the
Preferred Securities;
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ARTICLE V
ISSUER TRUSTEES
SECTION 5.1 NUMBER OF ISSUER TRUSTEES.
The initial number of Issuer Trustees shall be 5, and:
(a) at any time before the issuance of any Trust Securities,
the Sponsor may, by written instrument, increase or decrease the number of
Issuer Trustees; and
(b) after the issuance of any Trust Securities, the number of
Issuer Trustees may be increased or decreased by vote of the Holders of a
Majority in Liquidation Amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities;
PROVIDED, HOWEVER, that the number of Issuer Trustees shall in no event be less
than three; PROVIDED FURTHER that (i) there shall be at least two Administrative
Trustees who are employees or officers of, or are affiliated with the Sponsor
and (ii) one Issuer Trustee shall be the Property Trustee for so long as this
Declaration is required to qualify as an indenture under the Trust Indenture
Act, and such Issuer Trustee may also serve as Delaware Trustee if it meets the
applicable requirements.
SECTION 5.2 DELAWARE TRUSTEE; ELIGIBILITY.
If required by the Business Trust Act, one Issuer Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is resident of the State of Delaware;
or
(b) if not a natural person, an entity that has its principal
place of business in the State of Delaware, and otherwise meets the requirements
of applicable law,
PROVIDED that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee may also be the Delaware Trustee and Section 5.14
shall have no application.
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SECTION 5.3 PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Issuer Trustee which shall
act as Property Trustee and shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business
under the laws of the United States of America or any state or territory
thereof or of the District of Columbia, or a Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 5.3(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published; and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-5 and to the extent the
Investment Company Act or Trust Indenture Act requires a trustee having
certain qualifications to hold title to the "eligible assets" of the Trust,
the Property Trustee shall possess those qualifications.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(d).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture Act)
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
(d) The Convertible Preferred Securities Guarantee shall be
deemed to be specifically described in this Declaration for purposes of clause
(i) of the first provision contained in Section 310(b) of the Trust Indenture
Act.
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SECTION 5.4 QUALIFICATIONS OF ADMINISTRATIVE TRUSTEES AND TRUSTEE GENERALLY.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 INITIAL TRUSTEES.
The initial Administrative Trustees are:
Robert D. Woltil
William C. Warrick
Robert F. Murphy
The initial Delaware Trustee is:
The Bank of New York (Delaware)
The initial Property Trustee is:
The Bank of New York
SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Sections 5.6(b) and 5.6(c), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Trust Securities, by
written instrument executed by the Sponsor; and
(ii) after the issuance of any Trust Securities, by
vote of the Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class.
(b) The Issuer Trustee that acts as Property Trustee shall not
be removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as a Property Trustee under Section 5.3 (a "SUCCESSOR
PROPERTY TRUSTEE") has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and delivered to the
Trust, the Sponsor and the removed Property Trustee.
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(c) The Issuer Trustee that acts as Delaware Trustee shall not
be removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"SUCCESSOR DELAWARE TRUSTEE") has been appointed and has accepted such
appointment by instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Sponsor and the removed Delaware Trustee.
(d) An Issuer Trustee appointed to office shall hold office
until his, hers or its successor shall have been appointed or until his, her or
its death, removal, resignation, dissolution or liquidation. Any Issuer Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing signed by the Issuer Trustee and delivered to the Sponsor
and the Trust, which resignation shall take effect upon such delivery or upon
such later date as is specified therein; PROVIDED, HOWEVER, that:
(i) No such resignation of the Issuer Trustee that
acts as the Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Property Trustee and delivered
to the Trust, the Sponsor and the resigning Property
Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed
to the Holders of the Trust Securities; and
(ii) no such resignation of the Issuer Trustee that
acts as the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust, the
Sponsor and the resigning Delaware Trustee.
(e) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with Section 5.6(d).
(f) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days
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after delivery pursuant to this Section 5.6 of an instrument of resignation
or removal, the Property Trustee or Delaware Trustee resigning or being
removed, as applicable, may petition any court of competent jurisdiction for
appointment of a Successor Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper and prescribe, appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 VACANCIES AMONG TRUSTEES.
If an Issuer Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by a majority of the
Administrative Trustees, shall be conclusive evidence of the existence of such
vacancy. The vacancy shall be filled with an Issuer Trustee appointed in
accordance with Section 5.6.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of an
Issuer Trustee shall not operate to annul, dissolve or terminate the Trust or
terminate this Declaration. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with this Section 5.6, the Administrative
Trustees in office, regardless of their number, shall have all the powers
granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Declaration.
SECTION 5.8 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF AN
ISSUER TRUSTEE.
Any entity into which the Property Trustee, the Delaware Trustee
or any Administrative Trustee that is not a natural person, as the case may be,
may be merged or converted or with which either may be consolidated, or any
entity resulting from any merger, conversion or consolidation to which the
Property Trustee, the Delaware Trustee or Administrative Trustee, as the case
may be, shall be a party, or any entity succeeding to all or substantially all
the corporate trust business of the Property Trustee, the Delaware Trustee or
the Administrative Trustee, as the case may be, shall be the successor of the
Property
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Trustee, the Delaware Trustee or the Administrative Trustee, as the case may
be, hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article V, without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
SECTION 5.9 AUTHORITY, POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES.
(a) Subject to the limitations provided in this Declaration
and to the specific duties of the Property Trustee, the Administrative Trustees
shall have exclusive and complete authority to carry out the purposes of the
Trust. An action taken by the Administrative Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee on behalf of the Trust in accordance with its
powers shall constitute the act of and serve to bind the Trust.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Administrative Trustees is called with respect to any
matter over which the Administrative Trustees have power to act, any power of
the Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(c) Unless otherwise determined by the Administrative
Trustees, and except as otherwise required by the Business Trust Act or
applicable law, any Administrative Trustee is authorized to execute on behalf of
the Trust any documents which the Administrative Trustees have the power and
authority to cause the Trust to execute pursuant to Section 5.9, PROVIDED, that
any shelf registration statement, including any amendments thereto, shall be
signed by a majority of the Administrative Trustees.
(d) The Administrative Trustees shall have the exclusive
power, duty and authority to cause the Trust to engage in the following
activities:
(i) to issue and sell the Convertible Preferred
Securities and the Common Securities in accordance with this Declaration;
PROVIDED, HOWEVER, that the Trust may issue no more than one series of
Convertible Preferred Securities and no more than one series of Common
Securities, and, PROVIDED, FURTHER, that there shall be no interests in the
Trust other than the Trust Securities, and the issuance of Trust Securities
shall be limited to simultaneous issuance of both Convertible Preferred
Securities and Common Securities on the Closing Date and any other date
Convertible Preferred Securities and Common Securities are sold pursuant to
the over-allotment option granted in the Purchase Agreement;
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(ii) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Registration Rights
Agreement, the Common Securities Purchase Agreement, the Convertible
Debentures Purchase Agreement and the Certificate Depository Agreement and
such other agreements as may be necessary or incidental to the purposes and
function of the Trust;
(iii) to assist in the registration of the Convertible
Preferred Securities under the Securities Act and under state securities or
blue sky laws according to the terms of the Registration Rights Agreement,
and the qualification of this Declaration as a trust indenture under the
Trust Indenture Act upon the effectiveness of the Shelf Registration
Statement pursuant to the Registration Rights Agreement;
(iv) to assist the registration of the Convertible
Preferred Securities under the Exchange Act, in connection with the Shelf
Registration Statement and according to the terms of the Registration
Rights Agreement, and the preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing (only to the extent
that such listing or registration is requested by the Sponsor);
(v) execute and perform the Purchase Agreement,
Registration Rights Agreement and other agreements, documents and
instruments providing for the sale of the Convertible Preferred Securities;
(vi) to acquire the Convertible Debentures with the
proceeds of the sale of the Convertible Preferred Securities and the Common
Securities; PROVIDED, HOWEVER, that the Administrative Trustees shall cause
legal title to the Convertible Debentures to be held of record in the name
of the Property Trustee for the benefit of the Holders of the Convertible
Preferred Securities and the Holders of Common Securities;
(vii) to give the Sponsor and the Property Trustee
prompt written notice of the occurrence of a Special Event; PROVIDED that
the Administrative Trustees shall consult with the Sponsor and the Property
Trustee before taking or refraining from taking any Ministerial Action in
relation to a Special Event;
(viii) to establish a record date with respect to all
actions to be taken hereunder that require a record date be established,
including and with respect to, for the purposes of Section 316(c) of the
Trust Indenture Act, Distributions, voting rights, redemptions and
exchanges, and to issue relevant notices to the Holders of
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Convertible Preferred Securities and Holders of Common Securities as to
such actions and applicable record dates;
(ix) to take all actions and perform such duties as may
be required of the Administrative Trustees pursuant to the terms of the
Trust Securities;
(x) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or demands of
or against the Trust ("Legal Action"), unless pursuant to Section 5.11(e),
the Property Trustee has the exclusive power to bring such Legal Action;
(xi) to employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers, contractors,
advisors, and consultants and pay reasonable compensation for such
services;
(xii) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(xiii) to give the certificate required by Section
314(a)(4) of the Trust Indenture Act to the Property Trustee, which
certificate may be executed by any Administrative Trustee;
(xiv) to incur expenses that are necessary or incidental
to carry out any of the purposes of the Trust;
(xv) to act as, or appoint another Person to act as,
registrar and transfer agent for the Trust Securities;
(xvi) to give prompt written notice to the Holders of
the Trust Securities of any notice received from the Sponsor of its
election to defer payments of interest on the Convertible Debentures by
extending the interest payment period under the Indenture;
(xvii) to execute all documents or instruments, perform
all duties and powers, and do all things for and on behalf of the Trust in
all matters necessary or incidental to the foregoing;
(xviii) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's valid
existence, rights, franchises and
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privileges as a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the
Convertible Preferred Securities or to enable the Trust to effect the
purposes for which the Trust was created;
(xix) to take any action, not inconsistent with this
Declaration or with applicable law, that the Administrative Trustees
determine in their discretion to be necessary or desirable in carrying out
the activities of the Trust as set out in this Section 5.9, including, but
not limited to:
(A) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(B) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(C) cooperating with the Company to ensure that
the Convertible Debentures will be treated as indebtedness
of the Company for United States federal income tax
purposes;
PROVIDED that such action does not adversely affect the interests of Holders;
(xx) to take all action necessary to cause all
applicable tax returns and tax information reports that are required to be
filed with respect to the Trust to be duly prepared and filed by the
Administrative Trustees, on behalf of the Trust;
(xxi) execute, if necessary, an offering memorandum (the
"Offering Memorandum") in preliminary and final form prepared by the
Sponsor, in relation to the offering and sale of the Convertible Preferred
Securities, and to execute and file with the Commission, at such time as
determined by the Sponsor, any Registration Statement, including any
amendments thereto, as contemplated by the Registration Rights Agreement;
(xxii) execute and file an application prepared by the
Sponsor, to permit the Preferred Securities to trade or be quoted or listed
in or on the PORTAL Market or any other securities exchange quotation
system or the Nasdaq Stock Market's National Market;
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(xxiii) execute and deliver letters, documents or
instruments to The Depository Trust Company and other clearing agencies
relating to the Convertible Preferred Securities; and
(xxiv) to correspond with the Securities and Exchange
Commission, when necessary or advisable.
(e) The Administrative Trustees must exercise the powers set
forth in this Section 5.9 in a manner that is consistent with the purposes
and functions of the Trust set out in Section 3.3, and the Administrative
Trustees shall not take any action that is inconsistent with the purposes and
functions of the Trust set forth in Section 3.3.
(f) Subject to this Section 5.9, the Administrative Trustees
shall have none of the powers or the authority of the Property Trustee set
forth in Section 5.11.
(g) Any expenses incurred by the Administrative Trustees
pursuant to this Section 5.9 shall be reimbursed by the Sponsor.
SECTION 5.10 DELEGATION OF POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES.
The Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is
not prohibited by applicable law or contrary to the provisions of the Trust,
as set forth herein. The Administrative Trustees may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 their power for the purpose of executing any documents contemplated
in Section 5.9, including any shelf registration statement or any amendment
thereto or other document filed with the Commission, or making any other
governmental filing.
SECTION 5.11 POWERS AND DUTIES OF THE PROPERTY TRUSTEE.
(a) The legal title to the Convertible Debentures shall be
owned by and held of record in the name of the Property Trustee in trust for
the benefit of the Holders of the Trust Securities. The right, title and
interest of the Property Trustee to the Convertible Debentures shall vest
automatically in each Person who may hereafter be appointed as Property
Trustee in accordance with Section 5.6. Such vesting and cessation of title
shall be
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effective whether or not conveyancing documents with regard to the
Convertible Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Convertible Debentures to the Administrative Trustees or
to the Delaware Trustee (if the Property Trustee does not also act as
Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of the
Trust Securities and, upon the receipt of payments of funds made in respect
of the Convertible Debentures held by the Property Trustee, deposit such
funds into the Property Account and make payments to the Holders of the
Convertible Preferred Securities and Holders of the Common Securities from
the Property Account in accordance with Section 6.1. Funds in the Property
Account shall be held uninvested until disbursed in accordance with this
Declaration. The Property Account shall be an account that is maintained
with a banking institution the rating on whose long-term unsecured
indebtedness is at least equal to the rating assigned to the Convertible
Preferred Securities by a "nationally recognized statistical rating
organization," as that term is defined for purposes of Rule 436(g)(2) under
the Securities Act;
(ii) engage in such ministerial activities as so
directed and as shall be necessary or appropriate to effect the redemption
of the Convertible Preferred Securities and the Common Securities to the
extent the Convertible Debentures are redeemed or mature;
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Trust
Securities, engage in such ministerial activities as so directed as shall
be necessary or appropriate to effect the distribution of the Convertible
Debentures to Holders of Trust Securities upon the occurrence of certain
Special Events arising from a change in law or a change in legal
interpretation or other specified circumstances pursuant to the terms of
the Trust Securities; and
(iv) give prompt written notice to the Holders of the
Trust Securities of any notice received from the Company of its election to
defer payments
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of interest on the Convertible Debentures by extending the interest
payment period under the Indenture.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant
to the terms of the Trust Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default of which a
Responsible Officer of the Property Trustee has actual knowledge or the
Property Trustee's duties and obligations under this Declaration or the Trust
Indenture Act. If the Property Trustee fails to enforce its rights under the
Convertible Debentures after a Holder of Convertible Preferred Securities has
made a written request, such Holder of Convertible Preferred Securities may,
to the fullest extent permitted by law, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Convertible Debentures without first instituting any legal proceeding against
the Property Trustee or any other Person. Notwithstanding the foregoing, if
an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on
the Convertible Debentures on the date such interest or principal is
otherwise payable (or in the case of redemption on the date fixed for
redemption), then a Holder of Convertible Preferred Securities may directly
institute a proceeding for enforcement of payment to such Holder (a "Direct
Action") of the principal of or interest on Convertible Debentures having a
principal amount equal to the aggregate liquidation amount of the Convertible
Preferred Securities of such Holder on or after the respective due date
specified in the Convertible Debentures. Except as provided above, the
Holders of Convertible Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Convertible
Debentures. In connection with such Direct Action, the Company will be
subrogated to the rights of such Holder of Convertible Preferred Securities
under the Declaration to the extent of any payment made by the Company to
such Holder of Convertible Preferred Securities in such Direct Action.
(f) Subject to this Section 5.11, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 5.9.
(g) The Property Trustee must exercise the powers set forth
in this Section 5.11 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Property Trustee shall
not take any action that is inconsistent with the purposes and functions of
the Trust set out in Section 3.3.
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(h) The Property Trustee may authorize one or more Persons
(each, a "Paying Agent") to pay Distributions, redemption payments or
liquidation payments on behalf of the Trust with respect to all Securities
and any such Paying Agent shall comply with Section 317(b) of the Trust
Indenture Act. Any Paying Agent may be removed by the Property Trustee at
any time and a successor Paying Agent or additional Paying Agent may be
appointed at any time by the Property Trustee. The Property Trustee hereby
initially appoints The Bank of New York as the Paying Agent.
SECTION 5.12 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE.
(a) The Property Trustee, before the occurrence of any Event
of Default and after the curing or waiving of all Events of Default that may
have occurred, shall undertake to perform only such duties and obligations as
are specifically set forth in this Declaration and no implied covenants shall
be read into this Declaration against the Property Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) of which a Responsible Officer of the Property Trustee has
actual knowledge, the Property Trustee shall exercise such rights and powers
vested in it by this Declaration, and use the same degree of care and skill
in its exercise, as a prudent individual would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that
prior to the occurrence of an Event of Default and after the curing or
waiving of all such Events of Default that may have occurred, in the absence
of bad faith on the part of the Property Trustee, the Property Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Property Trustee and conforming to the requirements of this
Declaration; but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the Property
Trustee, the Property Trustee shall be under a duty to examine the same to
determine whether or not they conform on their face to the requirements of
this Declaration.
(c) The Property Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts.
(d) The Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in Liquidation
Amount of the Trust Securities relating
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to the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration.
(e) The Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Property
Trustee be liable for any default or misconduct of the Administrative
Trustees or the Sponsor.
(f) No provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Property Trustee against such risk or liability is not
reasonably assured to it.
(g) The Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Convertible Debentures
and the Property Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded to
the Property Trustee under this Declaration and the Trust Indenture Act.
(h) The Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in
writing with the Sponsor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the Property
Account maintained by the Property Trustee pursuant to Section 5.11(c)(i) and
except to the extent otherwise required by law or by agreement.
(i) The Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of the
Convertible Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith.
SECTION 5.13 CERTAIN RIGHTS OF PROPERTY TRUSTEE.
(a) Subject to the provisions of Section 5.12:
(i) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond,
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debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the
Administrative Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Sponsor or the Administrative
Trustees;
(iv) the Property Trustee shall have no duty to see to
any recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities
laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of
its choice or other experts and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the scope of such
experts' area of expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion, such
counsel may be counsel to the Sponsor or any of its Affiliates, and may
include any of its employees. The Property Trustee shall have the right at
any time to seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Declaration at
the request or direction of any Holder, unless such Holder shall have
provided to the Property Trustee adequate security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of the
Property Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Property
Trustee; PROVIDED that, nothing contained in this Section 5.13(a)(vi) shall
be taken to relieve the Property
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Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders of the Trust
Securities, and the signature of the Property Trustee or its agents alone
shall be sufficient and effective to perform any such action and no third
party shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration
the Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (A) may request instructions from the
Holders of the Trust Securities, which instructions may only be given by
the Holders of the same proportion in liquidation amount of the Trust
Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action,
(B) may refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (C) shall be protected in
acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to take
any action that is discretionary under the provisions of this Declaration;
and
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(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the
Property Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts, or to exercise any such
right, power, duty or obligation. No permissive power or authority available
to the Property Trustee shall be construed to be a duty.
(c) It is expressly understood and agreed by the parties
hereto that in fulfilling its obligations as Property Trustee hereunder on
behalf of the Trust, (a) any agreements or instruments executed or delivered
by The Bank of New York are executed and delivered not in its individual
capacity but solely as Property Trustee under this Declaration in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of
the Trust is made and intended not as representations, warranties, covenants,
undertakings and agreements by The Bank of New York in its individual
capacity but is made and intended for the purpose of binding only the Trust,
and (c) under no circumstances shall The Bank of New York in its individual
capacity be personally liable for the payment of any indebtedness or expenses
of the Trust or be liable for the breach or failure of any obligation,
representation, warrant, or covenant made or undertaken by the Trust under
this Declaration except if such breach or failure is due to any negligence or
wilful misconduct of the Property Trustee.
SECTION 5.14 DELAWARE TRUSTEE.
(a) Notwithstanding any other provision of this Declaration
other than Section 5.2, the Delaware Trustee shall not be entitled to
exercise any powers, nor shall the Delaware Trustee have any of the duties
and responsibilities of the Administrative Trustees or the Property Trustee
described in this Declaration. Except as set forth in Section 5.2, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act.
(b) It is expressly understood and agreed by the parties
hereto that in fulfilling its obligations as Delaware Trustee hereunder on
behalf of the Trust, (i) any agreements or instruments executed or delivered
by The Bank of New York (Delaware) are
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executed and delivered not in its individual capacity but solely as Delaware
Trustee under this Declaration in the exercise of the powers and authority
conferred and vested in it, (ii) each of the representations, undertakings
and agreements herein made on the part of the Trust is made and intended not
as representations, warranties, covenants, undertakings and agreements by The
Bank of New York (Delaware) in its individual capacity but is made and
intended for the purpose of binding only the Trust, and (c) under no
circumstances shall The Bank of New York (Delaware) in its individual
capacity be personally liable for the payment of any indebtedness or expenses
of the Trust or be liable for the breach or failure of any obligation,
representation, warrant, or covenant made or undertaken by the Trust under
this Declaration except if such breach or failure is due to any negligence or
wilful misconduct of the Delaware Trustee.
SECTION 5.15 MEETINGS.
If there is more than one Administrative Trustee, meetings of
the Administrative Trustees shall be held from time to time upon the call of
any Administrative Trustee. Regular meetings of the Administrative Trustees
may be held at a time and place fixed by resolution of the Administrative
Trustees. Notice of any in-person meetings of the Administrative Trustees
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 48 hours
before such meeting. Notice of any telephonic meetings of the Administrative
Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a
brief statement of the time, place and anticipated purposes of the meeting.
The presence (whether in person or by telephone) of an Administrative Trustee
at a meeting shall constitute a waiver of notice of such meeting except where
an Administrative Trustee attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting
has not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Administrative Trustees may be taken at a
meeting by vote of a majority of the Administrative Trustees present (whether
in person or by telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting by the unanimous
written consent of the Administrative Trustees. In the event there is only
one Administrative Trustee, any and all action of such Administrative Trustee
shall be evidenced by a written consent of such Administrative Trustee.
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ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS.
If and to the extent that the Company makes a payment of interest
(including Compounded Interest), Additional Interest, premium and/or principal
on the Convertible Debentures held by the Property Trustee, or Liquidated
Damages, if any, (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders of Convertible Preferred Securities and Common Securities in accordance
with the preferences set forth in the respective terms of such Trust Securities,
as described in Annex I hereto.
ARTICLE VII
THE TRUST SECURITIES
SECTION 7.1 TITLE AND TERMS.
The Administrative Trustees shall on behalf of the Trust issue
one class of Convertible Preferred Securities, representing undivided
beneficial interests in the assets of the Trust (the "Convertible Preferred
Securities"), and one class of convertible common securities, representing
undivided beneficial interests in the assets of the Trust (the "Common
Securities"), each having such terms (the "Terms") as are set forth in Annex
I. The Trust shall issue no securities or other interests in the assets of
the Trust other than the Convertible Preferred Securities and the Common
Securities. The aggregate number of Convertible Preferred Securities
outstanding at any time shall not exceed the number set forth in the Terms in
Annex I hereto.
The Terms of the Trust Securities set forth in Annex I and the
forms of Certificates set forth in Exhibits A-1 and A-2 are part of the terms
of this Declaration and to the extent applicable, the Property Trustee and
the Sponsor, by their execution and delivery of this Declaration, expressly
agree to such Terms and to be bound thereby.
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SECTION 7.2 GENERAL PROVISIONS REGARDING THE TRUST SECURITIES.
(a) The consideration received by the Trust for the issuance
of the Trust Securities shall constitute a contribution to the capital of the
Trust and shall not constitute a loan to the Trust.
(b) Upon issuance of the Trust Securities as provided in this
Declaration, the Trust Securities so issued shall be validly issued, fully paid
and nonassessable.
(c) Every Person, by virtue of having become a Holder or a
Convertible Preferred Security Beneficial Owner in accordance with the terms of
this Declaration, shall be deemed to have expressly assented and agreed to the
terms of, and shall be bound by, this Declaration.
SECTION 7.3 GENERAL FORM OF CERTIFICATES.
The Convertible Preferred Security Certificates and the Property
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 and the Common Security Certificates shall be substantially in the
form of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration.
The Certificates may have letters, numbers, notations or other
marks of identification or designation and such legends or endorsements required
by law, stock exchange rule, agreements to which the Trust is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Trust). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Property Trustee in
writing.
The definitive Certificates shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Trust Securities may be listed, all as
determined by the Administrative Trustees, as evidenced by their execution
thereof. The Trust shall issue no Trust Securities in bearer form.
SECTION 7.4 FORM OF CONVERTIBLE PREFERRED SECURITIES CERTIFICATES; GLOBAL
CERTIFICATES.
(a) Convertible Preferred Securities initially sold to
qualified institutional buyers in reliance on Rule 144A under the Securities Act
initially will be represented by one
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or more certificates in registered, global form (collectively, the
"Restricted Global Certificate"). Convertible Preferred Securities that upon
initial issuance are beneficially owned by persons that are not "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
("QIBs") will be represented by one or more certificates in registered,
definitive form (collectively, the "Definitive Convertible Preferred Security
Certificates") and may not be represented by a Global Certificate. The Trust
Securities Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of at least one Administrative Trustee and the
Convertible Preferred Security Certificates shall be authenticated by the
Property Trustee. Trust Securities Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this
Declaration, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the delivery of such Trust Securities
Certificates or did not hold such offices at the date of delivery of such
Trust Securities Certificates. A transferee of a Trust Securities
Certificate shall become a Holder, and shall be entitled to the rights and
subject to the obligations of a Holder hereunder, upon due registration of
such Trust Securities Certificate in such transferee's name pursuant to
Section 8.1(d).
(b) Every Global Certificate (as defined in Section 8.2)
authenticated and delivered hereunder shall bear a legend in substantially the
following form, in capital letters and bold-face type:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
DECLARATION OF TRUST HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN
THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION OF TRUST.
(c) If the Depositary is The Depository Trust Company, the
Global Certificate authenticated and delivered hereunder shall also bear a
legend in substantially the following form, in capital letters and bold-face
type:
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UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
SECTION 7.5 EXECUTION AND DATING OF CERTIFICATES.
The Certificates shall be signed on behalf of the Trust by an
Administrative Trustee. In case any Administrative Trustee who shall have
signed any of the Certificates shall cease to be such Administrative Trustee
before the Certificates so signed shall be delivered by the Trust, such
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Administrative Trustee; and any
Certificates may be signed on behalf of the Trust by such persons who, at the
actual date of execution of such Certificate, shall be the Administrative
Trustees of the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such an Administrative Trustee. Each
Convertible Preferred Security shall be dated the date of its authentication.
One Administrative Trustee shall sign the Convertible Preferred
Security Certificates for the Trust by manual or facsimile signature. Unless
otherwise determined by the Trust, such signature shall, in the case of Common
Security Certificates, be a manual signature.
SECTION 7.6 GLOBAL SECURITIES; NON-GLOBAL SECURITIES; COMMON SECURITIES
CERTIFICATE.
(a) Each Global Certificate authenticated under this
Declaration shall be registered in the name of the Clearing Agency designated by
the Sponsor for such Global Certificate or a nominee thereof and delivered to
such Clearing Agency or a nominee thereof or custodian therefor, and each such
Global Certificate shall constitute a Convertible Preferred Security for all
purposes of this Declaration.
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(b) If a Global Certificate is to be exchanged for
Definitive Convertible Preferred Security Certificates or canceled in whole,
it shall be surrendered by or on behalf of the Clearing Agency, its nominee
or custodian to the Property Trustee, as Registrar, for exchange or
cancellation as provided in this Article 7. If any Global Certificate is to
be exchanged for Definitive Convertible Preferred Security Certificates or
cancelled in part, or if another Convertible Preferred Security is to be
exchanged in whole or in part for a beneficial interest in any Global
Certificate, in each case, as provided in Section 8.2, then either (i) such
Global Certificate shall be so surrendered for exchange or cancellation as
provided in this Article 7 or (ii) the liquidation amount thereof (or number
of Convertible Preferred Securities represented thereby) shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
cancelled, or equal to the liquidation amount of (or number of securities
represented by) such Certificated Convertible Preferred Security to be so
exchanged for a beneficial interest therein, as the case may be, by means of
an appropriate adjustment made on the records of the Property Trustee, as
Registrar, whereupon the Property Trustee, in accordance with the Applicable
Procedures, shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records. Upon any
such surrender or adjustment of a Global Certificate, an Administrative
Trustee shall execute on behalf of the Trust by manual or facsimile
signature, and the Property Trustee shall, subject to Section 8.2 and as
otherwise provided in this Article 7, authenticate and deliver any
Convertible Preferred Securities issuable in exchange for such Global
Certificate (or any portion thereof) to or upon the written order of, and
registered in such names as may be directed by, the Clearing Agency or its
authorized representative. Upon the request of the Property Trustee in
connection with the occurrence of any of the events specified in the
preceding paragraph, the Sponsor shall promptly make available to the
Property Trustee a reasonable supply of Convertible Preferred Securities that
are not in the form of Global Certificates but are in certificated form. The
Property Trustee shall be entitled to conclusively rely upon any order,
direction or request of the Clearing Agency or its authorized representative
which is given or made pursuant to this Article 7 if such order, direction or
request is given or made in accordance with the Applicable Procedures.
(c) Every Convertible Preferred Security authenticated and
delivered upon registration of, transfer of, or in exchange for or in lieu
of, a Global Certificate or a Definitive Convertible Preferred Security, as
the case may be, or any portion thereof, whether pursuant to this Article 7
or otherwise, shall be authenticated and delivered in the form of, and shall
be, a Global Certificate, unless such Convertible Preferred Security is
registered in the name of a Person other than the Clearing Agency for such
Global Certificate or a nominee thereof.
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(d) The Clearing Agency or its nominee, as registered owner
of a Global Certificate, shall be the Holder of such Global Certificate for
all purposes under this Declaration and the Convertible Preferred Securities,
and owners of beneficial interests in a Global Certificate shall hold such
interests pursuant to the Applicable Procedures. Accordingly, any such
Convertible Preferred Security Beneficial Owner's beneficial interest in a
Global Certificate will be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the Clearing Agency or
its nominee or its participants and such owners of beneficial interests in a
Global Certificate will not be considered the owners or holders of such
Global Certificate for any purpose of this Declaration or the Convertible
Preferred Securities.
(e) A single Common Securities Certificate representing the
Common Securities shall initially be issued to the Sponsor in the form of a
definitive Common Securities Certificate.
SECTION 7.7 DEFINITIVE CONVERTIBLE PREFERRED SECURITY CERTIFICATES.
If:
(a) a Clearing Agency notifies the Trust that it is unwilling
or unable to continue its services as securities depositary with respect to the
Convertible Preferred Securities and no successor Clearing Agency shall have
been appointed pursuant to Section 7.15 within 90 days of such notification or
if at any time such Clearing Agency ceases to be a clearing agency registered as
such under the Exchange Act when such Clearing Agency is required to be so
registered to act as such depositary and no successor Clearing Agency shall have
been appointed pursuant to Section 7.15 within 90 days of such notification;
(b) the Administrative Trustees (with the consent of the
Sponsor), in their sole discretion determine that the Convertible Preferred
Securities in global form shall be exchanged for Convertible Preferred
Securities in definitive form; or
(c) there shall have occurred and be continuing an Event of
Default;
then:
(d) Definitive Convertible Preferred Security Certificates
shall be prepared by the Administrative Trustees on behalf of the Trust with
respect to such Convertible Preferred Securities; and
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(e) upon surrender of the Global Certificates by the
Clearing Agency, accompanied by registration instructions, the Administrative
Trustees shall cause Definitive Convertible Preferred Security Certificates
to be delivered to Convertible Preferred Security Beneficial Owners of such
Convertible Preferred Securities in accordance with the instructions of the
Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on and shall be protected in relying on, said instructions of the Clearing
Agency. The Definitive Convertible Preferred Security Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Administrative Trustees, as evidenced by
their execution thereof and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Administrative Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Convertible Preferred
Securities may be listed, or to conform to usage.
At such time as all interests in a Convertible Preferred
Security in global form have been redeemed, converted, exchanged, repurchased
or canceled, such Convertible Preferred Security in global form shall be,
upon receipt thereof, canceled by the Trust in accordance with standing
procedures and instructions of the Clearing Agency.
Convertible Preferred Securities that upon initial issuance are
beneficially owned by persons that are not QIBs will be issued as Definitive
Convertible Preferred Security Certificates and may not be represented by a
Global Certificate.
SECTION 7.8 RESTRICTIVE LEGENDS.
(a) The Restricted Global Certificate and the Definitive
Convertible Preferred Securities Certificates shall bear the following legend
(the "Restricted Securities Legend") unless the Sponsor determines otherwise
in accordance with applicable law.
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE
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HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE WHICH IS AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES THEREOF UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
RULE) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO SUN HEALTHCARE
GROUP, INC., (THE "COMPANY") (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER
AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT, THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
SECTION 7.9 TEMPORARY CERTIFICATES.
Until definitive Certificates are ready for delivery, the Trust
may prepare and, in the case of the Convertible Preferred Securities, the
Property Trustee shall authenticate temporary Certificates. Temporary
Certificates shall be substantially in the form of definitive Certificates but
may have variations that the Trust considers appropriate for temporary
Certificates. Without unreasonable delay, the Trust shall prepare and, in the
case of the Convertible Preferred Securities, the Property Trustee shall
authenticate definitive Certificates in exchange for temporary Certificates.
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SECTION 7.10 REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
In the event that the Convertible Preferred Securities are not in
book-entry only form, the Trust shall maintain in the Borough of Manhattan, The
City of New York, (i) an office or agency where Convertible Preferred Securities
may be presented for registration of transfer or for exchange ("Registrar") and
(ii) an office or agency where Convertible Preferred Securities may be presented
for payment ("Paying Agent"). The Trust shall maintain an office or agency
where Securities may be presented for conversion ("Conversion Agent"). The
Registrar shall keep a register of the Convertible Preferred Securities and of
their transfer and exchange. The Trust may appoint the Registrar, the Paying
Agent and the Conversion Agent and may appoint one or more co-registrars, one or
more additional paying agents and one or more additional conversion agents in
such other locations as it shall determine. The term "Paying Agent" includes
any additional paying agent and the term "Conversion Agent" includes any
additional conversion agent. The Trust may change any Paying Agent, Registrar,
co-registrar or Conversion Agent without prior notice to any Holder. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Administrative Trustees. The Trust shall notify the Property Trustee of
the name and address of any agent not a party to this Declaration. If the Trust
fails to appoint or maintain another entity as Registrar, Paying Agent or
Conversion Agent, the Property Trustee shall act as such. The Trust or any of
its Affiliates may act as Paying Agent, Registrar, or Conversion Agent. The
Trust shall act as Paying Agent, Registrar, co-registrar, and Conversion Agent
for the Common Securities.
The Trust initially appoints the Property Trustee as
Registrar, Paying Agent and Conversion Agent for the Convertible Preferred
Securities. The Property Trustee shall be entitled to the protections of
Sections 5.12 and 5.13 and Article IX in its capacity as Registrar, Paying
Agent and Conversion Agent.
SECTION 7.11 PAYING AGENT TO HOLD MONEY IN TRUST.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of principal or distribution on the Trust Securities, and will
notify the Property Trustee if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require a Paying Agent to pay
all money held by it to the Property Trustee. The Trust at any time may require
a Paying Agent to pay all money held by it to the Property Trustee and to
account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further
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liability for the money. If the Trust or the Sponsor or an Affiliate of the
Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 7.12 OUTSTANDING CONVERTIBLE PREFERRED SECURITIES.
The Convertible Preferred Securities outstanding at any time
are all the Convertible Preferred Securities authenticated by the Property
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 7.12 as not outstanding.
If a Convertible Preferred Security is replaced, paid or
purchased pursuant to Section 8.3, it ceases to be outstanding unless the
Property Trustee receives proof satisfactory to it that the replaced, paid or
purchased Convertible Preferred Security is held by a bona fide purchaser.
If Convertible Preferred Securities are considered paid in
accordance with the terms of this Declaration, they cease to be outstanding and
interest on them ceases to accrue.
A Convertible Preferred Security does not cease to be outstanding
because one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the
Convertible Preferred Security.
SECTION 7.13 CONVERTIBLE PREFERRED SECURITIES IN TREASURY.
In determining whether the Holders of the required amount of
Trust Securities have concurred in any direction, waiver or consent, Convertible
Preferred Securities owned by the Trust, the Sponsor or an Affiliate of the
Sponsor, as the case may be, shall be disregarded and deemed not to be
outstanding, except that for the purposes of determining whether the Property
Trustee shall be fully protected in relying on any such direction, waiver or
consent, only Convertible Preferred Securities which the Property Trustee knows
are so owned shall be so disregarded.
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SECTION 7.14 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Holders of
Convertible Preferred Securities is required under this Declaration, the
Administrative Trustees shall, in the case of any Global Certificate, give
all such notices and communications specified herein to be given to the
Convertible Preferred Security Holders to the Depositary, and shall have no
notice obligations to the Convertible Preferred Security Beneficial Owners.
SECTION 7.15 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If the Depositary elects to discontinue its services as
securities depositary with respect to the Convertible Preferred Securities,
the Administrative Trustees may, in their sole discretion, appoint a
successor Clearing Agency with respect to such Convertible Preferred
Securities.
SECTION 7.16 DEEMED SECURITY HOLDERS.
The Trustees and any agent may treat the Person in whose name
any Certificate shall be registered on the books and records of the Trust as
the sole holder of such Certificate and of the Trust Securities represented
by such Certificate for purposes of receiving Distributions and for all other
purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Certificate or in the Trust
Securities represented by such Certificate on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF TRUST SECURITIES
SECTION 8.1 GENERAL.
(a) Where Convertible Preferred Security Certificates are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal number of Convertible Preferred
Securities represented by different certificates, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfers and exchanges,
the Trust shall issue
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and the Property Trustee shall authenticate Convertible Preferred Security
Certificates at the Registrar's request.
(b) Trust Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration,
in the terms set forth in Annex I and pursuant to the legends, if any, on such
securities. Any transfer or purported transfer of any Trust Security not made
in accordance with this Declaration shall be null and void.
(c) Subject to this Article VIII, the Sponsor and any Related
Party may only transfer Common Securities to the Sponsor or a Related Party of
the Sponsor; PROVIDED that, any such transfer is subject to the condition
precedent that the transferor obtain the written opinion of nationally
recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(d) The Administrative Trustees shall provide for the
registration of Trust Securities and of transfers of Trust Securities, which
will be effected without charge but only upon payment (with such indemnity as
the Administrative Trustees may require) in respect of any tax or other
governmental charges that may be imposed in relation to it. Upon surrender for
registration of transfer of any Certificates, the Administrative Trustees shall
cause one or more new Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer (including,
unless waived, the certification by the transferor and transferee on the reverse
side of the Convertible Preferred Security) in form satisfactory to the
Administrative Trustees and the Sponsor duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Administrative Trustees. A
transferee of a Certificate shall be entitled to the rights and subject to the
obligations of a Holder hereunder upon the receipt by such transferee of a
Certificate. By acceptance of a Certificate, each transferee shall be deemed to
have agreed to be bound by this Declaration.
(e) The Trust shall not be required (i) to issue, register the
transfer of or exchange Convertible Preferred Security Certificates during a
period beginning at the
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opening of business 15 days before the day of any selection of Convertible
Preferred Securities for redemption and ending at the close of business on
the earliest date in which the relevant notice of redemption is deemed to
have been given to all holders of Convertible Preferred Securities to be so
redeemed and (ii) to register the transfer or exchange of any Convertible
Preferred Security so selected for redemption in whole or in part, except the
unredeemed portion of any Convertible Preferred Security being redeemed in
part.
SECTION 8.2 CERTAIN TRANSFERS AND EXCHANGES.
(a) So long as Convertible Preferred Securities are eligible
for book-entry settlement with the Clearing Agency or unless otherwise required
by law, all Convertible Preferred Securities that are so eligible may be
represented by one or more fully registered Convertible Preferred Security
Certificates (each a "Global Certificate") in global form to be delivered to the
Depositary, the initial Clearing Agency, by, or on behalf of, the Trust. Such
Global Certificates shall initially be registered on the books and records of
the Trust in the name of Cede & Co., the nominee of the Depositary, and no
Convertible Preferred Security Beneficial Owner will receive a definitive
Convertible Preferred Security Certificate representing such Convertible
Preferred Security Beneficial Owner's interests in such Global Certificates,
except as provided in Section 7.7 below. The transfer and exchange of
beneficial interests in any such Convertible Preferred Security in global form
shall be effected through the Clearing Agency in accordance with this
Declaration (including the applicable restrictions on transfer contained herein,
if any) and the procedures of the Clearing Agency therefor.
(b) Convertible Preferred Securities that upon initial
issuance are beneficially owned by QIBs may, at the option of the Trust, be
represented by one or more Global Certificates. Except as otherwise provided
herein, beneficial owners of a Convertible Preferred Security in global form
shall not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered Holders of such Convertible Preferred
Security in global form.
(c) So long as the Convertible Preferred Securities are
eligible for book-entry settlement and to the extent Convertible Preferred
Securities held by QIBs are held in a global form, or unless otherwise required
by law, upon any transfer of a Definitive Convertible Preferred Certificate to a
QIB in accordance with Rule 144A, unless otherwise requested by the transferor,
and upon receipt of the Definitive Convertible Preferred Security Certificates
being so transferred, together with a certification from the transferor and
transferee that the transfer is being made in compliance with Rule 144A and
certification in
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the form set forth on the reverse side of the Convertible Preferred Security
(or other evidence satisfactory to the Property Trustee on behalf of the
Trust) and any other documents or certifications required by the Trust or the
Property Trustee to ensure compliance with the Securities Act, the Property
Trustee on behalf of the Trust shall make an endorsement on any Restricted
Global Certificate, to reflect an increase in the number of Convertible
Preferred Securities represented by such Global Certificate, and the Property
Trustee on behalf of the Trust shall cancel such Definitive Convertible
Preferred Security Certificates in accordance with the standing instructions
and procedures of the Clearing Agency, the number of Convertible Preferred
Securities represented by such Restricted Global Certificate shall be
increased accordingly; PROVIDED that no Definitive Convertible Preferred
Security Certificates, or portion thereof, in respect of which the Trust or
an Affiliate of the Trust held any beneficial interest shall be included in
such Restricted Global Certificate until such Definitive Convertible
Preferred Security Certificate is freely tradeable in accordance with Rule
144(k); PROVIDED FURTHER that the Trust shall issue Convertible Preferred
Securities in definitive form upon any transfer of a beneficial interest in
the Convertible Preferred Security in global form to the Company, any
Affiliate of the Company or to an institutional accredited investor in
accordance with subsection (d) below.
(d) In the event a beneficial interest in a Restricted Global
Certificate is transferred or exchanged other than pursuant to an effective
registration statement so that such beneficial interest will be held by a person
who is not a QIB or otherwise are to be held as a definitive Convertible
Preferred Security, such beneficial interest, upon receipt by the Property
Trustee from the Clearing Agency or its nominee on behalf of any Person having a
beneficial interest in a Global Certificate of written instructions or such
other form of instructions as is customary for the Clearing Agency or the person
designated by the Clearing Agency as having such a beneficial interest in a
Restricted Convertible Preferred Security and a certification from the
transferor and transferee in the form set forth on the reverse side of the
Convertible Preferred Security (or other evidence satisfactory to the Property
Trustee on behalf of the Trust) and any other documents or certifications
required by the Sponsor or the Property Trustee to ensure compliance with the
Securities Act, shall be exchanged for a Restricted Definitive Convertible
Preferred Security representing the same number of Convertible Preferred
Securities.
(e) In the event a beneficial interest in a Restricted
Definitive Convertible Preferred Security Certificate is transferred or
exchanged other than pursuant to an effective registration statement so that
such beneficial interest will be held by a person who is not a QIB or otherwise
are to be held as a definitive Convertible Preferred Security, such beneficial
interest, upon receipt by the Property Trustee from the person having such a
beneficial interest in a Restricted Convertible Preferred Security and a
certification from the
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transferor and transferee in the form set forth on the reverse side of the
Convertible Preferred Security (or other evidence satisfactory to the
Property Trustee on behalf of the Trust) and any other documents or
certifications required by the Sponsor or the Property Trustee to ensure
compliance with the Securities Act, shall be exchanged for a Restricted
Definitive Convertible Preferred Security representing the same number of
Convertible Preferred Securities.
(f) Any Global Certificate may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Declaration as may be required by the
Clearing Agency, by any national securities exchange or by the National
Association of Securities Dealers, Inc. in order for the Convertible Preferred
Securities to be tradeable on the PORTAL Market or as may be required for the
Convertible Preferred Securities to be tradeable on any other market developed
for trading of securities pursuant to Rule 144A or required to comply with any
applicable law or any regulation thereunder or with the rules and regulations of
any securities exchange upon which the Convertible Preferred Securities may be
listed or traded or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular
Convertible Preferred Securities are subject.
(g) Unless and until definitive, fully registered Definitive
Convertible Preferred Security Certificates have been issued to the Convertible
Preferred Security Beneficial Owners pursuant to Section 7.7:
(h) the provisions of this Section 8.2 shall be in full force
and effect with respect to such Convertible Preferred Securities;
(ii) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on the Global Certificates and receiving
approvals, votes or consents hereunder) as the Holder of such Convertible
Preferred Securities (with respect to such Convertible Preferred Security
Beneficial Owners) and the sole holder of the Global Certificates and shall
have no obligation to the Convertible Preferred Security Beneficial Owners
of such Convertible Preferred Securities;
(iii) to the extent that the provisions of this Section 8.2
conflict with any other provisions of this Declaration, the provisions of
this Section 8.2 shall control; and
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(iv) the rights of the Convertible Preferred Security
Beneficial Owners shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between such
Convertible Preferred Security Beneficial Owners and the Clearing Agency
and/or the Clearing Agency participants. The Clearing Agency will make
book-entry transfers among Clearing Agency participants and receive and
transmit payments of Distributions on the Global Certificates to such
Clearing Agency participants. The Clearing Agency will make book entry
transfers among the Clearing Agency participants PROVIDED, that solely for
the purposes of determining whether the holders of the requisite amount of
Convertible Preferred Securities have voted on any matter provided for in
this Declaration, so long as Definitive Convertible Preferred Security
Certificates have not been issued for all such securities, the Trustees may
conclusively rely on, and shall be protected in relying on, any written
instrument (including a proxy) delivered to the Trustees by the Clearing
Agency setting forth the Convertible Preferred Securities Beneficial
Owners' votes or assigning the right to vote on any matter to any other
Persons either in whole or in part.
(g) Notwithstanding any other provisions of this Declaration
(other than the provisions set forth in this Section 8.2(f)), a Convertible
Preferred Security in global form may not be transferred as a whole except by
the Clearing Agency to a nominee of the Clearing Agency or by a nominee of the
Clearing Agency to the Clearing Agency or another nominee to a successor
Clearing Agency or a nominee of such successor Clearing Agency.
(h) SECURITIES ACT LEGENDS. Global Certificates and
Definitive Convertible Preferred Security Certificates and their respective
Successor Securities shall bear a Restricted Securities Legend and be subject to
the restrictions on transfer contained therein as set forth in Section 7.8
subject to the following:
(i) subject to the following Clauses of this Section
8.2(g), a new Convertible Preferred Security which is not a Global
Certificate and is issued in exchange for another Convertible Preferred
Security (including, a Global Certificate) of any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by such
other Convertible Preferred Security and be subject to the restrictions on
transfer contained therein;
(ii) Any Convertible Preferred Securities which are
sold or otherwise disposed of pursuant to an effective registration
statement under the Securities Act, together with their Successor
Securities shall not bear a Securities Act Legend; the Sponsor shall inform
the Property Trustee in writing of the effective date
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of any such registration statement registering the Convertible Preferred
Securities under the Securities Act and shall notify the Property
Trustee at any time when prospectuses may not be delivered with respect
to Convertible Preferred Securities to be sold pursuant to such
registration statement. The Property Trustee shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance
with the aforementioned registration statement;
(iii) at any time after the Convertible Preferred
Securities may be freely transferred without registration under the
Securities Act, which shall be determined in the sole discretion of the
Sponsor, or without being subject to transfer restrictions pursuant to the
Securities Act, a new Convertible Preferred Security which does not bear a
Securities Act Legend may be issued in exchange for or in lieu of a
Convertible Preferred Security (other than a Global Certificate) or any
portion thereof which bears such a legend if the Property Trustee has
received an Unrestricted Securities Certificate, satisfactory to the
Property Trustee and the Sponsor and duly executed by the Holder of such
legended Convertible Preferred Security or his attorney duly authorized in
writing, and after such date and receipt of such certificate, an
Administrative Trustee shall execute on behalf of the Trust by manual or
facsimile signature, and the Property Trustee shall authenticate and
deliver such a new Convertible Preferred Security in exchange for or in
lieu of such other Convertible Preferred Security as provided in this
Article 8;
(iv) a new Convertible Preferred Security which does
not bear a Securities Act Legend may be issued in exchange for or in lieu
of a Convertible Preferred Security (other than a Global Certificate) or
any portion thereof which bears such a legend if, in the Sponsor's
judgment, placing such a legend upon such new Convertible Preferred
Security is not necessary to ensure compliance with the registration
requirements of the Securities Act, and an Administrative Trustee shall
execute on behalf of the Trust by manual or facsimile signature, and the
Property Trustee, at the written direction of the Sponsor, shall
authenticate and deliver such a new Convertible Preferred Security as
provided in this Article 8; and
(v) notwithstanding the foregoing provisions of this
Section 8.2(g), a Successor Security of a Convertible Preferred Securities
that does not bear a particular form of Securities Act Legend shall not
bear such form of legend unless the Sponsor has reasonable cause to believe
that such Successor Security is a "restricted security" within the meaning
of Rule 144 or otherwise, in the Sponsor's judgment, restricted under the
Securities Act, in which case an Administrative Trustee shall execute on
behalf of the Trust by manual or facsimile signature, and the
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Property Trustee, at the written direction of the Sponsor, shall
authenticate and deliver a new Convertible Preferred Security bearing a
Restricted Securities Legend in exchange for such Successor Security as
provided in this Article 8.
SECTION 8.3 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES; REPLACEMENT
SECURITIES.
If the Holder of a Trust Security claims that the Certificate
representing such Trust Security has been lost, destroyed or wrongfully taken or
if such Certificate is mutilated and is surrendered to the Trust or in the case
of the Convertible Preferred Securities to the Property Trustee, the Trust shall
issue and the Property Trustee shall authenticate a replacement Certificate if
the Property Trustee's and the Trust's requirements, as the case may be, are
met. If required by the Property Trustee or the Trust, an indemnity bond must
be sufficient in the judgment of both to protect the Trustees, the Property
Trustee, the Sponsor or any authenticating agent from any loss which any of them
may suffer if a Certificate is replaced. The Company may charge for its
expenses in replacing a Certificate.
In case any such mutilated, destroyed, lost or stolen Trust
Security has become or is about to become due and payable, the Sponsor in its
discretion may, instead of issuing a new Certificate, pay such Trust Security.
Every replacement Certificate is an additional obligation of the
Trust.
SECTION 8.4 CANCELLATION OF CONVERTIBLE PREFERRED SECURITY CERTIFICATES.
The Trust at any time may deliver Convertible Preferred Security
Certificates to the Property Trustee for cancellation. The Registrar, Paying
Agent and Conversion Agent shall forward to the Property Trustee any Convertible
Preferred Securities surrendered to them for registration of transfer,
redemption, conversion, exchange or payment. The Property Trustee shall
promptly cancel all Convertible Preferred Securities surrendered for
registration of transfer, redemption, conversion, exchange, payment, replacement
or cancellation and shall dispose of cancelled Convertible Preferred Securities
as the Trust directs. The Trust may not issue new Convertible Preferred
Securities to replace Convertible Preferred Securities that it has paid or that
have been delivered to the Property Trustee for cancellation or that any holder
has converted.
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ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF TRUST SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 LIABILITY.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Trust Securities, the Sponsor shall
not be:
(i) personally liable for the return of any portion of
the capital contributions (or any return thereon) of the Holders of the
Trust Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of
Trust Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and
obligations of the Trust (other than with respect to the Trust Securities) to
the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Convertible Preferred Securities shall be entitled to the same
limitation of personal liability as is extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
SECTION 9.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence (subject
to the Trust Indenture Act) or willful misconduct with respect to such acts or
omissions.
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(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Trust Securities might properly be paid.
SECTION 9.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust Indenture
Act), are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between an Indemnified Person and any Covered Person or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall
act in a manner that is, or provides terms that are, fair and reasonable to
the Trust or any Holder of Trust Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
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(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 9.4 INDEMNIFICATION.
(a) (i) The Company shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself,
create a presumption that the Company Indemnified Person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Company shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that he is or was a Company Indemnified Person
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to
be
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in or not opposed to the best interests of the Trust and except that no
such indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged to be
liable to the Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine 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 for such expenses which such
Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 9.4(a), or in defense of any claim,
issue or matter therein, he shall be indemnified, to the full extent
permitted by law, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 9.4(a) (unless ordered by a court) shall be made by the
Company only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Administrative Trustees by a majority vote of a quorum consisting of
such Administrative Trustees who were not parties to such action, suit or
proceeding, (2) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Administrative Trustees so directs, by
independent legal counsel in a written opinion, or (3) by the Holders of
the Common Securities of the Trust.
(v) Expenses (including attorneys' fees) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 9.4(a) shall be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Company as authorized in this Section
9.4(a). Notwithstanding the foregoing, no advance shall be made by the
Company if a determination is reasonably and promptly made (i) by the
Administrative Trustees by a majority vote of a quorum of disinterested
Administrative Trustees, (ii) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested
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Administrative Trustees so directs, by independent legal counsel in a
written opinion or (iii) by the Holders of the Common Securities of
the Trust, that, based upon the facts known to the Administrative
Trustees, counsel or the Holders of the Common Securities at the time
such determination is made, such Company Indemnified Person acted in
bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to
any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful.
In no event shall any advance be made in instances where the
Administrative Trustees, independent legal counsel or the Holders of
the Common Securities reasonably determine that such person
deliberately breached his duty to the Trust or the Holders of the
Common or Convertible Preferred Securities.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 9.4(a)
shall not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Company
or Holders of the Convertible Preferred Securities of the Trust or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. All rights to indemnification
under this Section 9.4(a) shall be deemed to be provided by a contract
between the Company and each Company Indemnified Person who serves in such
capacity at any time while this Section 9.4(a) is in effect. Any repeal or
modification of this Section 9.4(a) shall not affect any rights or
obligations then existing.
(vii) The Company or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under
the provisions of this Section 9.4(a).
(viii) For purposes of this Section 9.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 9.4(a) with respect to the
resulting or surviving entity as he would have with respect to such
constituent entity if its separate existence had continued.
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(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a Company Indemnified Person and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii)
the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss,
liability or expense including taxes (other than taxes based on the income of
such Fiduciary Indemnified Person) incurred without gross negligence (subject
to the Trust Indenture Act) or bad faith on its part, arising out of or in
connection with the acceptance or administration or the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligation to indemnify as set forth in this
Section 9.4(b) shall survive the satisfaction and discharge of this
Declaration.
SECTION 9.5 OUTSIDE BUSINESSES.
Any Covered Person, the Sponsor, the Delaware Trustee and its
Affiliates and the Property Trustee and its Affiliates may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no rights
by virtue of this Declaration in and to such independent ventures or the
income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed
wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee,
its Affiliates, or the Property Trustee or its Affiliates shall be obligated
to present any particular investment or other opportunity to the Trust even
if such opportunity is of a character that, if presented to the Trust, could
be taken by the Trust, and any Covered Person, the Sponsor, the Delaware
Trustee, its Affiliates and the Property Trustee and its Affiliates shall
have the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee, its Affiliates and
the Property Trustee and its Affiliates may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary
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for, trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Sponsor or its Affiliates.
ARTICLE X
ACCOUNTING
SECTION 10.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall commence on
January 1 and end on December 31, unless otherwise required by the Code or
changed by the requisite vote of the Administrative Trustees.
SECTION 10.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of
account, records and supporting documents, which shall reflect in reasonable
detail, each transaction of the Trust. The books of account shall be
maintained on the accrual method of accounting, in accordance with generally
accepted accounting principles, consistently applied. The Trust shall use
the accrual method of accounting for United States federal income tax
purposes. The books of account and the records of the Trust shall be
examined by and reported upon as of the end of each Fiscal Year by a firm of
independent certified public accountants selected by the Administrative
Trustees.
(b) The Administrative Trustees shall cause to be prepared
and delivered (or made available) to each of the Holders of Trust Securities,
within 90 days after the end of each Fiscal Year of the Trust, annual
financial statements of the Trust, including a balance sheet of the Trust as
of the end of such Fiscal Year, and the related statements of income or loss
or the financial statements of the Company, which shall include information
regarding the Trust to the extent required by the Exchange Act and the
Commission;
(c) The Administrative Trustees shall cause to be duly
prepared and delivered to each of the Holders of Trust Securities, any annual
United States federal income tax information statement required by the Code,
containing such information with regard to the Trust Securities held by each
Holder as is required by the Code and the Treasury Regulations.
Notwithstanding any right under the Code to deliver any such statement at a
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later date, the Administrative Trustees shall endeavor to deliver all such
statements within 30 days after the end of each Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual United
States federal income tax return, on a Form 1041 or such other form required
by the Code, and any other annual income tax returns required to be filed by
the Administrative Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 10.3 BANKING.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; PROVIDED, HOWEVER, that all payments
of funds in respect of the Convertible Debentures held by the Property
Trustee shall be made directly to the Property Account and no other funds of
the Trust shall be deposited in the Property Account. The sole signatories
for such accounts shall be designated by the Administrative Trustees;
PROVIDED, HOWEVER, that the Property Trustee shall designate the signatories
for the Property Account.
SECTION 10.4 WITHHOLDING.
The Trust and the Administrative Trustees shall comply with
all withholding requirements under United States federal, state and local
law. The Trust shall request, and the Holders shall provide to the Trust,
such forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder, and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The
Administrative Trustee shall file required forms with applicable
jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the
Holder to applicable jurisdictions. To the extent that the Trust is required
to withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Holder, the amount withheld shall be
deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed overwithholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may
reduce subsequent Distributions by the amount of such withholding.
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ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by
any applicable terms of the Trust Securities, this Declaration may only be
amended by a written instrument approved and executed by:
(i) the majority of the Administrative Trustees;
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate (if
requested) from each of the Trust and the Sponsor that such amendment is
permitted by, and conforms to, the terms of this Declaration (including the
terms of the Trust Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first received (if
requested):
(A) an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms
of the Trust Securities); and
(B) an opinion of counsel (who may be counsel to
the Sponsor or the Trust) that such amendment is permitted by,
and conforms to, the terms of this Declaration (including the
terms of the Trust Securities); and
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(iii) to the extent the result of such amendment would
be to:
(A) cause the Trust to fail to continue to be
classified for purposes of United States federal income taxation
as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Property Trustee in contravention of the Trust
Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company that is required to be registered under the
Investment Company Act.
(c) So long as any Trust Securities remain outstanding, any
amendment that would adversely affect the rights, privileges or preferences
of any Holder of Trust Securities in any material respect may be effected
only with such additional requirements as may be set forth in the terms of
such Trust Securities.
(d) Section 8.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Trust Securities.
(e) Article IV and the rights of the holders of the Common
Securities under Article V to increase or decrease the number of, and appoint
and remove Trustees shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities.
(f) Notwithstanding Section 11.1(c), this Declaration may be
amended without the consent of the Holders of the Trust Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or inconsistent with any other provision
of this Declaration;
(iii) add to the covenants, restrictions or obligations
of the Sponsor;
(iv) conform to any change in Rule 3a-5 or written
change in interpretation or application of Rule 3a-5 by any legislative
body, court, government agency or regulatory authority, which amendment
does not have a material adverse effect on the rights, preferences or
privileges of the Holders; and
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(v) modify, eliminate and add to any provision of this
Declaration to such extent as may be necessary to comply with applicable law or
otherwise.
SECTION 11.2 MEETINGS OF THE HOLDERS OF TRUST SECURITIES; ACTION BY WRITTEN
CONSENT.
(a) Meetings of the Holders of any class of Trust Securities
may be called at any time by the Administrative Trustees (or as provided in
the terms of the Trust Securities) to consider and act on any matter on which
Holders of such class of Trust Securities are entitled to act under the terms
of this Declaration, the terms of the Trust Securities or the rules of any
stock exchange on which the Convertible Preferred Securities are listed or
admitted for trading. The Administrative Trustees shall call a meeting of
the Holders of such class if directed to do so by the Holders of at least 10%
in liquidation amount of such class of Trust Securities. Such direction
shall be given by delivering to the Administrative Trustees one or more calls
in a writing stating that the signing Holders of Trust Securities wish to
call a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Holders of Trust Securities calling a meeting
shall specify in writing the Certificates held by the Holders of Trust
Securities exercising the right to call a meeting and only those Trust
Securities represented by the Certificates so specified shall be counted for
purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of
the Trust Securities, the following provisions shall apply to meetings of
Holders of Trust Securities:
(i) notice of any such meeting shall be given to all
the Holders of Trust Securities having a right to vote thereat at least
seven days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Trust Securities is
permitted or required under this Declaration or the rules of any stock
exchange or over-the-counter market on which the Convertible Preferred
Securities are listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders of Trust Securities. Any
action that may be taken at a meeting of the Holders of Trust Securities
may be taken without a meeting if a consent in writing setting forth the
action so taken is signed by the Holders of Trust Securities owning not
less than the minimum amount of Trust Securities in liquidation amount that
would be necessary to authorize or take such action at a meeting at which
all Holders of Trust Securities having a right to vote thereon were present
and voting. Prompt notice of the taking of action without a meeting shall
be given to the Holders of Trust Securities entitled to vote who have not
consented in writing. The Administrative Trustees may specify that any
written
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ballot submitted to the Security Holders for the purpose of taking
any action without a meeting shall be returned to the Trust within the time
specified by the Administrative Trustees;
(ii) each Holder of a Security may authorize any Person
to act for it by proxy on all matters in which a Holder of Trust Securities
is entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Holder of
Trust Securities executing it. Except as otherwise provided herein, all
matters relating to the giving, voting or validity of proxies shall be
governed by the General Corporation Law of the State of Delaware relating
to proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders of the Trust Securities were
stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Trust
Securities shall be conducted by the Administrative Trustees or by such
other Person that the Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration,
the terms of the Trust Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Convertible Preferred Securities
are then listed or trading provide otherwise, the Administrative Trustees,
in their sole discretion, shall establish all other provisions relating to
meetings of Holders of Trust Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by
any Holders of Trust Securities, waiver of any such notice, action by
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect
to the exercise of any such right to vote.
ARTICLE XII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.
The Issuer Trustee that acts as initial Property Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor
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Property Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Property Trustee's acceptance of its appointment as
Property Trustee that:
(a) The Property Trustee is a New York banking corporation
with trust powers, duly organized and validly existing under the laws of the
United States of America, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of,
this Declaration.
(b) The execution, delivery and performance by the Property
Trustee of the Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee; and the Declaration has
been duly executed and delivered by the Property Trustee, and constitutes a
legal, valid and binding obligation of the Property Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the
Declaration by the Property Trustee does not conflict with or constitute a
breach of the articles of association or By-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee will be the
record holder of the Convertible Debentures and the Property Trustee has not
knowingly created any liens or encumbrances on such Convertible Debentures.
(e) No consent, approval or authorization of, or
registration with or notice to any state or federal banking authority is
required for the execution, delivery or performance by the Property Trustee,
of the Declaration.
SECTION 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Issuer Trustee that acts as initial Delaware Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration and at the time of Closing, and each Successor Delaware Trustee
represents and warrants to the Trust and the Sponsor at the time of the
Successor Delaware Trustee's acceptance of its appointment as Delaware
Trustee that:
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(a) The Delaware Trustee is duly organized, validly existing
and in good standing under the laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, the Declaration.
(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee; and the Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of this Declaration.
(e) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
ARTICLE XIII
CONVERSION
SECTION 13.1 CONVERSION RIGHTS.
The holders of Trust Securities shall have the right at any time
prior to 5:00 p.m. (New York City time) on the Business Day immediately
preceding the date of repayment of such Trust Securities, whether at maturity or
upon redemption (either at the option of the Company or pursuant to a Tax
Event), at their option, to cause the Conversion Agent to convert Trust
Securities, on behalf of the converting Holders, into shares of Sun
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Common Stock of the Company in the manner described herein on and subject to
the following terms and conditions:
The Trust Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of Sun Common Stock of
the Company pursuant to the Holder's direction to the Conversion Agent to
exchange such Trust Securities for a portion of the Convertible Debentures
theretofore held by the Trust on the basis of one Trust Security per $25
principal amount of Convertible Debentures, and immediately convert such amount
of Convertible Debentures into fully paid and nonassessable shares of Sun Common
Stock of the Company at an initial conversion rate of 1.2419 shares of Sun
Common Stock of the Company per $25 principal amount of Convertible Debentures
(which is equivalent to a conversion price of $20.13 per share of Sun Common
Stock of the Company, subject to certain adjustments set forth in this Article
Thirteen (as so adjusted, the "Conversion Price")).
SECTION 13.2 CONVERSION PROCEDURES.
(a) In order to convert Trust Securities into Sun Common
Stock, the Holder shall submit to the Conversion Agent an irrevocable request
to convert Trust Securities on behalf of such Holder (the "Conversion
Notice"), forms of which are set forth in Exhibit A together, if the Trust
Securities are in certificated form, with such certificates. The Conversion
Notice shall (i) set forth the number of Trust Securities to be converted and
the name or names, if other than the Holder, in which the shares of Sun
Common Stock of the Company should be issued and (ii) direct the Conversion
Agent (A) to exchange such Trust Securities for a portion of the Convertible
Debentures held by the Trust (at the rate of exchange specified in Section
13.1) and (B) to immediately convert such Convertible Debentures on behalf of
such Holder, into Sun Common Stock of the Company (at the conversion rate
specified in Section 13.1).
(b) The Conversion Agent shall notify the Trust of the
Holder's election to exchange Trust Securities for a portion of the
Convertible Debentures held by the Trust and the Trust shall, upon receipt of
such notice, deliver to the Conversion Agent the appropriate principal amount
of Convertible Debentures for exchange in accordance with this Article
Thirteen. The Conversion Agent shall thereupon notify the Company of the
Holder's election to convert such Convertible Debentures into shares of Sun
Common Stock of the Company. Accrued Distributions will not be paid on
Preferred Trust Securities that are converted, nor will any payment,
allowance or adjustment be made for accumulated and unpaid Distributions,
whether or not in arrears, on converted Convertible Preferred Securities
except that if any Convertible Preferred Security is converted on or after a
record date for
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payment of Distributions thereon, the Distributions payable on the related
payment date with respect to such Convertible Preferred Security shall be
distributed to the Holder on such record date, despite such conversion.
Except as provided above, neither the Trust nor the Company will make, or be
required to make, any payment, allowance or adjustment upon any conversion on
account of any accumulated and unpaid Distributions accrued on the Trust
Securities (including any Additional Interest, Compounded Interest or
Liquidated Damages, if any) surrendered for conversion, or on account of any
accumulated and unpaid dividends on the shares of Sun Common Stock of the
Company issued upon such conversion. The Company shall make no payment or
allowance for distributions on the shares of Sun Common Stock of the Company
issued upon such conversion, except to the extent that such shares of Sun
Common Stock of the Company are held of record on the record date for any
such distributions and except as provided in Section 1309 of the Indenture.
Trust Securities shall be deemed to have been converted immediately prior to
5:00 p.m. (New York City time) on the day on which a Conversion Notice
relating to such Trust Securities is received by the Trust in accordance with
the foregoing provision (the "Conversion Date"). The Person or Persons
entitled to receive the Sun Common Stock of the Company issuable upon
conversion of the Convertible Debentures shall be treated for all purposes as
the record holder or holders of such Sun Common Stock of the Company as of
the Conversion Date. As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver at the office of the Conversion
Agent a certificate or certificates for the number of full shares of Sun
Common Stock of the Company issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same, unless otherwise directed by the Holder
in the notice of conversion and the Conversion Agent shall distribute such
certificate or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof
appoints The Bank of New York for the purpose of effecting the conversion of
Trust Securities in accordance with this Article Thirteen. In effecting the
conversion and transactions described in this Article Thirteen, the
Conversion Agent shall be acting as agent of the Holders of Trust Securities
directing it to effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Trust Securities from time to time for
Convertible Debentures held by the Trust in connection with the conversion of
such Trust Securities in accordance with this Article Thirteen and (ii) to
convert all or a portion of the Convertible Debentures into Sun Common Stock
of the Company and thereupon to deliver such shares of Sun Common Stock of
the Company in accordance with the provisions of this Article Thirteen and to
deliver to the Trust a new debenture or Convertible Debentures for any
resulting unconverted principal amount.
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(d) No fractional shares of Sun Common Stock of the Company
will be issued as a result of conversion, but in lieu thereof such fractional
interest will be paid in cash (based on the last reported sale price of the
Sun Common Stock of the Company on the Conversion Date) by the Company to the
Trust, which in turn will make such payment to the Holder or Holders of Trust
Securities so converted.
(e) The Company shall at all times reserve and keep available
out of its authorized and unissued Sun Common Stock, solely for issuance upon
the conversion of the Convertible Debentures, free from any preemptive or
other similar rights, such number of shares of Sun Common Stock of the
Company as shall from time to time be issuable upon the conversion of all the
Convertible Debentures then outstanding. Notwithstanding the foregoing, the
Company shall be entitled to deliver upon conversion of Convertible
Debentures, shares of Sun Common Stock of the Company reacquired and held in
the treasury of the Company (in lieu of the issuance of authorized and
unissued shares of Sun Common Stock of the Company), so long as any such
treasury shares are free and clear of all liens, charges, security interests
or encumbrances. Any shares of Sun Common Stock issued upon conversion of
the Convertible Debentures shall be duly authorized, validly issued, fully
paid and nonassessable. The Trust shall deliver the shares of Sun Common
Stock received upon conversion of the Convertible Debentures to the
converting Holder free and clear of all liens, charges, security interests
and encumbrances, except for United States withholding taxes. Each of the
Company and the Trust shall prepare and shall use its best efforts to obtain
and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all
applicable requirements as to registration or qualification of the Sun Common
Stock (and all requirements to list the Sun Common Stock issuable upon
conversion of Convertible Debentures that are at the time applicable), in
order to enable the Company to lawfully issue Sun Common Stock to the Trust
upon conversion of the Convertible Debentures and the Trust to lawfully
deliver the Sun Common Stock to each Holder upon conversion of the Trust
Securities.
(f) The Company will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Sun Common Stock on
conversion of Convertible Debentures and the delivery of the shares of Sun
Common Stock by the Trust upon conversion of the Trust Securities. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any transfer involved in the issue and delivery of shares of Sun
Common Stock in a name other than that in which the Trust Securities so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Trust the amount
of any such tax or has established to the satisfaction of the Trust that such
tax has been paid.
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(g) Nothing in this Article Thirteen shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the Trust
Securities or as set forth in Annex I to the Declaration or otherwise require
the Property Trustee or the Trust to pay any amounts on account of such
withholdings.
SECTION 13.3 CONVERSION PRICE ADJUSTMENTS.
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Trust
Securities are outstanding, (i) pay a dividend or make a distribution with
respect to its Sun Common Stock in shares of Sun Common Stock, (ii) subdivide
its outstanding shares of Sun Common Stock, (iii) combine its outstanding shares
of Sun Common Stock into a smaller number of shares or (iv) issue by
reclassification of its shares of Sun Common Stock any shares of capital stock
of the Company, the conversion price in effect immediately prior to such action
shall be adjusted so that the Holder of any Trust Securities thereafter
surrendered for conversion shall be entitled to receive the number of shares of
capital stock of the Company which he would have owned immediately following
such action had such Trust Securities been converted immediately prior thereto.
An adjustment made pursuant to this Section 13.3(a) shall become effective
immediately after the record date in the case of a dividend or other
distribution and shall become effective immediately after the effective date in
case of a subdivision, combination or reclassification (or immediately after the
record date if a record date shall have been established for such event). If,
as a result of an adjustment made pursuant to this Section 13.3(a), the Holder
of any Trust Securities thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes or series of capital stock of
the Company, the Board of Directors (whose determination shall be conclusive and
shall be described in a Board Resolution filed with the Trustee) shall determine
the allocation of the adjusted conversion price between or among shares of such
classes or series of capital stock.
(b) In case the Company shall, while any of the Trust
Securities are outstanding, issue rights or warrants to all holders of its Sun
Common Stock entitling them (for a period expiring within 45 days after the
record date mentioned in this Section 13.3(b)) to subscribe for or purchase
shares of Sun Common Stock at a price per share less than the current market
price per share of Sun Common Stock (as determined pursuant to Section 13.3(f)
below) on such record date, the conversion price for the Trust Securities shall
be adjusted so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the date of issuance of such
rights or warrants by a
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fraction of which the numerator shall be the number of shares of Sun Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered for subscription or purchase would purchase at such current
market price, and of which the denominator shall be the number of shares of
Sun Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Sun Common Stock offered for
subscription or purchase. Such adjustment shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such rights or warrants. For the purposes of this subsection, the
number of shares of Sun Common Stock at any time outstanding shall not
include shares held in the treasury of the Company. The Company shall not
issue any rights or warrants in respect of shares of Sun Common Stock held in
the treasury of the Company. In case any rights or warrants referred to in
this subsection in respect of which an adjustment shall have been made shall
expire unexercised within 45 days after the same shall have been distributed
or issued by the Company, the conversion price shall be readjusted at the
time of such expiration to the conversion price that would have been in
effect if no adjustment had been made on account of the distribution or
issuance of such expired rights or warrants. In determining whether any
rights, options, or warrants entitle the holders to subscribe for or purchase
shares of Sun Common Stock at less than such Current Market Price and, in
determining the aggregate offering price of such shares of Sun Common Stock,
there shall be taken into account any consideration received for such rights,
options or warrants, the value of such consideration, if other than cash, to
be determined by the Board of Directors. Notwithstanding this Article XIII,
no adjustment will be made pursuant to this Article XIII if the Company
makes proper provision for each Holder of Convertible Preferred Securities
who converts a Convertible Preferred Security to receive, in addition to the
Sun Common Stock issuable upon such conversion, the kind and amount assets
(including securities) if such Holder had been a holder of the Common Stock
at the time of the distribution of such assets or securities. Rights,
options or warrants distributed by the Company to all holders of the Sun
Common Stock that entitle the holders thereof to purchase shares of the
Company's capital stock and that, until the occurrence of an event (a
"Triggering Event"), (i) are deemed to be transferred with the Sun Common
Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Sun Common Stock, shall not be deemed to be distributed
until the occurrence of the Triggering Event.
(c) Subject to the last sentence of this Section 13.3(c), in
case the Company shall, by dividend or otherwise, distribute to all holders of
its Sun Common Stock evidences of its indebtedness, shares of any class or
series of capital stock, cash or assets (including securities, but excluding any
rights or warrants referred to in Section 13.3(b) and dividends and
distributions in connection with the liquidation, dissolution or winding up of
the Company and dividends and distributions paid exclusively in cash and any
dividend or
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distribution referred to in Section 13.3(a)), the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
effectiveness of the conversion price reduction contemplated by this Section
13.3(c) by a fraction of which the numerator shall be the current market price
per share (determined as provided in Section 13.3(f)) of the Sun Common Stock on
the date fixed for the payment of such distribution (the "Reference Date") less
the fair market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of Sun Common Stock and the denominator shall be such current
market price per share of the Sun Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following the
Reference Date. In the event that such dividend or distribution is not so paid
or made, the conversion price shall again be adjusted to be the conversion price
which would then be in effect if such dividend or distribution had not occurred.
If the Board of Directors determines the fair market value of any distribution
for purposes of this Section 13.3(c) by reference to the actual or when issued
trading market for any securities comprising such distribution, it must in doing
so consider the prices in such market over the same period used in computing the
current market price per share of Sun Common Stock (determined as provided in
Section 13.3(f)). For purposes of this Section 13.3(c), any dividend or
distribution that includes shares of Sun Common Stock or rights or warrants to
subscribe for or purchase shares of Sun Common Stock shall be deemed instead to
be (1) a dividend or distribution of the evidences of indebtedness, shares of
capital stock, cash or assets other than such shares of Sun Common Stock or such
rights or warrants (making any conversion price reduction required by this
Section 13.3(c)) immediately followed by (2) a dividend or distribution of such
shares of Sun Common Stock or such rights or warrants (making any further
conversion price reduction required by Section 13.3(a) or 13.3(b)), except (A)
the Reference Date of such dividend or distribution as defined in this Section
13.3(c) shall be substituted as (a) "the record date in the case of a dividend
or other distribution," and (b) "the record date for the determination of
stockholders entitled to receive such rights or warrants" and (c) "the date
fixed for such determination" within the meaning of Sections 13.3(a) and 13.3(b)
and (B) any shares of Sun Common Stock included in such dividend or distribution
shall not be deemed outstanding for purposes of computing any adjustment of the
conversion price in Section 13.3(a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Sun Common Stock exclusively in cash (excluding any cash
portion of distributions referred to in Section 13.3(c) or in connection with a
consolidation, merger or sale of assets of the Company as referred to in Section
13.4(c)), excluding cash dividends if such dividends (and other distributions)
together with all other such all-cash dividends and
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distributions made within the preceding 12 months in respect of which no
adjustment has been made do not exceed 20% of the Company's current
capitalization (being the product of the then current market price per share
determined as provided in Section 13.3(f) of Sun Common Stock times the
number of shares of Sun Common Stock then outstanding) on the Trading Day
immediately preceding the date of declaration of such dividend), the
conversion price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the effectiveness of the conversion price reduction contemplated by this
Section 13.3(d) by a fraction of which the numerator shall be the current
market price per share (determined as provided in Section 13.3(f)) of the Sun
Common Stock on the date fixed for the payment of such distribution less the
amount of cash so distributed and not excluded as provided applicable to one
share of Sun Common Stock and the denominator shall be such current market
price per share of Sun Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for the payment of such distribution; PROVIDED, HOWEVER, that in the
event the portion of the cash so distributed applicable to one share of Sun
Common Stock is equal to or greater than the current market price per share
(as defined in Section 13.3(f)) of the Sun Common Stock on the record date
mentioned above, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder of shares of Trust Securities shall have
the right to receive upon conversion the amount of cash such Holder would
have received had such Holder converted each share of Trust Securities
immediately prior to the record date for the distribution of the cash. In
the event that such dividend or distribution is not so paid or made, the
conversion price shall again be adjusted to be the conversion price which
would then be in effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Sun Common Stock shall expire and such tender or exchange offer
shall involve the payment by the Company or such Subsidiary of consideration per
share of Sun Common Stock having a fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds 110% of the current
market price per share (determined as provided in Section 13.3(f)) of the Sun
Common Stock on the Trading Day next succeeding the Expiration Time, the
conversion price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the effectiveness of the conversion price reduction contemplated by this Section
13.3(e) by a fraction of which the numerator shall be the number of shares of
Sun Common Stock outstanding (including any tendered or exchanged shares) at the
Expiration Time multiplied by the current market price per share (determined
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as provided in Section 13.3(f)) of the Sun Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of
(x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of Sun
Common Stock outstanding (less any Purchased Shares) at the Expiration Time
and the current market price per share (determined as provided in Section
13.3(f)) of the Sun Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time.
(f) For the purpose of any computation under Section 13.3(b),
13.3(c), 13.3(d) or 13.3(e), the current market price per share of Sun Common
Stock on any date in question shall be deemed to be the average of the daily
Closing Prices for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
earlier of the day in question or, if applicable, the day before the "ex" date
with respect to the issuance or distribution requiring such computation;
PROVIDED, HOWEVER, that if another event occurs that would require an adjustment
pursuant to Section 13.3(a) through (e), inclusive, the Board of Directors may
make such adjustments to the Closing Prices during such five Trading Day period
as it deems appropriate to effectuate the intent of the adjustments in this
Section 13.3, in which case any such determination by the Board of Directors
shall be set forth in a Board Resolution and shall be conclusive. For purposes
of this paragraph, the term "ex" date, (i) when used with respect to any
issuance or distribution, means the first date on which the Sun Common Stock
trades regular way on the New York Stock Exchange or on such successor
securities exchange as the Sun Common Stock may be listed or in the relevant
market from which the Closing Prices were obtained without the right to receive
such issuance or distribution, and (ii) when used with respect to any tender or
exchange offer, means the first date on which the Sun Common Stock trades
regular way on such securities exchange or in such market after the Expiration
Time of such offer.
(g) The Company may make such reductions in the conversion
price, in addition to those required by Sections 13.3(a) through (e), as it
considers to be advisable to avoid or diminish any income tax to holders of Sun
Common Stock or rights to purchase Sun Common Stock resulting from any dividend
or distribution of stock (or rights to acquire stock) or from any event treated
as such for income tax purposes. The Company from time to time may reduce the
conversion price by any amount for any period of time if the period is at least
20 days, the reduction is irrevocable during the period, and the Board of
Directors
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of the Company shall have made a determination that such reduction would be
in the best interest of the Company, which determination shall be conclusive.
Whenever the conversion price is reduced pursuant to the preceding sentence,
the Company shall mail to holders of record of the Convertible Debentures a
notice of the reduction at least 15 days prior to the date the reduced
conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
(h) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the conversion price; PROVIDED, HOWEVER, that any adjustments which by reason of
this Section 13.3(h) are not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(i) If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value to the Holder of the Trust Securities.
(j) Except as stated above, the conversion price will not be
adjusted for the issuance of Sun Common Stock or any securities convertible into
or exchangeable for Sun Common Stock or carrying the right to purchase any of
the foregoing.
SECTION 13.4 FUNDAMENTAL CHANGE.
(a) In the event that the Company is party to any transaction
(including, without limitation, a merger other than a merger that does not
result in a reclassification, conversion, exchange or cancellation of Sun Common
Stock), consolidation, sale of all or substantially all of the assets of the
Company, recapitalization or reclassification of Sun Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination of Sun Common Stock) or
any compulsory share exchange (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which shares of Sun Common Stock
shall be converted into the right to receive, or shall be exchanged for, (i) in
the case of any Transaction other than a Transaction involving a Common Stock
Fundamental Change (and subject to funds being legally available for such
purpose under applicable law at the time of such conversion), securities, cash
or other property, each Convertible Preferred Security shall thereafter be
convertible into the kind and, in the case of a Transaction which does not
involve a Fundamental Change, amount of securities, cash and other property
receivable upon the consummation of such Transaction by a holder of that number
of shares of Sun
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Common Stock into which a Convertible Preferred Security was convertible
immediately prior to such Transaction, or (ii) in the case of a Transaction
involving a Common Stock Fundamental Change, common stock, each Convertible
Preferred Security shall thereafter be convertible (in the manner described
therein) into common stock of the kind received by holders of Sun Common
Stock (but in each case after giving effect to any adjustment discussed below
relating to a Fundamental Change if such Transaction constitutes a
Fundamental Change). The holders of Convertible Preferred Securities will
have no voting rights with respect to any Transaction.
(b) If any Fundamental Change occurs, then the conversion
price in effect will be adjusted immediately after such Fundamental Change as
described below.
(c) The conversion price in the case of any Transaction
involving a Fundamental Change will be adjusted immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change, the
conversion price of the Convertible Preferred Securities will
thereupon become the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to
the preceding paragraphs, and (B) the greater of the Applicable
Price or the then applicable Reference Market Price plus any
then-accrued and unpaid distributions on one Convertible
Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change,
the conversion price of the Convertible Preferred Securities in
effect immediately prior to such Common Stock Fundamental Change,
but after giving effect to any other prior adjustments effected
pursuant to the preceding paragraphs, will thereupon be adjusted
by multiplying such conversion price by a fraction of which the
numerator will be the Purchaser Stock Price and the denominator
will be the Applicable Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (A) 100% of
the value of the consideration received by a holder of Sun Common
Stock is common stock of the successor, acquirer, or other third
party (and cash, if any, is paid only with respect to any
fractional interests in such common stock resulting from such
Common Stock Fundamental Change) and (B) all Sun Common Stock
will be have been exchanged for, converted into, or acquired for
common stock (and cash with respect to fractional interests) of
the successor, acquirer, or other third
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party, the conversion price of the Convertible Preferred
Securities in effect immediately prior to such Common Stock
Fundamental Change will thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator will be
one and the denominator will be the number of shares of common
stock of the successor, acquirer, or other third party received
by a holder of one share of Sun Common Stock as a result of such
Common Stock Fundamental Change.
The Company or the Person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquires the
Company's shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constituent document to establish such right.
Such certificate or articles of incorporation or other constituent document
shall provide for adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article Thirteen. The above provisions shall similarly apply to
successive transactions of the foregoing type.
SECTION 13.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted Conversion Price and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Convertible Preferred Securities and the Convertible
Debentures; and
(b) a notice stating the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall as soon as practicable be
mailed by the Company to all record holders of Convertible Preferred Securities
and the Convertible Debentures at their last addresses as they appear upon the
stock transfer books of the Company and the Trust.
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SECTION 13.6 PRIOR NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Sun Common Stock, other than (A) a dividend payable in
shares of Sun Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 13.3(c) or 13.3(d), or (ii) authorize
a tender or exchange offer that would require an adjustment pursuant to Section
13.3(e);
(b) the Company shall authorize the granting to all holders of
Sun Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
of any reclassification of Sun Common Stock (other than a subdivision or
combination of the outstanding Sun Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Sun Common Stock is converted into other securities,
cash or other property; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall (1) if any Convertible Preferred Securities are
outstanding, cause to be filed with the transfer agent for the Convertible
Preferred Securities, and shall cause to be mailed to the holders of record
of the Convertible Preferred Securities, at their last addresses as they
shall appear upon the stock transfer books the Trust or (2) shall cause to be
mailed to all Holders at their last addresses as they shall appear in the
Security Register, at least 15 days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date
as of which the holders of Sun Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Sun Common
Stock of record shall be entitled to exchange their shares of Sun Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer,
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share exchange, dissolution, liquidation or winding up (but no failure to
mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 13.7 CERTAIN DEFINED TERMS.
The following definitions shall apply to terms used in this
Article Thirteen:
(a) "CLOSING PRICE" of any Sun Common Stock on any day shall
mean the reported last sale price on such day or in case no sale takes place on
such day, the average of the reported closing bid and asked prices in each case
on the New York Stock Exchange Consolidated Transactions Tape or, if the stock
is not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such stock is listed or admitted
to trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by any
New York Stock Exchange member firm, selected by the Debenture Trustee for that
purpose.
(b) "TRADING DAY" shall mean a day on which securities are
traded on the national securities exchange or quotation system used to determine
the Closing Price.
SECTION 13.8 DIVIDEND OR INTEREST REINVESTMENT PLANS.
Notwithstanding the foregoing provisions, the issuance of any
shares of Sun Common Stock pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the Company and the investment
of additional optional amounts in shares of Sun Common Stock under any such
plan, and the issuance of any shares of Sun Common Stock or options or rights to
purchase such shares pursuant to any employee benefit plan or program of the
Company or pursuant to any option, warrant, right or exercisable, exchangeable
or convertible security outstanding as of the date the Convertible Debentures
were first issued, shall not be deemed to constitute an issuance of Sun Common
Stock or exercisable, exchangeable or convertible securities by the Company to
which any of the adjustment provisions described above applies. There shall
also be no adjustment of the conversion price in case of the issuance of any
stock (or securities convertible into or exchangeable for stock) of the Company
except as specifically described in this Article Thirteen.
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SECTION 13.9 CERTAIN ADDITIONAL RIGHTS.
In case the Company shall, by dividend or otherwise, declare or
make a distribution on its Sun Common Stock referred to in Section 13.3(c) or
13.3(d) (including, without limitation, dividends or distributions referred to
in the last sentence of Section 13.3(c)), the Holder of the Trust Securities,
upon the conversion thereof subsequent to 5:00 p.m. (New York City time) on the
date fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of Sun Common Stock into which the Trust Securities are converted, the
portion of the shares of Sun Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of Sun Common Stock; PROVIDED, HOWEVER, that, at the election of
the Company (whose election shall be evidenced by a resolution of the Board of
Directors) with respect to all Holders so converting, the Company may, in lieu
of distributing to such Holder any portion of such distribution not consisting
of cash or securities of the Company, pay such Holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors). If any conversion of Trust Securities described in
the immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Sun Common Stock which the Holder of Trust Securities
so converted is entitled to receive in accordance with the immediately preceding
sentence, the Company may elect (such election to be evidenced by a resolution
of the Board of Directors) to distribute to such Holder a due bill for the
shares of Sun Common Stock, rights, warrants, evidences of indebtedness, shares
of capital stock, cash or assets to which such Holder is so entitled, PROVIDED,
that such due bill (i) meets any applicable requirements of the principal
national securities exchange or other market on which the Sun Common Stock is
then traded and (ii) requires payment or delivery of such shares of Sun Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash or assets no later than the date of payment or delivery thereof to holders
of shares of Sun Common Stock receiving such distribution.
SECTION 13.10 RESTRICTIONS ON SUN COMMON STOCK ISSUABLE UPON CONVERSION.
(a) Shares of Sun Common Stock to be issued upon conversion of
a Convertible Preferred Security shall bear the following legend (the
"Restricted Common Stock Legend") and be subject to the restrictions on transfer
contained therein unless the Company determines otherwise in accordance with
applicable law.
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THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE 144(k)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO SUN HEALTHCARE GROUP, INC. (THE "COMPANY") (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN
EACH OF THE FOREGOING CASES TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
(b) If shares of Sun Common Stock to be issued upon conversion
of a Trust Security in respect of Restricted Convertible Preferred Securities
are to be registered in a name other than that of the Holder of such Convertible
Preferred Security, then the Person in whose name such shares of Sun Common
Stock are to be registered must deliver to the Conversion Agent a certificate or
certificates satisfactory to the Company and signed by such Person and the
transferee, as to compliance with the restrictions on transfer applicable to
such Convertible Preferred Security. Neither the Trustee nor any Conversion
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Agent or Registrar shall be required to register in a name other than that of
the Holder shares of Sun Common Stock issued upon conversion of any such Trust
Security in respect of such Convertible Preferred Securities not so accompanied
by a properly completed certificate or certificates.
SECTION 13.11 TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION PRICE OR
ADJUSTMENTS.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Trust Security to
determine whether any facts exist which may require any adjustment of the
conversion price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. Neither the
Trustee nor any Conversion Agent shall be accountable with respect to the
validity or value (or the kind of account) of any shares of Sun Common Stock or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Trust Security; and neither the Trustee nor any Conversion
Agent makes any representation with respect thereto. Neither the Trustee nor
any Conversion Agent shall be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Sun Common Stock
or stock certificates or other securities or property upon the surrender of any
Trust Security for the purpose of conversion, or, except as expressly herein
provided, to comply with any of the covenants of the Company contained in this
Article Thirteen.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 NOTICES.
All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be delivered, sent by
facsimile or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrative
Trustees at the Trust's mailing address set forth below (or such other address
as the Trust may give notice of to the Holders of the Trust Securities):
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c/o Sun Healthcare Group, Inc.
101 Sun Avenue NE
Albuquerque, New Mexico 87109
Tel: (505) 856-2423
Fax: (505) 822-0747
Attention: Robert F. Murphy, Esq.
Senior Vice President, General Counsel
and Secretary
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give notice
of to the Holders of the Trust Securities):
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Tel. (212) 815-5783
Fax: (212) 815-5915
Attention: Corporate Trust Trustee,
Administration
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Trust Securities):
The Bank of New York (Delaware)
101 Barclay Street, Floor 21 West
New York, New York 10286
Tel. (212) 815-5783
Fax: (212) 815-5915
Attention: Corporate Trust Trustee,
Administration
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
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c/o Sun Healthcare Group, Inc.
101 Sun Avenue NE
Albuquerque, New Mexico 87109
Tel: (505) 856-2423
Fax: (505) 822-0747
Attention: Robert F. Murphy, Esq.
Senior Vice President General Counsel
and Secretary
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 14.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 14.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 HEADINGS.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 SUCCESSORS AND ASSIGNS
Whenever in this Declaration any of the parties hereto is named
or referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants
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and agreements in this Declaration by the Sponsor and the Trustees shall bind
and inure to the benefit of their respective successors and assigns, whether
so expressed.
SECTION 14.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
ARTICLE XV
REGISTRATION RIGHTS
SECTION 15.1 REGISTRATION RIGHTS.
The Holders of the Convertible Preferred Securities, the
Convertible Debentures and the Securities Guarantee and the shares of Sun Common
Stock of the Sponsor issuable upon conversion of the Convertible Debentures
and/or the Convertible Preferred Securities are entitled to the benefits of the
Registration Rights Agreement.
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IN WITNESS WHEREOF, the undersigned has caused these presents to
be executed as of the date first above written.
/s/ Robert D. Woltil
-----------------------------------
Robert D. Woltil, as Administrative Trustee
/s/ William C. Warrick
-----------------------------------
William C. Warrick, as Administrative Trustee
/s/ Robert F. Murphy
-----------------------------------
Robert F. Murphy, as Administrative Trustee
THE BANK OF NEW YORK (DELAWARE), Delaware
Trustee
By: /s/ Frederick W. Clark
--------------------------------
Name: Frederick W. Clark
Title: Authorized Signatory
THE BANK OF NEW YORK,
Property Trustee
By: /s/ Mary LaGumina
--------------------------------
Name: Mary LaGumina
Title: Assistant Vice President
SUN HEALTHCARE GROUP, INC.,
Sponsor
By: /s/ Robert D. Woltil
--------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
<PAGE>
ANNEX I
TERMS OF TRUST SECURITIES
<PAGE>
ANNEX I
TERMS OF
7% CONVERTIBLE TRUST ISSUED CONVERTIBLE PREFERRED SECURITIES
7% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration
of Trust, dated as of May 4, 1998 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Convertible Preferred Securities and the
Convertible Common Securities are set out below (each capitalized term used but
not defined herein has the meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER.
(a) "CONVERTIBLE PREFERRED SECURITIES": 13,800,000 7% Convertible
Trust Issued Preferred Securities of the Trust with a liquidation
amount of $25 per Convertible Preferred Security are hereby
designated for the purposes of identification only as "7%
Convertible Trust Issued Preferred Securities (liquidation amount
of $25 per Convertible Preferred Security)" (the "Convertible
Preferred Securities"). The Convertible Preferred Security
Certificates evidencing the Convertible Preferred Securities shall
be substantially in the form of Exhibit A-1 to the Declaration,
with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform
to the rules of any stock exchange or other organization on which
the Convertible Preferred Securities are listed.
(b) "COMMON SECURITIES": 426,805.25 Convertible Common Securities of
the Trust with a liquidation amount of $25 per Convertible Common
Security to meet the capital requirements of the Trust in the event
of an issuance of Additional Convertible Preferred Securities, if
any, are hereby designated for the purposes of identification only
as "7% Convertible Common Securities (liquidation amount of $25 per
Common Security)" (the "Convertible Common Securities"). The
Common Security Certificates evidencing the Convertible Common
Securities shall be substantially in the form of Exhibit A-2 to the
Declaration, with such
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changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice.
2. DISTRIBUTIONS.
(a) Distributions payable on each Trust Security will be fixed at a
rate per annum of 7% (the "Coupon Rate") of the stated liquidation
amount of $25 per Trust Security, such rate being the rate of
interest payable on the Convertible Debentures to be held by the
Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes any such interest including
any Additional Interest, Compounded Interest and Liquidated Damages
(all as defined in the Declaration), if any, payable unless
otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Convertible Debentures
held by the Property Trustee and to the extent the Trust has funds
available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period
on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the
basis of the actual number of days elapsed per 90-day quarter.
(b) Except as otherwise described below, Distributions on the Trust
Securities will be cumulative, will accrue from the date of initial
issuance and will be payable quarterly in arrears, on the following
dates, which dates correspond to the interest payment dates on the
Convertible Debentures: February 1, May 1, August 1 and November
1, of each year, commencing on August 1, 1998, when, as and if
available for payment by the Property Trustee. Provided that no
Event of Default has occurred and is continuing, the Company has
the right at any time during the term of the Convertible Debentures
to defer interest payments from time to time by extending the
interest payment period for successive periods not exceeding 20
consecutive quarters (each an "Extension Period") for each such
period; PROVIDED, that no Extension Period may extend beyond the
maturity date of the Convertible Debentures. As a consequence of
such extension, quarterly Distributions on the Trust Securities
would be deferred (though such Distributions would continue to
accrue with interest since interest would continue to accrue on the
Convertible Debentures) during any such extended interest payment
period. In the event that the Company exercises this right, then,
during such period the Company has
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agreed, among other things, (a) not to declare or pay dividends
on, or make a distribution with respect to, or redeem or
purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock (other than (i) purchases or
acquisitions of shares of Sun Common Stock in connection with
the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of
its obligations pursuant to any contract or security requiring
the Company to purchase shares of Sun Common Stock, (ii) as a
result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital
stock or (iii) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or
exchanged) or make any guarantee payments with respect to the
foregoing, (b) not to make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank
PARI PASSU with or junior to the Convertible Debentures (except by
conversion into or exchange for shares of its capital stock) and
(c) not to make any guarantee payments with respect to the
foregoing (other than pursuant to the Convertible Preferred
Securities Guarantee). Prior to the termination of any such
Extension Period, the Company may further extend the interest
payment period; PROVIDED, that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity date of the
Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements.
(c) Distributions on the Trust Securities will be payable to the
Holders thereof as they appear on the books and records of the
Trust on the relevant record dates. The relevant record dates
shall be the fifteenth day prior to the next succeeding payment
dates, except as otherwise described in this Annex I to the
Declaration. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment in respect of
the Convertible Preferred Securities being held in book-entry form
through The Depository Trust Company (the "Depositary") will be
made as described under the heading "Description of the Convertible
Preferred Securities -- Form, Denominations and Registration" in
the Offering Memorandum. The relevant record dates for the
Convertible Common Securities shall be the same record dates as for
the Convertible Preferred Securities. Distributions payable on any
Trust Securities that are not punctually paid on any Distribution
payment date as a result of the Company having failed
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to make a payment under the Convertible Debentures, will cease to
be payable to the Person in whose name such Trust Securities are
registered on the relevant record date, and such defaulted
Distribution will instead be payable to the Person in whose name
such Trust Securities are registered on the special record date or
other specified date determined in accordance with the Indenture. If
Distributions are deferred, the deferred Distributions and accrued
interest thereon shall be paid to the Holders of record of Trust
Securities as they appear on the books and records of the Trust on
the record date next following the termination of such deferral
period. If any date on which Distributions are payable on the
Trust Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any distribution
or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
(d) In the event of an election by the Holder to convert its Trust
Securities through the Conversion Agent into Sun Common Stock of
the Company pursuant to the terms of the Trust Securities as set
forth in the Declaration and in this Annex I to the Declaration,
accrued Distributions will not be paid on Convertible Preferred
Securities that are converted, nor will any payment, allowance or
adjustment be made for accumulated and unpaid Distributions,
whether or not in arrears, on converted Convertible Preferred
Securities except that if any Convertible Preferred Security is
converted on or after a record date for payment of Distributions
thereon, the Distributions payable on the related payment date with
respect to such Convertible Preferred Security shall be distributed
to the Holder on such record date, despite such conversion.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined in paragraph 9) among the
Holders of the Trust Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any voluntary or involuntary dissolution of the
Trust (each a "Liquidation"), the then Holders of the Trust Securities on the
date of the Liquidation will be entitled to receive out of the assets of the
Trust available for distribution to Holders of Trust Securities after
satisfaction of liabilities of creditors, distributions in an amount equal to
the aggregate of the stated liquidation amount of $25 per Trust Security plus
accrued and unpaid
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Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Convertible Debentures in an aggregate principal amount equal to the
aggregate stated liquidation amount of such Trust Securities, with an
interest rate equal to the Coupon Rate of, and accrued and unpaid interest in
an amount equal to the accrued and unpaid Distributions on, such Trust
Securities, shall be distributed on a Pro Rata basis to the Holders of the
Trust Securities.
If, upon any such Liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Trust Securities shall be paid on a Pro Rata basis in
accordance with paragraph 9 below.
4. REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Convertible Debentures, in whole or in
part, whether at maturity or upon redemption (either at the option
of the Company or pursuant to a Tax Event), the proceeds from such
repayment or payment shall be simultaneously applied to redeem
Trust Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Convertible Debentures so
repaid or redeemed at a redemption price equal to the redemption
price of such repaid or redeemed Convertible Debentures, together
with accrued and unpaid Distributions thereon through the date
fixed for redemption, payable in cash (the "Redemption Price").
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Convertible Common Securities and the Convertible
Preferred Securities will be redeemed Pro Rata and the Convertible
Preferred Securities to be redeemed will be as described in
paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company Event (each
as defined below and each a "Special Event") shall occur and be
continuing, the Administrative Trustees shall, unless the
Convertible Debentures are redeemed in the limited circumstances in
relation to a Tax Event described in the following paragraph of
this paragraph 4(c), dissolve the Trust and, after satisfaction of
creditors of the Trust, if any, cause Convertible Debentures held
by the Property Trustee (w) having an aggregate principal amount
equal to the aggregate stated liquidation amount of, (x) an
interest rate identical to the Coupon Rate of, (y) accrued and
unpaid interest on equal to the accrued and unpaid Distributions
on, and (z) the same record dates for payment as, the Trust
Securities, to be distributed
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to the Holders of the Trust Securities in liquidation of such
Holders' interest in the Trust on a Pro Rata basis, within
90 days following the occurrence of such Special Event
(the "90 Day Period"); PROVIDED, HOWEVER, that in the case
of a Tax Event, such dissolution and distribution shall be
conditioned on the Property Trustee's receipt of an opinion of a
nationally recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may rely on
published revenue rulings of the Internal Revenue Service, to the
effect that the Holders of the Convertible Preferred Securities
will not recognize any income, gain or loss for United States
federal income tax purposes as a result of such dissolution and
distribution of Convertible Debentures, and PROVIDED, FURTHER, that
if at the time there is available to the Trust the opportunity to
eliminate, within the 90 Day Period, the Special Event by taking
some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure that in
the sole judgment of the Company has, or will cause, no adverse
effect on the Trust, the Company or the Holders of the Trust
Securities and will involve no material cost ("Ministerial
Action"), the Trust will pursue such Ministerial Action in lieu of
dissolution.
If in the event of a Tax Event, (i) after receipt
of a Dissolution Tax Opinion (as defined below) by the Trust, the
Property Trustee has received an opinion (a "Redemption Tax
Opinion") of a nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there
is more than an insubstantial risk that the Company would be
precluded from deducting the interest on the Convertible Debentures
for United States federal income tax purposes even if the
Convertible Debentures were distributed to the Holders of Trust
Securities in liquidation of such Holders' interest in the Trust as
described in this paragraph 4(c), or (ii) after receipt of a Tax
Event Opinion, the Administrative Trustees shall have been informed
by such tax counsel that a No Recognition Opinion cannot be
delivered to the Trust, the Company shall have the right, upon not
less than 30 nor more than 60 days' notice, to redeem the
Convertible Debentures in whole (but not in part) for cash at 100%
of the principal amount thereof plus accrued and unpaid interest
thereon within 90 days following the occurrence of such Tax Event,
and promptly following such redemption, the Trust Securities shall
be redeemed at the liquidation amount thereof plus accrued and
unpaid distributions thereon; PROVIDED, HOWEVER, that if at the
time there is available to the Company or the Trust the opportunity
to eliminate, within such 90 Day Period, the Tax Event by taking
some Ministerial Action that has no adverse effect on the Trust,
the Holders of Trust Securities or the Company, the Trust or the
Company will pursue such Ministerial Action in lieu of redemption.
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<PAGE>
"Tax Event" means that the Property Trustee shall
have received an opinion of a nationally recognized independent tax
counsel experienced in such matters (a "Dissolution Tax Opinion")
to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any
such laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial
decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such
laws or regulations that differs from the theretofore generally
accepted position or (d) any action taken by any governmental
agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation
or pronouncement is issued or announced or which action is taken,
in each case after the date of the Offering Memorandum
(collectively, a "Change in Tax Law"), there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States federal income tax
with respect to interest accrued or received on the Convertible
Debentures, (ii) the Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of other
taxes, duties or other governmental charges, or (iii) interest
payable by the Company to the Trust on the Convertible Debentures
is not, or within 90 days of the date thereof will not be,
deductible by the Company for United States federal income tax
purposes. Notwithstanding anything in the previous sentence to the
contrary, a Tax Event shall not include any Change in Tax Law that
requires the Company for United States federal income tax purposes
to defer taking a deduction for any original issue discount ("OID")
that accrues with respect to the Convertible Debentures until the
interest payment related to such OID is paid by the Company in
cash; PROVIDED, that such Change in Tax Law does not create more
than an insubstantial risk that the Company will be prevented from
taking a deduction for OID accruing with respect to the Convertible
Debentures at a date that is no later than the date the interest
payment related to such OID is actually paid by the Company in
cash.
"Investment Company Event" means that the Property
Trustee shall have received an opinion of a nationally recognized
independent counsel experienced in practice under the Investment
Company Act (an "Investment Company Event Opinion") that, as a
result of a change in law or regulation or a change in
interpretation or application of law or regulation by any
legislative
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<PAGE>
body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company
that is required to be registered under the Investment Company
Act, which Change in 1940 Act Law becomes effective on or after
the date of the Offering Memorandum.
On the date fixed for any distribution of
Convertible Debentures, upon dissolution of the Trust: (i) the
Trust Securities will no longer be deemed to be outstanding, (ii)
the Depositary or its nominee, as the record holder of such Trust
Securities, will receive a registered global certificate or
certificates representing the Convertible Debentures to be
delivered upon such distribution and (iii) certificates
representing Trust Securities not held by Depositary or its nominee
will be deemed to represent beneficial interests in Convertible
Debentures having an aggregate principal amount equal to the stated
liquidation amount, and bearing accrued and unpaid interest equal
to accrued and unpaid Distributions, on such Trust Securities until
such certificates are presented to the Company or its agent for
transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Trust
Securities unless all accrued and unpaid Distributions have been
paid in cash on all Trust Securities for all quarterly Distribution
periods terminating on or before the date of redemption.
(e) If the Convertible Debentures are distributed to the Holders of the
Trust Securities, pursuant to the terms of the Indenture, the
Company will use its reasonable best efforts to have the
Convertible Debentures listed on the New York Stock Exchange or on
such other exchange as the Convertible Preferred Securities were
listed immediately prior to the distribution of the Convertible
Debentures.
(f) REDEMPTION OR DISTRIBUTION PROCEDURES.
(i) Notice of any redemption of, or notice of distribution of
Convertible Debentures in exchange for, the Trust
Securities (a "Redemption/Distribution Notice") will be
given by the Trust by mail to each Holder of Trust
Securities to be redeemed or exchanged not fewer than 30
nor more than 60 days before the date fixed for redemption
or exchange thereof, which, in the case of a redemption,
will be the date fixed for redemption of the Convertible
Debentures. For purposes of the calculation of the date
of redemption or exchange and
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the dates on which notices are given pursuant to this
paragraph 4(f)(i), a Redemption/Distribution Notice
shall be deemed to be given on the day such notice is
first mailed by first-class mail, postage prepaid, to
Holders of Trust Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Trust
Securities at the address of each such Holder appearing
in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either
thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with
respect to any other Holder.
(ii) In the event that fewer than all the outstanding Trust
Securities are to be redeemed, then the aggregate
liquidation preference of such Trust Securities to be
redeemed shall be allocated Pro Rata among the Convertible
Preferred Securities and the Convertible Common
Securities, it being understood that, in respect of
Convertible Preferred Securities registered in the name of
and held of record by the Depositary or its nominee (or
any successor Clearing Agency or its nominee), the
distribution of the proceeds of such redemption will be
made to each Clearing Agency participant (or Person on
whose behalf such nominee holds such securities) in
accordance with the procedures applied by such agency or
nominee. The particular Convertible Preferred Securities
to be redeemed shall be selected not more than 60 days
prior to the redemption date by the Property Trustee from
the outstanding Convertible Preferred Securities not
previously called for redemption, by lot or by such method
as the Property Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of
portions (equal to $25 or an integral multiple of $25 in
excess thereof) of the liquidation amount of the
Convertible Preferred Securities. The Property Trustee
shall promptly notify the Conversion Agent in writing of
the Convertible Preferred Securities selected for
redemption and, in the case of any Convertible Preferred
Securities selected for partial redemption, the
liquidation preference thereof to be redeemed.
(iii) If Trust Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice (which notice is
irrevocable), then, provided that the Company has paid the
Property Trustee a sufficient amount of cash in connection
with the related redemption or maturity of the Convertible
Debentures, (A) with respect to Convertible Preferred
Securities held in book-entry form, by 12:00 noon, New
York City time,
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<PAGE>
on the redemption date, the Trust will deposit irrevocably
with the Depositary or its nominee (or successor Clearing
Agency or its nominee) funds sufficient to pay the
applicable Redemption Price with respect to such
Convertible Preferred Securities and will give the
Depositary irrevocable instructions and authority to pay
the applicable Redemption Price to the Convertible
Preferred Security Beneficial Owners of such Convertible
Preferred Securities represented by the Global
Certificates, and (B) with respect to Convertible
Preferred Securities issued in definitive form and
Convertible Common Securities, the Trust will irrevocably
deposit with the Paying Agent funds sufficient to pay the
amount payable on redemption to the Holders of such Trust
Securities upon surrender of their certificates. If a
Redemption/Distribution Notice shall have been given and
funds deposited as required, then on the date of such
deposit, all rights of Holders of such Trust Securities so
called for redemption will cease, except (i) the right of
the Holders of such Trust Securities to receive the
Redemption Price, but without interest thereon, and (ii)
the right to convert such Trust Securities into Sun Common
Stock in the manner described herein through the close of
business on the date immediately prior to the date fixed
for redemption. Neither the Administrative Trustees, the
Registrar, nor the Trust shall be required to register or
cause to be registered the transfer of any Trust
Securities that have been so called for redemption. If
any date fixed for redemption of Trust Securities is not a
Business Day, then payment of the amount payable on such
date will be made on the next succeeding day that is a
Business Day (without any interest or other payment in
respect of any such delay) except that, if such Business
Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption
Price in respect of any Trust Securities is improperly
withheld or refused and not paid either by the Trust or by
the Company as guarantor pursuant to the relevant
Securities Guarantee, Distributions on such Trust
Securities will continue to accrue at the then applicable
rate, from the original redemption date to the date of
payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of
calculating the amount payable upon redemption (other than
for purposes of calculating any premium).
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<PAGE>
(iv) In the event of any redemption in part, the Trust shall
not be required to (i) issue, register the transfer of or
exchange of any Convertible Preferred Security during a
period beginning at the opening of business 15 days before
any selection for redemption of Convertible Preferred
Securities and ending at 5:00 p.m. (New York City time) on
the earliest date in which the relevant notice of
redemption is deemed to have been given to all holders of
Convertible Preferred Securities to be so redeemed and
(ii) register the transfer of or exchange of any
Convertible Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed
portion of any Convertible Preferred Securities being
redeemed in part.
(v) Redemption/Distribution Notices shall be sent by the
Administrative Trustees on behalf of the Trust to (A) in
the case of Convertible Preferred Securities held in
book-entry form, the Depositary and, in the case of Trust
Securities held in definitive form, the Holders of such
certificates and (B) in respect of the Convertible Common
Securities, the Holder thereof.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities
laws), the Company or any of its subsidiaries may at any
time and from time to time purchase outstanding
Convertible Preferred Securities by tender, in the open
market or by private agreement.
5. CONVERSION RIGHTS.
The Holders of Trust Securities shall have the right at any time after June
28, 1998 and prior to 5:00 p.m. (New York City time) on the Business Day
immediately preceding the date of repayment of such Trust Securities,
whether at maturity or upon redemption (either at the option of the Company
or pursuant to a Tax Event), at their option, to cause the Conversion Agent
to convert Trust Securities, on behalf of the converting Holders, into
shares of Sun Common Stock of the Company in the manner described in, and
subject to all of the terms and conditions of, Article Thirteen of the
Declaration.
6. VOTING RIGHTS - CONVERTIBLE PREFERRED SECURITIES.
(a) Except as provided under paragraph 6(b) and paragraph 8, in the
Business Trust Act and as otherwise required by law, the
Declaration and the Guarantee, the
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<PAGE>
Holders of the Convertible Preferred Securities will have no voting
rights. No vote or consent of the Holders of the Convertible
Preferred Securities will be required for the Trust to redeem and
cancel Convertible Preferred Securities or to distribute the
Convertible Debentures in accordance with the Declaration and the
terms of the Trust Securities.
(b) Subject to the requirements set forth in this paragraph 6(b), the
Holders of a majority in liquidation amount of the Convertible
Preferred Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee and direct the exercise of any
trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as
holder of the Convertible Debentures, to (i) exercise the remedies
available to it under the Indenture as a holder of the Convertible
Debentures, (ii) waive any past default or Event of Default and its
consequences that are waivable under the Indenture, (iii) exercise
any right to rescind or annul a declaration that the principal of
all the Convertible Debentures shall be due and payable, or (iv)
consent to any amendment, modification or termination of the
Indenture or the Convertible Debentures where such consent shall be
required; PROVIDED, HOWEVER, that where a consent or action under
the Indenture would require the consent or act of the Holders of a
Super Majority of Convertible Debentures affected thereby, the
Property Trustee may only give such consent or take such action at
the written direction of the Holders of at least the proportion in
liquidation amount of the Convertible Preferred Securities that the
relevant Super Majority represents of the aggregate principal
amount of the Convertible Debentures outstanding. The Property
Trustee shall be under no obligation to revoke any action
previously authorized or approved by a vote of the Holders of the
Convertible Preferred Securities. Other than with respect to
directing the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee or the Indenture
Trustee as set forth above, the Property Trustee shall be under no
obligation to take any action in accordance with the directions of
the Holders of the Convertible Preferred Securities under this
paragraph 6 unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that for the purposes of
United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action and each
Holder will be treated as owning an undivided beneficial interest
in the Convertible Debentures. If the Property Trustee fails to
enforce its rights under the Convertible Debentures after a Holder
of Convertible Preferred Securities has made a written request,
such Holder of Convertible Preferred Securities may, to the fullest
extent permitted by
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<PAGE>
law, institute a legal proceeding directly against the Company to
enforce the Property Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against
the Property Trustee or any other Person. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to
pay interest or principal on the Convertible Debentures on the
date such interest or principal is otherwise payable (or in the
case of redemption on the date fixed for redemption), then a Holder
of Convertible Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder (a "Direct
Action") of the principal of or interest on Convertible Debentures
having a principal amount equal to the aggregate liquidation amount
of the Convertible Preferred Securities of such Holder on or after
the respective due date specified in the Convertible Debentures.
Except as provided above, the Holders of Convertible Preferred
Securities will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures. In
connection with such Direct Action, the Company will be subrogated
to the rights of such Holder of Convertible Preferred Securities
under the Declaration to the extent of any payment made by the
Company to such Holder of Convertible Preferred Securities in such
Direct Action.
(c) Any required approval or direction of Holders of Convertible
Preferred Securities may be given at a separate meeting of Holders
of Convertible Preferred Securities convened for such purpose, at a
meeting of all of the Holders of Trust Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which Holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Convertible Preferred Securities. Each
such notice will include a statement setting forth the following
information (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is
sought and (iii) instructions for the delivery of proxies or
consents.
(d) Notwithstanding that Holders of Convertible Preferred Securities
are entitled to vote or consent under any of the circumstances
described above, any of the Convertible Preferred Securities that
are owned by the Company or any Affiliate of the Company shall not
be entitled to vote or consent and shall, for purposes of
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<PAGE>
such vote or consent, be treated as if such Convertible Preferred
Securities were not outstanding.
(e) Holders of the Convertible Preferred Securities will have no rights
to appoint or remove the Administrative Trustees, who may be
appointed, removed or replaced solely by the Sponsor as the holder
of all Convertible Common Securities.
7. VOTING RIGHTS - CONVERTIBLE COMMON SECURITIES.
(a) Except as provided under paragraphs 7(b) and (c) and paragraph 8,
in the Business Trust Act and as otherwise required by law and the
Declaration, the Holders of the Convertible Common Securities will
have no voting rights. No vote or consent of the Holders of the
Convertible Common Securities will be required for the Trust to
redeem and cancel Convertible Common Securities or to distribute
the Convertible Debentures in accordance with the Declaration and
the terms of the Trust Securities.
(b) The Holders of the Convertible Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to appoint,
remove or replace any Trustee or to increase or decrease the number
of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after the Event
of Default with respect to the Convertible Preferred Securities has
been cured, waived, or otherwise eliminated and subject to the
requirements of the penultimate sentence of this paragraph 7(c),
the Holders of a Majority in Liquidation Amount of the Convertible
Common Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under the Declaration,
including (i) directing the time, method, place of conducting any
proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee
with respect to the Convertible Debentures, (ii) waive any past
default and its consequences that are waivable under Section 513 of
the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Debentures
shall be due and payable, or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible
Debentures where such consent shall be required; PROVIDED that,
where a consent or action under the Indenture would require the
consent or act of the Holders of a Super Majority in principal
amount of Convertible Debentures affected thereby, the Property
Trustee may only give
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<PAGE>
such consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of the
Convertible Common Securities which the relevant Super Majority
represents of the aggregate principal amount of the Convertible
Debentures outstanding. Pursuant to this paragraph 7(c), the
Property Trustee shall not revoke any action previously authorized
or approved by a vote of the Holders of the Convertible Preferred
Securities. Other than with respect to directing the time, method
and place of conducting any proceeding for any remedy available to
the Property Trustee or the Indenture Trustee as set forth above,
the Property Trustee shall be under no obligation to take any
action in accordance with the directions of the Holders of the
Convertible Common Securities under this paragraph 7(c) unless
the Property Trustee has obtained an opinion of independent tax
counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than
a grantor trust on account of such action and each Holder will be
treated as owning an undivided beneficial interest in the
Convertible Debentures. If the Property Trustee fails to enforce
its rights under the Convertible Debentures after a Holder of
Convertible Common Securities has made a written request, such
Holder of Convertible Common Securities may, to the fullest extent
permitted by law, institute a legal proceeding directly against the
Company or any other Person to enforce the Property Trustee's
rights under the Convertible Debentures, without first instituting
any legal proceeding against the Property Trustee or any other
Person.
(d) Any approval or direction of Holders of Convertible Common
Securities may be given at a separate meeting of Holders of
Convertible Common Securities convened for such purpose, at a
meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which Holders of Convertible
Common Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of Convertible Common Securities.
Each such notice will include a statement setting forth (i) the
date of such meeting or the date by which such action is to be
taken, (ii) a description of any resolution proposed for adoption
at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
8. AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 11.1 of the
Declaration, if any proposed amendment to the Declaration provides
for, or the Administrative
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<PAGE>
Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the
Trust Securities in any material respect, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in
Section 3.10 of the Declaration, then the Holders of Trust
Securities as a class will be entitled to vote on such amendment or
proposal (but not on any other amendment or proposal) and such
amendment or proposal shall not be effective except with the
approval of the Holders of a Majority in Liquidation Amount of the
Trust Securities affected thereby, voting together as a single
class; PROVIDED, HOWEVER, if any amendment or proposal referred to
in clause (i) above would adversely affect only the Convertible
Preferred Securities or only the Convertible Common Securities,
then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not
be effective except with the approval of at least a Majority in
Liquidation Amount of such class of Trust Securities.
(b) In the event the consent of the Property Trustee as the holder of
the Convertible Debentures is required under the Indenture with
respect to any amendment, modification or termination on the
Indenture or the Convertible Debentures, the Property Trustee shall
request the written direction of the Holders of the Trust
Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment,
modification or termination as directed by a Majority in
Liquidation Amount of the Trust Securities voting together as a
single class; PROVIDED, HOWEVER, that where a consent under the
Indenture would require a Super Majority in aggregate principal
amount of the Convertible Debentures, the Property Trustee may only
give such consent at the written direction of the Holders of at
least the same proportion in aggregate stated liquidation
preference of the Trust Securities; PROVIDED, FURTHER, that the
Property Trustee shall not take any action in accordance with the
directions of the Holders of the Trust Securities under this
paragraph 8(b) unless the Property Trustee has obtained an opinion
of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a
grantor trust on account of such action.
9. PRO RATA.
A reference in these terms of the Trust Securities to any payment,
distribution or treatment as being "PRO RATA" shall mean pro rata to each Holder
of Trust Securities according to the aggregate liquidation amount of the Trust
Securities held by the relevant Holder in relation
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<PAGE>
to the aggregate liquidation amount of all Trust Securities outstanding
unless, in relation to a payment, an Event of Default under the Declaration
has occurred and is continuing, in which case any funds available to make
such payment shall be paid first to each Holder of the Convertible Preferred
Securities pro rata according to the aggregate liquidation amount of
Convertible Preferred Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Convertible Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders
of the Convertible Preferred Securities, to each Holder of Convertible Common
Securities pro rata according to the aggregate liquidation amount of
Convertible Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Convertible Common Securities outstanding.
10. RANKING; SUBORDINATION.
The Convertible Preferred Securities rank PARI PASSU and payment
thereon shall be made Pro Rata with the Convertible Common Securities, PROVIDED
THAT, if on any distribution date or redemption date an Event of Default occurs
and is continuing under the Indenture in respect of the Convertible Debentures
held by the Property Trustee, the rights of Holders of the Convertible Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Convertible Preferred Securities.
Payment of Distributions on, and the amount payable upon redemption
of, the Trust Securities, as applicable, shall be made PRO RATA based on the
liquidation amount of the Trust Securities; PROVIDED, HOWEVER, that, if on any
distribution date or redemption date an Event of Default shall have occurred and
be continuing, no payment of any Distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Convertible Common Securities,
shall be made unless payment in full in cash of all accumulated and unpaid
distributions on all outstanding Convertible Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the amount payable upon redemption of the Convertible Preferred Securities,
the full amount of such amount in respect of all outstanding Convertible
Preferred Securities shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or the amount payable upon redemption of,
Convertible Preferred Securities then due and payable.
In the case of any Event of Default, the holder of Convertible Common
Securities will be deemed to have waived any such Event of Default until all
such Events of Default with respect to the Convertible Preferred Securities have
been cured, waived or otherwise eliminated. Until any such Events of Default
with respect to the Convertible Preferred Securities have been so
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<PAGE>
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the Holders of the Convertible Preferred Securities and not the
Holder of the Convertible Common Securities, and only the Holders of the
Convertible Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
Each Holder of Convertible Preferred Securities and Convertible
Common Securities, by the acceptance thereof, agrees to the provisions of the
Convertible Preferred Securities Guarantee and the Convertible Common Securities
Guarantee, respectively, including the subordination provisions therein and to
the provisions of the Indenture.
12. NO PREEMPTIVE RIGHTS.
The Holders of the Trust Securities shall have no preemptive rights
to subscribe for any additional securities.
13. MISCELLANEOUS.
These terms constitute a part of the Declaration.
The Company will provide a copy of the Declaration, the Convertible
Preferred Securities Guarantee or the Convertible Common Securities Guarantee
(as may be appropriate), and the Indenture to a Holder without charge on written
request to the Trust at its principal place of business.
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<PAGE>
EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY
<PAGE>
EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY
[FACE OF SECURITY]
[Include if Convertible Preferred Security is in global form:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED
IN WHOLE OR IN PART FOR A CONVERTIBLE PREFERRED SECURITY REGISTERED,
AND NO TRANSFER OF THIS CONVERTIBLE PREFERRED SECURITY IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE DECLARATION.]
[Include if Convertible Preferred Security is in global form and The
Depository Trust Company is the Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
<PAGE>
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS AFTER THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR RULE) (THE "RESALE RESTRICTION TERMINATION
DATE") ONLY (A) TO SUN HEALTHCARE GROUP, INC., (THE "COMPANY") (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
A-1-2
<PAGE>
Cert. No.:
CUSIP NO.
-------
Convertible Preferred Securities
of
Sun Financing I
7% Convertible Preferred Securities
(liquidation amount $25 per Convertible Preferred Security)
Sun Financing I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
________________ (the "Holder") is the registered owner of Convertible
Preferred Securities of the Trust representing undivided beneficial interests
in the assets of the Trust designated the "7% Convertible Preferred
Securities (liquidation amount $25 per Convertible Preferred Security)" (the
"Convertible Preferred Securities"). The Convertible Preferred Securities
are transferable on the books and records of the Trust, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Convertible
Preferred Securities represented hereby are issued and shall in all respects
be subject to the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of May 4, 1998, as the same may be amended from time
to time, including the designation of the terms of the Convertible Preferred
Securities as set forth in Annex I to the Declaration (the "Declaration").
Capitalized terms used herein but not defined shall have the meaning given
them in the Declaration. The Holder is entitled to the benefits of the
Convertible Preferred Securities Guarantee to the extent provided therein.
The Company will provide a copy of the Declaration, the Convertible Preferred
Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible
Preferred Securities set forth on the reverse hereof, which select provisions
shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Convertible Debentures as indebtedness and the
Convertible Preferred Securities as evidence of indirect beneficial ownership in
the Convertible Debentures.
Unless the Property Trustee's Certificate of Authentication hereon
has been properly executed, these Convertible Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed.
Dated:
SUN FINANCING I
By:
---------------------------------
Name:
Title:
Attest:
- ------------------------------
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Securities referred to in
the within-mentioned Declaration.
Dated:
THE BANK OF NEW YORK, as Property Trustee
By:
--------------------------------------
Authorized Signatory
A-1-4
<PAGE>
[REVERSE OF SECURITY]
Distributions payable on each Convertible Preferred Security will
be fixed at a rate per annum of 7% (the "Coupon Rate") of the stated liquidation
amount of $25 per Convertible Preferred Security, such rate being the rate of
interest payable on the Convertible Debentures to be held by the Property
Trustee. Distributions in arrears for more than one quarter will bear interest
thereon compounded quarterly at the Coupon Rate (to the extent permitted by
applicable law). The term "Distributions" as used herein includes any such
interest including any Additional Interest, Compounded Interest and Liquidated
Damages, if any, payable unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of the Convertible
Debentures held by the Property Trustee and to the extent the Trust has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
Except as otherwise described below, Distributions on the
Convertible Preferred Securities will be cumulative, will accrue from the date
of initial issuance and will be payable quarterly in arrears, on the following
dates, which dates correspond to the interest payment dates on the Convertible
Debentures: February 1, May 1, August 1, and November 1, of each year,
commencing on August 1, 1998, when, as and if available for payment by the
Property Trustee. The Company has the right at any time during the term of the
Convertible Debentures to defer interest payments from time to time by extending
the interest payment period for successive periods not exceeding 20 consecutive
quarters (each an "Extension Period") for each such period; PROVIDED, that no
Extension Period may extend beyond the maturity date of the Convertible
Debentures. As a consequence of such extension, quarterly Distributions on the
Convertible Preferred Securities would be deferred (though such Distributions
would continue to accrue with interest since interest would continue to accrue
on the Convertible Debentures) during any such extended interest payment period.
In the event that the Company exercises this right, then, during such period the
Company has agreed, among other things, (a) not to declare or pay dividends on,
or make a distribution with respect to, or redeem or purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Sun Common Stock in connection with
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Sun Common
Stock, (ii) as a result of a reclassification of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or (iii) the purchase
of fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged) or make any guarantee payments with respect to the
foregoing, (b) not
A-1-5
<PAGE>
to make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank PARI PASSU with or junior to the Convertible Debentures and
(c) not to make any guarantee payments with respect to the foregoing (other
than pursuant to the Convertible Preferred Securities Guarantee). Prior to
the termination of any such Extension Period, the Company may further extend
the interest payment period; PROVIDED, that such Extension Period, together
with all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity date of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Company may commence a new Extension Period,
subject to the above requirements.
Distributions on the Convertible Preferred Securities will be
payable to the Holders thereof as they appear on the books and records of the
Trust on the relevant record dates. The relevant record dates shall be the
fifteenth day prior to the next such succeeding payment date, except as
otherwise described in the Declaration.
The Convertible Preferred Securities shall be redeemable as
provided in the Declaration.
The Convertible Preferred Securities shall be convertible into
shares of common stock of Sun Healthcare Group, Inc. ("Sun Common Stock"),
through (i) the exchange of Convertible Preferred Securities for a portion of
the Convertible Debentures and (ii) the immediate conversion of such Convertible
Debentures into Sun Common Stock, in the manner and according to the terms set
forth in Article Thirteen of the Declaration.
A-1-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Preferred Security Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
Agent to transfer this Convertible Preferred Security Certificate on the books
of the Trust. The Agent may substitute another to act for him or her.
Date:
-----------------------
- --------------------------------------------------
(Sign exactly as your name appears on the
other side of this Convertible Preferred Security
Certificate)
Signature Guarantee:(*)
---------------------------------------------
_______________________________
(*) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-1-7
<PAGE>
[Include the following if the Convertible Preferred Security bears a Restricted
Securities Legend]
In connection with any transfer of any of the Convertible Preferred Securities
evidenced by this certificate, the undersigned confirms that such Convertible
Preferred Securities are being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without
transfer; or
(2) / / transferred to a "Qualified Institutional Buyer" pursuant
to and in compliance with Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"); or
(3) / / transferred to an institutional "accredited investor"; or
(4) / / transferred pursuant to another available exemption from
the registration requirements of the Securities Act; or
(5) / / transferred pursuant to an effective Registration
Statement under the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Convertible Preferred Securities evidenced by this certificate in the name
of any person other than the registered Holder thereof; PROVIDED, HOWEVER, that
if box (2) or (3) is checked, the Trustee may require, prior to registering any
such transfer of the Convertible Preferred Securities, such legal opinions,
certifications and other information as the Company has reasonably requested in
writing and directed the Trustee to require confirmation that such transfer is
being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act, such as the exemption
provided by Rule 144 under such Act; PROVIDED, FURTHER, that after the date that
a Shelf Registration Statement under the Securities Act has been filed and so
long as such Shelf Registration Statement continues to be effective, the Trustee
may only permit transfers for which box (5) has been checked.
________________________________________
Signature
Signature Guarantee:(**)
______________________________________________________________________________
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________________________ __________________________________
NOTICE: To be executed by an
executive officer]
_______________________________
(**) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-1-8
<PAGE>
[TO BE COMPLETED BY A PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrant that it is purchasing
Convertible Debenture for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act.
Dated: ____________________________ __________________________________
NOTICE: To be executed by an
executive officer]
A-1-9
<PAGE>
CONVERSION NOTICE
To: The Bank of New York, as Property Trustee of Sun Financing I
The undersigned owner of these Convertible Preferred Securities
hereby irrevocably exercises the option to convert these Convertible Preferred
Securities, or the portion below designated, into common stock of Sun Healthcare
Group, Inc. (the "Sun Common Stock") in accordance with the terms of the Amended
and Restated Declaration of Trust (the "Declaration"), dated as of May 4, 1998,
by Robert D. Woltil, William C. Warrick and Robert F. Murphy, as Administrative
Trustees, The Bank of New York, as Property Trustee, The Bank of New York
(Delaware) as Delaware Trustee, Sun Healthcare Group, Inc., as Sponsor, and by
the Holders, from time to time, of individual beneficial interests in the Trust
to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Convertible Preferred Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Convertible Preferred Securities for a portion
of the Convertible Debentures (as that term is defined in the Declaration) held
by the Trust (at the rate of exchange specified in the terms of the Declaration)
and (ii) immediately convert such Convertible Debentures on behalf of the
undersigned into Sun Common Stock (at the conversion rate specified in the terms
of the Declaration).
The undersigned also hereby directs the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of conversion rights in accordance
with the terms of the Declaration and the Convertible Preferred Securities
agrees to be bound by the terms of the Registration Rights Agreement relating to
the Sun Common Stock issuable upon conversion of the Convertible Preferred
Securities.
Date: ________________
Number of Convertible Preferred Securities to be converted: ___________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Sun Common Stock are to be
issued, along with the address or addresses of such person or persons.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
__________________________________________
(Sign exactly as your name appears on the
other side of this Convertible Preferred Security
Certificate) (for conversion only)
A-1-10
<PAGE>
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
___________________________________________
___________________________________________
___________________________________________
___________________________________________
Signature Guarantee:(*)
----------------------------------------------
_______________________________
(*) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-1-11
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
[FACE OF SECURITY]
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE REGISTRATION
STATEMENT. OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF THE SPONSOR.
Certificate Number
Common Securities
of
SUN FINANCING I
7% Convertible Common Securities
(liquidation amount $25 per Convertible Common Security)
Sun Financing I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that
___________________________ (the "Holder") is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the "7% Convertible Common Securities
(liquidation amount $25 per Convertible Common Security)" (the "Common
Securities"). The Common Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of May 4, 1998, as the same may be amended from time to time
(the "Declaration"), including the designation of the terms of the Common
Securities as set forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration.
The Holder is entitled to the benefits of the Common Securities Guarantee to the
extent provided therein. The Company
<PAGE>
will provide a copy of the Declaration, the Common Securities Guarantee and
the Indenture to a Holder without charge upon written request to the Sponsor
at its principal place of business.
Reference is hereby made to select provisions of the Common
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Company is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal
income tax purposes the Convertible Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Convertible
Debentures.
IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed.
Dated:
SUN FINANCING I
By:
-------------------------------
Name:
Title:
[Seal]
Attest:
- -------------------------
A-2-2
<PAGE>
[REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a
rate per annum of 7% (the "Coupon Rate") of the stated liquidation amount of
$25 per Common Security, such rate being the rate of interest payable on the
Convertible Debentures to be held by the Property Trustee. Distributions in
arrears for more than one quarter will bear interest thereon compounded
quarterly at the Coupon Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes any such interest including
any Additional Interest, Compounded Interest and Liquidated Damages, if any,
payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Convertible Debentures held
by the Property Trustee and to the extent the Trust has funds available
therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed per 90-day quarter.
Except as otherwise described below, Distributions on the Common
Security Securities will be cumulative, will accrue from the date of initial
issuance and will be payable quarterly in arrears, on the following dates,
which dates correspond to the interest payment dates on the Convertible
Debentures: February 1, May 1, August 1 and November 1, of each year,
commencing on August 1, 1998, when, as and if available for payment by the
Property Trustee. The Company has the right at any time during the term of
the Convertible Debentures to defer interest payments from time to time by
extending the interest payment period for successive periods not exceeding 20
consecutive quarters (each an "Extension Period") for each such period;
PROVIDED, that no Extension Period may extend beyond the maturity date of the
Convertible Debentures. As a consequence of such extension, quarterly
Distributions on the Common Security Securities would be deferred (though
such Distributions would continue to accrue with interest since interest
would continue to accrue on the Convertible Debentures) during any such
extended interest payment period. In the event that the Company exercises
this right, then, during such period the Company has agreed, among other
things, (a) not to declare or pay dividends on, or make a distribution with
respect to, or redeem or purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock (other than (i) purchases or
acquisitions of shares of Sun Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Sun Common
Stock, (ii) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock or (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged) or make any guarantee payments
with respect to the foregoing, (b) not to make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank PARI PASSU
with or
A-2-3
<PAGE>
junior to the Convertible Debentures and (c) not to make any guarantee
payments with respect to the foregoing (other than pursuant to the Common
Securities Guarantee). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period; PROVIDED, that
such Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
date of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a
new Extension Period, subject to the above requirements.
The Common Securities shall be convertible into shares of common
stock of Sun Healthcare Group, Inc. ("Sun Common Stock") through (i) the
exchange of Common Securities for a portion of the Convertible Debentures and
(ii) the immediate conversion of such Convertible Debentures into Sun Common
Stock, in the manner and according to the terms set forth in Article Thirteen
of the Declaration.
A-2-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
Agent to transfer this Common Security Certificate on the books of the Trust.
The Agent may substitute another to act for him or her.
Date:
----------------------------
- -------------------------------------------------
(Sign exactly as your name appears on the
other side of this Common Security
Certificate)
Signature Guarantee:(*)
-----------------------------------
______________________
(*) (Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A-2-5
<PAGE>
[Include the following if the Common Security bears a Restricted Securities
Legend]
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without
transfer; or
(2) / / transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended (the
"Securities Act"); or
(3) / / transferred to an institutional "accredited investor"; or
(4) / / transferred pursuant to another available exemption from
the registration requirements of the Securities Act; or
(5) / / transferred pursuant to an effective Registration
Statement under the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Common Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if
box (3) is checked, the Trustee may require, prior to registering any such
transfer of the Common Securities, such legal opinions, certifications and
other information as the Company has reasonably requested in writing and
directed the Trustee to require confirmation that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, such as the exemption
provided by Rule 144 under such Act; PROVIDED, FURTHER, that after the date
that a Shelf Registration Statement under the Securities Act has been filed
and so long as such Shelf Registration Statement continues to be effective,
the Trustee may only permit transfers for which box (5) has been checked.
------------------------------------
Signature
Signature Guarantee:(**)
--------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Common Security for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
---------------------------- ----------------------------------
______________________
(**) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-2-6
<PAGE>
NOTICE: To be executed by an executive officer]
A-2-7
<PAGE>
[TO BE COMPLETED BY A PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrant that it is purchasing
Convertible Debenture for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is
an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act.
Dated:
---------------------------- ----------------------------------
NOTICE: To be executed by an
executive officer]
A-2-8
<PAGE>
CONVERSION NOTICE
To: The Bank of New York, as Property Trustee of Sun Financing I.
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common Securities, or the
portion below designated, into common stock of Sun Healthcare Group, Inc.
(the "Sun Common Stock") in accordance with the terms of the Amended and
Restated Declaration of Trust (the "Declaration"), dated as of May 4, 1998,
by Robert D. Woltil, William C. Warrick and Robert F. Murphy, as
Administrative Trustees, The Bank of New York, as Delaware Trustee, The Bank
of New York (Delaware), as Property Trustee, Sun Healthcare Group, Inc., as
Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to
the aforementioned exercise of the option to convert these Common Securities,
the undersigned hereby directs the Conversion Agent (as that term is defined
in the Declaration) to (i) exchange such Common Securities for a portion of
the Convertible Debentures (as that term is defined in the Declaration) held
by the Trust (at the rate of exchange specified in the terms of the
Declaration) and (ii) immediately convert such Convertible Debentures on
behalf of the undersigned into Sun Common Stock (at the conversion rate
specified in the terms of the Declaration).
The undersigned also hereby directs the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Date:
---------------------
Number of Common Securities to be converted:
-------------------
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Sun Common Stock are to be
issued, along with the address or addresses of such person or persons.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_________________________________________
(Sign exactly as your name appears on the
other side of this Common Security
Certificate) (for conversion only)
A-2-9
<PAGE>
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Signature Guarantee:(*)
--------------------------------
______________________
(*) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-2-10
<PAGE>
EXHIBIT B - Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 8.2(b)(iv))
Attention: Corporate Trust Department
Re: 7% Convertible Preferred
Securities of Sun Financing I (the "Securities")
Reference is made to the Amended and Restated Declaration, dated
as of May 4, 1998 (as amended from time to time, the "Declaration"), among
Sun Healthcare Group, Inc. (the "Company"), the Bank of New York (Delaware)
as Delaware Trustee, The Bank of New York as Property Trustee and the
Administrative Trustees named therein and the holders, from time to time, of
undivided beneficial interests in the assets of the Trust. Terms used herein
and defined in the Declaration or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act"), are used herein as so defined.
The certificate relates to ____________ shares of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s).:
-----------------------------------------------------
CERTIFICATE No(s):
-----------------------------------------------------
The Person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them
to do so. Such beneficial owner or owners are referred to herein collectively
as the "Owner". If the Specified Securities are represented by a Global
Certificate, they are held through the Clearing Agency or participant in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Certificate, they are registered
in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to Section
8.2 of the Declaration. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after a holding period of at least
two years (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the Specified Securities were last acquired from the Trust or from an
affiliate of the Trust, whichever is later, and the Owner is not, and during
the preceding three months has not been, an affiliate of the Trust. The
Owner also acknowledges that any future transfers of the Specified Securities
must comply with all applicable securities laws of the states of the United
States and other jurisdictions.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Trust and the Purchasers.
Dated:
------------------------------
(Print the name of the Undersigned, as such
term is defined in the second paragraph of
this certificate.)
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
(If the Undersigned is a corporation,
partnership or fiduciary, the title
of the person signing on behalf of
the Undersigned must be stated.)
B-1
<PAGE>
Exhibit 10.4
Sun Healthcare Group, Inc., as Issuer
and
The Bank of New York, as Trustee
-----------------
Indenture
Dated as of May 4, 1998
$355,670,131.25
7% Convertible Junior Subordinated Debentures Due 2028
-----------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- --------------
<S> <C>
Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . . 609
(a)(2). . . . . . . . . . . . . . . . . . . . . . 609
(a)(3). . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4). . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . 608, 610
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . 701
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . 704, 102
(b) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1). . . . . . . . . . . . . . . . . . . . . . 102
(c)(2). . . . . . . . . . . . . . . . . . . . . . 102
(c)(3). . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 502, 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 513
(a)(2). . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions and Other Provisions of General Application . . . . . . . . . -2-
SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . -14-
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . -14-
SECTION 104. Acts of Holders; Record Dates. . . . . . . . . . . . . . . -15-
SECTION 105. Notices, Etc., to Trustee and the Company. . . . . . . . . -16-
SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . -17-
SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . -17-
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . -17-
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . -18-
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . . -18-
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . -18-
SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . -18-
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE II
Convertible Debenture Forms. . . . . . . . . . . . . . . . . . . . . . . -19-
SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . -19-
SECTION 202. Initial Issuance to Property Trustee . . . . . . . . . . . -19-
ARTICLE III
The Convertible Debentures. . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . -22-
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . -23-
SECTION 304. Temporary Convertible Debentures . . . . . . . . . . . . . -23-
SECTION 305. Registration, Registration of Transfer and Exchange. . . . -24-
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Convertible Debentures . . . . . . . . . . . . . . . . . . -25-
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . -26-
SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . -28-
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . -28-
SECTION 310. Right of Set Off . . . . . . . . . . . . . . . . . . . . . -29-
-ii-
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 311. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 312. Option to Extend Interest Payment Period . . . . . . . . . -29-
SECTION 313. Paying Agent, Security Registrar and Conversion Agent. . . -31-
SECTION 314. Global Security. . . . . . . . . . . . . . . . . . . . . . -31-
ARTICLE IV
Satisfaction and Discharge. . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . -34-
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . -35-
ARTICLE V
Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . -35-
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . -37-
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . -38-
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . -39-
SECTION 505. Trustee May Enforce Claims Without Possession
of Convertible Debentures. . . . . . . . . . . . . . . . . -39-
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . -40-
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . -40-
SECTION 508. Unconditional Right of Holders to Receive Principal and
Interest and Convert . . . . . . . . . . . . . . . . . . . -41-
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . -41-
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . -42-
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . -42-
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . -42-
SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . -42-
SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . -43-
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . -43-
SECTION 516. Enforcement by Holders of Convertible Preferred
Securities . . . . . . . . . . . . . . . . . . . . . . . . -44-
ARTICLE VI
The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
-iii-
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . -44-
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . -45-
SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . -45-
SECTION 604. Not Responsible for Recitals or Issuance of
Convertible Debentures . . . . . . . . . . . . . . . . . . -46-
SECTION 605. May Hold Convertible Debentures. . . . . . . . . . . . . . -46-
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . -47-
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . -47-
SECTION 608. Disqualification; Conflicting Interests. . . . . . . . . . -48-
SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . -48-
SECTION 610. Resignation and Removal; Appointment of Successor. . . . . -48-
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . -50-
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . . . -50-
SECTION 613. Preferential Collection of Claims Against Company. . . . . -50-
ARTICLE VII
Holders' Lists and Reports by Trustee and Company . . . . . . . . . . . . -51-
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . . . . -51-
SECTION 702. Preservation of Information; Communications to
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . -51-
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . -52-
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . -52-
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease. . . . . . . . . . . -53-
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms. . . . . . . . . . . . . . . . . . . . . . . -53-
SECTION 802. Successor Substituted. . . . . . . . . . . . . . . . . . . -54-
ARTICLE IX
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . -54-
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . -54-
SECTION 902. Supplemental Indentures with Consent of Holders. . . . . . -55-
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . -56-
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . -57-
-iv-
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . . -57-
SECTION 906. Reference in Convertible Debentures to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . . -57-
ARTICLE X
Covenants; Representations and Warranties . . . . . . . . . . . . . . . . -57-
SECTION 1001. Payment of Principal and Interest. . . . . . . . . . . . . -57-
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . . -57-
SECTION 1003. Money for Convertible Debenture Payments to Be
Held in Trust. . . . . . . . . . . . . . . . . . . . . . . -58-
SECTION 1004. Statement by Officers as to Default. . . . . . . . . . . . -59-
SECTION 1005. Limitation on Dividends; Covenants as to the Trust . . . . -59-
SECTION 1006. Payment of Expenses of the Trust . . . . . . . . . . . . . -60-
SECTION 1007. Registration Rights. . . . . . . . . . . . . . . . . . . . -61-
ARTICLE XI
Redemption of Convertible Debentures. . . . . . . . . . . . . . . . . . . -61-
SECTION 1101. Optional Redemption. . . . . . . . . . . . . . . . . . . . -61-
SECTION 1102. Tax Event Optional Redemption. . . . . . . . . . . . . . . -62-
SECTION 1103. Applicability of Article . . . . . . . . . . . . . . . . . -63-
SECTION 1104. Election to Redeem; Notice to Trustee. . . . . . . . . . . -63-
SECTION 1105. Selection by Trustee of Convertible Debentures to Be
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . -63-
SECTION 1106. Notice of Redemption . . . . . . . . . . . . . . . . . . . -64-
SECTION 1107. Deposit and Payment of Redemption Price. . . . . . . . . . -64-
SECTION 1108. Convertible Debentures Payable on Redemption Date. . . . . -65-
SECTION 1109. Convertible Debentures Redeemed in Part. . . . . . . . . . -65-
SECTION 1110. No Sinking Fund. . . . . . . . . . . . . . . . . . . . . . -66-
SECTION 1111. Mandatory Redemption . . . . . . . . . . . . . . . . . . . -66-
SECTION 1112. Exchange of Trust Securities for Convertible
Debentures . . . . . . . . . . . . . . . . . . . . . . . . -66-
ARTICLE XII
Subordination of Convertible Debentures . . . . . . . . . . . . . . . . . -67-
SECTION 1201. Agreement to Subordinate . . . . . . . . . . . . . . . . . -67-
SECTION 1202. Default on Senior Indebtedness . . . . . . . . . . . . . . -67-
SECTION 1203. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . -69-
-v-
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 1204. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . -70-
SECTION 1205. Trustee to Effectuate Subordination. . . . . . . . . . . . -70-
SECTION 1206. Notice by the Company. . . . . . . . . . . . . . . . . . . -70-
SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness . . -71-
SECTION 1208. Subordination May Not Be Impaired. . . . . . . . . . . . . -72-
ARTICLE XIII
Conversion of Convertible Debentures. . . . . . . . . . . . . . . . . . . -73-
SECTION 1301. Conversion Rights. . . . . . . . . . . . . . . . . . . . . -73-
SECTION 1302. Conversion Procedures. . . . . . . . . . . . . . . . . . . -73-
SECTION 1303. Conversion Price Adjustments . . . . . . . . . . . . . . . -76-
SECTION 1304. Fundamental Change.. . . . . . . . . . . . . . . . . . . . -81-
SECTION 1305. Notice of Adjustments of Conversion Price. . . . . . . . . -83-
SECTION 1306. Prior Notice of Certain Events . . . . . . . . . . . . . . -84-
SECTION 1307. Certain Defined Terms. . . . . . . . . . . . . . . . . . . -85-
SECTION 1308. Dividend or Interest Reinvestment Plans. . . . . . . . . . -85-
SECTION 1309. Certain Additional Rights. . . . . . . . . . . . . . . . . -86-
SECTION 1310. Restrictions on Sun Common Stock Issuable Upon
Conversion . . . . . . . . . . . . . . . . . . . . . . . . -86-
SECTION 1311. Trustee Not Responsible for Determining Conversion
Price or Adjustments . . . . . . . . . . . . . . . . . . . -88-
ARTICLE XIV
Immunity of Incorporators, Stockholders, Officers and Directors . . . . . -88-
SECTION 1401. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . -88-
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
EXHIBIT AND ANNEX
EXHIBIT A Form of Convertible Debenture
ANNEX A Amended and Restated Declaration of Trust among the Company,
as trust sponsor, The Bank of New York, as Property Trustee,
The Bank of New York (Delaware), as Delaware Trustee and
Robert D. Woltil, Robert F. Murphy and William C. Warrick as
Administrative Trustees, dated as of May 4, 1998.
</TABLE>
--------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vii-
<PAGE>
INDENTURE, dated as of May 4, 1998, between Sun Healthcare Group,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 101 Sun
Avenue, N.E., Albuquerque, New Mexico 87109, and The Bank of New York, as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Sun Financing I, a Delaware business trust (the "Trust"),
formed under the Amended and Restated Declaration of Trust among the Company, as
trust sponsor, The Bank of New York, as property trustee (the "Property
Trustee"), The Bank of New York (Delaware), as Delaware trustee (the "Delaware
Trustee"), and Robert D. Woltil, Robert F. Murphy and William C. Warrick, as
administrative trustees (the "Administrative Trustees"), dated as of May 4, 1998
(the "Declaration"), pursuant to the Purchase Agreement (the "Purchase
Agreement") dated April 28, 1998, among the Company and the initial purchasers
named therein, will issue and sell up to 13,800,000 of its 7% Convertible Trust
Issued Preferred Securities (the "Convertible Preferred Securities") with a
liquidation amount of $25 per Preferred Security, having an aggregate
liquidation amount with respect to the assets of the Trust of 345,000,000;
WHEREAS, the trustees of the Trust, on behalf of the Trust, will
execute and deliver to the Company 7% Convertible Common Securities (the
"Common Securities") of the Trust, registered in the name of the Company, in an
aggregate amount equal to three percent of the capitalization of the Trust,
equivalent to 426,805.25 Common Securities, with a liquidation amount of $25 per
Common Security, having an aggregate liquidation amount with respect to the
assets of the Trust of $10,670,131.25) (the "Common Securities");
WHEREAS, the Trust will use the proceeds from the sale of the
Convertible Preferred Securities and the Common Securities to purchase from the
Company 7% Convertible Junior Subordinated Debentures Due 2028 (the "Convertible
Debentures") of the Company in an aggregate principal amount of $355,670,131.25;
WHEREAS, the Company is guaranteeing the payment of distributions on
the Convertible Preferred Securities, and payment of the Redemption Price and
payments on liquidation with respect to the Convertible Preferred Securities, to
the extent provided in the Preferred Securities Guarantee Agreement (the
"Guarantee") dated May 4, 1998 between the Company and The Bank of New York, as
guarantee trustee, for the benefit of the holders of the Convertible Preferred
Securities from time to time;
<PAGE>
WHEREAS, the Company has duly authorized the creation of the
Convertible Debentures of the tenor and amount herein set forth and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture;
WHEREAS, so long as the Trust is a Holder of Convertible Debentures,
and any Convertible Preferred Securities are outstanding, the Trust Agreement
provides that the holders of Convertible Preferred Securities may cause the
Conversion Agent to (a) exchange such Convertible Preferred Securities for
Convertible Debentures held by the Trust and (b) immediately convert such
Convertible Debentures into Common Stock of the Company; and
WHEREAS, all things necessary to make the Convertible Debentures, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Convertible Debentures by the Holders thereof, it is mutually agreed, for the
equal and proportionate benefit of all Holders of the Convertible Debentures, as
follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
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(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"ACT", when used with respect to any Holder, has the meaning specified
in Section 104.
"ADDITIONAL INTEREST" has the meaning specified in Section 301.
"ADDITIONAL PAYMENTS" means Compounded Interest, Liquidated Damages,
if any, and Additional Interest, if any.
"ADMINISTRATIVE TRUSTEES" has the meaning specified in the Recitals of
this instrument.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"AGENT" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"APPLICABLE PRICE" means (i) in the case of a Non-Stock Fundamental
Change in which the holders of Sun Common Stock receive only cash, the amount of
cash received by the holder of one share of Sun Common Stock and (ii) in the
event of any other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the Closing Prices for the Sun Common Stock during the
ten trading days prior to the record date for the determination of the holders
of Sun Common Stock entitled to receive such securities, cash, or other property
in connection with such Non-Stock Fundamental Change or Common Stock Fundamental
Change or, if there is no such record date, the date upon which the holders of
the Sun Common Stock shall have the right to receive such securities, cash, or
other property (such record date or distribution date being hereinafter referred
to as the "Entitlement Date"), in each case as adjusted in good faith by the
Company to appropriately reflect any of the events referred to in Section 1303.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or any duly authorized committee of that board.
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"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means any day other than a day on which banking
institutions in The City of New York or in Wilmington, Delaware are authorized
or required by law to close.
"CLOSING PRICE" has the meaning specified in Section 1307.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"COMMON SECURITIES" has the meaning specified in the recitals to this
Instrument.
"COMMON SECURITIES GUARANTEE" means any guarantee that the Company may
enter into that operate directly or indirectly for the benefit of holders of
Common Securities of the Trust.
"COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Sun Common
Stock consists of common stock that for each of the ten consecutive trading days
prior to the Entitlement Date has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the Nasdaq National Market; provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding Convertible Preferred Securities continue to exist as
outstanding Convertible Preferred Securities or (ii) not later than the
occurrence of such Fundamental Change, the outstanding Convertible Preferred
Securities are converted into or exchanged for shares of convertible preferred
stock or debentures of an entity succeeding to the business of the Company or a
subsidiary thereof, which convertible preferred stock (or debentures, as the
case may be) has powers, preferences, and relative, participating, optional, or
other rights, and qualifications, limitations, and restrictions, substantially
similar to those of the Convertible Preferred Securities.
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"COMPANY" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, its Chief Financial Officer, or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"COMPOUNDED INTEREST" has the meaning specified in Section 312.
"CONVERSION AGENT" means the Person appointed to act on behalf of the
holders of Convertible Preferred Securities in effecting the conversion of
Convertible Preferred Securities as and in the manner set forth in the Trust
Agreement and Section 1302 hereof.
"CONVERSION DATE" has the meaning specified in Section 1302.
"CONVERSION PRICE" has the meaning specified in Section 1301.
"CONVERTIBLE DEBENTURES" has the meaning specified in the Recitals to
this instrument.
"CONVERTIBLE PREFERRED SECURITIES" has the meaning specified in the
Recitals to this instrument.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee in
New York, New York, at which at any particular time its corporate trust business
shall be administered and which at the date of this Indenture is 101 Barclay
Street, 21 West, New York, New York 10286, Attention: Corporate Trust Trustee
Administration.
"DECLARATION" has the meaning specified in the Recitals of this
instrument.
"DEFEASANCE TRUST" means a trust related to defeasance of
indebtedness.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DELAWARE TRUSTEE" has the meaning given it in the Recitals of this
instrument.
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"DEPOSITARY" means, with respect to any Convertible Debentures issued
in the form of one or more Global Security, a clearing agency registered under
the Exchange Act that is dedicated to act as Depositary for the Convertible
Debentures, and will initially be the Depository Trust Company.
"DESIGNATED SENIOR INDEBTEDNESS" has the meaning specified in Section
1202.
"DIRECT ACTION" means a proceeding directly instituted by a holder of
Convertible Preferred Securities for enforcement of payment to such holder of
the principal of or interest on the Convertible Debentures having a principal
amount equal to the aggregate liquidation amount of the Convertible Preferred
Securities of such holder on or after the respective due date specified in the
Convertible Debentures, if an Event of Default under the Trust Agreement has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable (or in the case of redemption,
on the redemption date.)
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration and the Convertible Debentures held by the Property Trustee are
to be distributed to the holders of Trust Securities issued by the Trust PRO
RATA in accordance with the Declaration.
"DISSOLUTION TAX OPINION" has the meaning specified in the
Declaration.
"EVENT OF DEFAULT" has the meaning specified in Section 501.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
"EXTENSION PERIOD" has the meaning specified in Section 312.
"FUNDAMENTAL CHANGE" means the occurrence of any Transaction or event
in connection with a plan pursuant to which all or substantially all of the Sun
Common Stock shall be exchanged for, converted into, acquired for, or constitute
solely the right to receive securities, cash, or other property (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization, or otherwise), provided, that,
in the case of a plan involving more than one such Transaction or event, for
purposes of adjustment of the conversion price, such Fundamental Change shall be
deemed
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to have occurred when substantially all of the Sun Common Stock shall be
exchanged for, converted into, or acquired for or constitute solely the right
to receive securities, cash, or other property, but the adjustment shall be
based upon the consideration that a holder of the Sun Common Stock received
in such Transaction or event as a result of which more than 50% of the Sun
Common Stock shall have been exchanged for, converted into, or acquired for
or constitute solely the right to receive securities, cash, or other
property. The term "Non-Stock Fundamental Change" means any Fundamental
Change other than a Common Stock Fundamental Change.
"GLOBAL SECURITY" has the meaning specified in Section 314.
"GUARANTEE" has the meaning specified in the Recitals to this
instrument.
"HOLDER" means a Person in whose name a Convertible Debenture is
registered in the Security Register.
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"INITIAL PURCHASERS" means Bear, Stearns & Co. Inc., Donaldson, Lufkin
& Jenrette Securities Corporation, J.P. Morgan Securities Inc., NationsBank
Montgomery Securities LLC and Schroder & Co. Inc., as initial purchasers under
the Purchase Agreement.
"INTEREST PAYMENT DATE" has the meaning specified in Section 301.
"INVESTMENT COMPANY EVENT" has the meaning specified in Annex I to the
Declaration.
"LIQUIDATED DAMAGES" has the meaning specified on the reverse side of
the form of debenture set forth in Exhibit A to this agreement
"MATURITY", when used with respect to any Convertible Debenture, means
the date on which the principal of such Convertible Debenture becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
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"MINISTERIAL ACTION" has the meaning specified in Section 1102.
"90-DAY PERIOD" has the meaning specified in Section 1102.
"NO RECOGNITION OPINION" has the meaning specified in Annex I to
the Declaration.
"NON BOOK-ENTRY PREFERRED SECURITIES" has the meaning specified in
section 314.
"NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other
than a Common Stock Fundamental Change.
"NOTICE OF CONVERSION" means the notice to be given by a holder of
Convertible Preferred Securities to the Conversion Agent directing the
Conversion Agent to exchange such Convertible Preferred Securities for
Convertible Debentures and to convert such Convertible Debentures into Sun
Common Stock on behalf of such holder.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the Chief Executive Officer,
the President, Chief Financial Officer or a Vice President, and by the
Treasurer, the Controller, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 1004
shall be the principal executive, financial or accounting officer of the
Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company.
"OUTSTANDING", when used with respect to Convertible Debentures,
means, as of the date of determination, all Convertible Debentures
theretofore authenticated and delivered under this Indenture, EXCEPT: (i)
Convertible Debentures theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation; (ii) Convertible Debentures for whose payment
or redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Convertible Debentures; PROVIDED,
that if such Convertible Debentures are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and (iii) Convertible
Debentures that have been paid pursuant to Section 307, converted into Sun
Common Stock pursuant to
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Section 1301, or in exchange for or in lieu of which other Convertible
Debentures have been authenticated and delivered pursuant to this Indenture,
other than any such Convertible Debentures in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such
Convertible Debentures are held by a bona fide purchaser in whose hands such
Convertible Debentures are valid obligations of the Company, PROVIDED,
HOWEVER, that in determining whether the Holders of the requisite principal
amount of the Outstanding Convertible Debentures have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Convertible Debentures owned by the Company or any other obligor upon the
Convertible Debentures or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only Convertible Debentures which the Trustee knows to be so owned shall be
so disregarded. Convertible Debentures so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Convertible Debentures and that the pledgee is not the Company or any
other obligor upon the Convertible Debentures or any Affiliate of the Company
or of such other obligor.
"PAYING AGENT" means any Person authorized by the Company to pay
the principal of or interest on any Convertible Debentures on behalf of the
Company.
"PERSON" means any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other
entity of whatever nature.
"PREDECESSOR SECURITY" of any particular Convertible Debenture
means every previous Convertible Debenture evidencing all or a portion of the
same debt as that evidenced by such particular Convertible Debenture; and,
for the purposes of this definition, any Convertible Debenture authenticated
and delivered under Section 306 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Convertible Debenture shall be deemed to evidence
the same debt as the mutilated, destroyed, lost or stolen Convertible
Debenture.
"PROPERTY TRUSTEE" has the meaning specified in the Recitals of
this instrument.
"PURCHASE AGREEMENT" has the meaning specified in the Recitals to
this instrument.
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"PURCHASED SHARES" has the meaning specified in Section 1303(e).
"PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive
trading days prior to and including the Entitlement Date, as adjusted in good
faith by the Company to appropriately reflect any of the events referred to
in Section 1303.
"REDEMPTION DATE", when used with respect to any Convertible
Debenture to be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"REDEMPTION PRICE", when used with respect to any Convertible
Debenture to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"REDEMPTION TAX OPINION" has the meaning set forth in Annex I to
the Declaration.
"REFERENCE DATE" has the meaning specified in Section 1303(c).
"REFERENCE MARKET PRICE" shall initially mean $11.00 (which is an
amount equal to 66 2/3% of the reported last sales price for Sun Common Stock
on the New York Stock Exchange Consolidated Transactions Tape on April 28,
1998) and in the event of any adjustment of the conversion price other than
as a result of a Non-Stock Fundamental Change, the Reference Market Price
shall also be adjusted so that the ratio of the Reference Market Price to the
conversion price after giving effect to any such adjustment shall always be
the same as the ratio of the initial Reference Market Price to the initial
conversion price of the Convertible Preferred Securities.
"REGULAR RECORD DATE" has the meaning specified in Section 301.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any
other officer in the Corporate Trust Department of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.
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"RESTRICTED CONVERTIBLE PREFERRED SECURITIES" means all Convertible
Preferred Securities required to bear any restricted securities legend
pursuant to the Declaration.
"RESTRICTED SECURITIES" means all the Convertible Debentures
required pursuant to Section 202 to bear the Restricted Securities Legend.
"RESTRICTED SECURITIES LEGEND" has the meaning specified in Section
202.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 305.
"SENIOR CREDIT FACILITY" means that certain Credit Agreement, dated
as of October 8, 1997 as amended by the First Amendment thereto dated
November 12, 1997 and the Second Amendment thereto dated March 27, 1998, by
and among the Company and NationsBank of Texas, N.A. and the other banks that
are parties thereto, providing for availability of up to $1.2 billion of
loans to the Company in the following components: (a) a revolving credit
facility of up to $500.0 million and (b) three term loans in the amounts of
$200.0 million, $250.0 million and $250.0 million, respectively, including
any related notes, collateral documents, instruments and agreements executed
in connection therewith, and in each case as amended, increased, modified,
extended, renewed, refunded, replaced or refinanced, in whole or in part,
from time to time.
"SENIOR INDEBTEDNESS" means in respect of the Company: (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor,
including, without limitation, in the case of Sun, all indebtedness, and all
obligations of Sun to pay fees and other amounts, under the Senior Credit
Facility or under the indentures with respect to the Company's outstanding
9 1/2% Senior Subordinated Notes due 2007 (the "2007 Notes") and the Company's
9 3/8% Senior Subordinated Notes due 2008, and any refinancing of the Senior
Credit Facility in the bank credit market (including institutional
participants therein), including interest accruing on or after a bankruptcy
or other similar event, whether or not an allowed claim therein, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
such obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of
other Persons for the payment of which such obligor is responsible or
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liable as obligor, guarantor or otherwise, and (vi) all obligations of the
type referred to in clauses (i) through (v) above of other Persons secured by
any lien on any property or asset of such obligor (whether or not such
obligation is assumed by such obligor), except for (1) any such indebtedness
that is by its terms subordinated to or PARI PASSU with the Convertible
Debentures and (2) any indebtedness between or among such obligor or its
affiliates, including all other debt securities and guarantees in respect of
those debt securities issued to any other trust, or a trustee of such trust,
partnership, or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in
connection with the issuance by such Financing Entity of Convertible
Preferred Securities or other securities which rank PARI PASSU with, or
junior to, the Convertible Preferred Securities, unless otherwise provided in
the terms of such debt securities. Such Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness, except as otherwise provided in the exception
clauses above.
"SPECIAL EVENT" has the meaning specified in Annex I to the
Declaration.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"STATED MATURITY", when used with respect to any Convertible
Debenture or any installment of interest thereon, means the date specified in
such Convertible Debenture as the fixed date on which the principal, together
with any accrued and unpaid interest (including Compounded Interest), of such
Convertible Debenture or such installment of interest is due and payable.
"SUBSIDIARY" of any Person means (i) a corporation more than 50% of
the outstanding Voting Stock of which is owned, directly or indirectly, by
such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof or (ii) any other Person (other
than a corporation) in which such Person, or one or more other Subsidiaries
of such Person or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has at least a majority ownership and power to direct
the policies, management and affairs thereof.
"SUN COMMON STOCK" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up
of the Company and which is not subject to redemption by the Company.
However, subject to the provisions of Article
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Thirteen, shares issuable on conversion of Convertible Debentures shall
include only shares of the class designated as Sun Common Stock of the
Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which
have no preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which are not subject to redemption by the Company; PROVIDED,
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable on conversion shall be
substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"TAX EVENT" has the meaning specified in Annex I to the Declaration.
"TRADING DAY" has the meaning specified in Section 1307.
"TRANSACTION" has the meaning specified in Section 1304.
"TRUST" has the meaning specified in the Recitals to this
instrument.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended from time to time, and the rules and regulations promulgated
thereunder, or any successor legislation.
"TRUST SECURITIES" means Common Securities and Convertible
Preferred Securities.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"VICE PRESIDENT," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"VOTING STOCK" of any Person means capital stock of such Person
which ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of Convertible Debentures has such voting power by
reason of any contingency.
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SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act or reasonably requested by the Trustee in
connection with such application or request. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be
given by an officer of the Company, or an Opinion of Counsel, if to be given
by counsel, and shall comply with the applicable requirements of the Trust
Indenture Act and any other applicable requirement set forth in this
Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel,
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unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous. Any
such certificate or opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect
to such factual matters is in the possession of the Company, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an
Agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such Agent
shall be sufficient for any purpose of this Indenture and (subject to Section
601) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee or the
Company, as the case may be, deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders of Outstanding
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Convertible Debentures entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote
on any action, authorized or permitted to be given or taken by Holders. If
not set by the Company prior to the first solicitation of a Holder made by
any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders required
to be provided pursuant to Section 701) prior to such first solicitation or
vote, as the case may be. With regard to any record date, only the Holders
on such date (or their duly designated proxies) shall be entitled to give or
take, or vote on, the relevant action.
(d) The ownership of Convertible Debentures shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Convertible Debenture shall
bind every future Holder of the same Convertible Debenture and the Holder of
every Convertible Debenture issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Convertible
Debenture.
Without limiting the foregoing, a Holder entitled hereunder to give or take
any such action with regard to any particular Convertible Debenture may do so
with regard to all or any part of the principal amount of such Convertible
Debenture or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of such
principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust & Agency Department, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the
Company addressed to it at the address of its principal
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office specified in the first paragraph of this instrument (Attention: Chief
Financial Officer) or at any other address previously furnished in writing to
the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at such Holder's address as it appears in the
Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice.
In any case where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Any notice when mailed to a Holder in the aforesaid manner shall be
conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall
be the equivalent of such notice. Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or to be excluded,
as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
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SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Convertible
Debentures shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Convertible Debentures, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness, the holders of
Convertible Preferred Securities (to the extent provided herein) and the
Holders of Convertible Debentures, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE CONVERTIBLE DEBENTURES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Convertible Debenture or the last date on which a
Holder has the right to convert his Convertible Debentures shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or
of the Convertible Debentures) payment of interest or principal or conversion
of the Convertible Debentures need not be made on such date, but may be made
on the next succeeding Business Day (except that, if such Business Day is in
the next succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the immediately
preceding Business Day) with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity or on
such last day for conversion, PROVIDED, that no interest shall accrue for
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the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be.
ARTICLE II
Convertible Debenture Forms
SECTION 201. FORMS GENERALLY.
The Convertible Debentures and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is
hereby incorporated in and expressly made a part of this Indenture. The
Convertible Debentures may have letters, numbers, notations or other marks of
identification or designation and such legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Convertible Debenture
shall be dated the date of its authentication. The terms and provisions of
the Convertible Debentures set forth in Exhibit A are part of the terms of
this Indenture and to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The definitive Convertible Debentures shall be typewritten or
printed, lithographed or engraved or produced by any combination of these
methods on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Convertible
Debentures may be listed, all as determined by the officers executing such
Convertible Debentures, as evidenced by their execution thereof.
SECTION 202. INITIAL ISSUANCE TO PROPERTY TRUSTEE.
The Convertible Debentures initially issued to the Property Trustee
of the Trust shall be in the form of one or more individual certificates in
definitive, fully registered form without coupons and shall bear the
following legend (the "Restricted Securities Legend") unless the Company
determines otherwise in accordance with applicable law.
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN
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MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
THEREOF UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE)
(THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO SUN HEALTHCARE GROUP,
INC., (THE "COMPANY") (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
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ARTICLE III
The Convertible Debentures
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Convertible Debentures that may
be authenticated and delivered under this Indenture is limited to
$355,670,131.25, except for Convertible Debentures authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Convertible Debentures pursuant to Section 304, 305, 306, 906, 1109
or 1301.
The Convertible Debentures shall be known and designated as the "7%
Convertible Junior Subordinated Debentures Due 2028" of the Company. Their
Stated Maturity shall be May 1, 2028, and they shall bear interest at the
rate of 7% per annum, from May 4, 1998 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the
case may be, payable quarterly (subject to deferral as set forth herein), in
arrears, on February 1, May 1, August 1 and November 1 (each an "Interest
Payment Date") of each year, commencing August 1, 1998, until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Convertible Debenture is registered at 5:00 p.m.
(New York City time) on the regular record date for such interest
installment, which shall be the close of business on the Business Day next
preceding such interest payment date (the "Regular Record Date"); provided,
however, in the event the Convertible Debentures are held by any entity other
than the Trust, the Company may set other record dates. Interest will
compound quarterly and will accrue at the rate of 7% per annum on any
interest installment in arrears for more than one quarter or during an
extension of an interest payment period as set forth in Section 312 hereof.
The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed
on the basis of the actual number of days elapsed per 90-day quarter. In the
event that any date on which interest is payable on the Convertible
Debentures is not a Business Day, then payment of interest payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
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If at any time while the Property Trustee is the Holder of any
Convertible Debentures, the Trust or the Property Trustee is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, then, in any such case, the Company will pay as additional
interest ("Additional Interest") on the Convertible Debentures held by the
Property Trustee, such amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying any
such taxes, duties, assessments or other governmental charges will be not
less than the amounts the Trust and the Property Trustee would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
The principal of and interest on the Convertible Debentures shall
be payable at the office or agency of the Company in the United States
maintained for such purpose and at any other office or agency maintained by
the Company for such purpose in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; PROVIDED, HOWEVER, that unless the Convertible Debentures are
held by the Trust or any successor permissible under Section 612 of this
Indenture, at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.
The Convertible Debentures shall be redeemable as provided in
Article Eleven hereof.
The Convertible Debentures shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Twelve hereof.
The Convertible Debentures shall be convertible as provided in
Article Thirteen hereof.
SECTION 302. DENOMINATIONS.
The Convertible Debentures shall be issuable only in registered
form without coupons.
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SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Convertible Debentures shall be executed on behalf of the
Company by its Chairman of the Board, its Vice Chairman of the Board, its
Chief Executive Officer, its President, its Chief Financial Officer, or one
of its Vice Presidents, and if the Company so chooses, under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Convertible
Debentures may be manual or facsimile.
Convertible Debentures bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Convertible Debentures or did not hold such offices at the date of such
Convertible Debentures.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Convertible Debentures executed by
the Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Convertible Debentures; and the
Trustee in accordance with such Company Order shall authenticate and make
available for delivery such Convertible Debentures as in this Indenture
provided and not otherwise.
The Convertible Debentures shall be dated the date of
authentication.
No Convertible Debenture shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears
on such Convertible Debenture a certificate of authentication substantially
in the form provided for herein executed by the Trustee by manual signature,
and such certificate upon any Convertible Debenture shall be conclusive
evidence, and the only evidence, that such Convertible Debenture has been
duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY CONVERTIBLE DEBENTURES.
Pending the preparation of definitive Convertible Debentures, the
Company may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Convertible Debentures which are typewritten, printed,
lithographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Convertible Debentures in lieu
of which they are issued and with such appropriate insertions, omissions,
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substitutions and other variations as the officers executing such Convertible
Debentures may determine, as evidenced by their execution of such Convertible
Debentures.
If temporary Convertible Debentures are issued, the Company will
cause definitive Convertible Debentures to be prepared without unreasonable
delay. After the preparation of definitive Convertible Debentures, the
temporary Convertible Debentures shall be exchangeable for definitive
Convertible Debentures upon surrender of the temporary Convertible Debentures
at any office or agency of the Company designated pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Convertible Debentures the Company shall execute and the
Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Convertible Debentures of
authorized denominations. Until so exchanged the temporary Convertible
Debentures shall in all respects be entitled to the same benefits under this
Indenture as definitive Convertible Debentures.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Convertible Debentures and of transfers of
Convertible Debentures. The Trustee is hereby appointed "Security Registrar"
for the purpose of registering Convertible Debentures and transfers of
Convertible Debentures as herein provided.
Upon surrender for registration of transfer of any Convertible
Debenture at an office or agency of the Company designated pursuant to
Section 1002 for such purpose, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Convertible Debentures of any authorized
denominations and of a like aggregate principal amount.
At the option of the Holder, Convertible Debentures may be
exchanged for other Convertible Debentures of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Convertible
Debentures to be exchanged at such office or agency. Whenever any
Convertible Debentures are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and make available for delivery,
the Convertible Debentures which the Holder making the exchange is entitled
to receive.
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All Convertible Debentures issued upon any registration of transfer
or exchange of Convertible Debentures shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Convertible Debentures surrendered upon such
registration of transfer or exchange.
Every Convertible Debenture presented or surrendered for
registration of transfer or for exchange shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar
duly executed, by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Convertible Debentures, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Convertible Debentures, other than exchanges pursuant to Section 304, 906,
1109 or 1301 not involving any transfer.
The Company shall not be required (i) in the case of a partial
redemption of the Securities, to issue, register the transfer of or exchange
any Convertible Debenture during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Convertible Debenture selected for redemption under the Section 1105 and
ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Convertible Debenture so selected
for redemption in whole or in part, except the unredeemed portion of any
Convertible Debenture being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN CONVERTIBLE DEBENTURES.
If any mutilated Convertible Debenture is surrendered to the
Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Convertible Debenture of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Convertible Debenture and (ii) such Convertible Debenture or indemnity as may
be required by them to save each of them and any Agent of either of them
harmless, then, in the absence of notice to the Company or the Trustee that
such Convertible Debenture has been acquired by a bona fide purchaser, the
Company shall execute and the Trustee shall authenticate and deliver, in lieu
of any such
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destroyed, lost or stolen Convertible Debenture, a new Convertible Debenture
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Convertible
Debenture has become or is about to become due and payable, the Company in
its discretion may, instead of issuing a new Convertible Debenture, pay such
Convertible Debenture.
Upon the issuance of any new Convertible Debenture under this
Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Convertible Debenture issued pursuant to this Section in
lieu of any destroyed, lost or stolen Convertible Debenture shall constitute
an original additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Convertible Debenture shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Convertible
Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Convertible
Debentures.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Convertible Debenture which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be
paid to the Person in whose name that Convertible Debenture (or one or more
Predecessor Securities) is registered at 5:00 p.m. (New York City time) on
the Regular Record Date.
Any interest on any Convertible Debenture which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Convertible Debentures (or their
respective Predecessor Securities) are registered at 5:00 p.m. (New York City
time) on a Special Record Date for the
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payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Convertible Debenture and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
(a) provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Convertible Debentures (or their respective Predecessor Securities) are
registered at 5:00 p.m. (New York City time) on such Special Record Date and
shall no longer be payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Convertible Debentures may be listed, and, if so
listed, upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause (B), such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section 307, each
Convertible Debenture delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Convertible Debenture
shall carry the rights to interest accrued and unpaid, and to accrue
(including in each such case Additional Payments, if any), which were carried
by such other Convertible Debenture.
In the case of any Convertible Debenture which is converted after
any Regular Record Date and on or prior to the next succeeding Interest
Payment Date (other than any Convertible Debenture whose Maturity is prior to
such Interest Payment Date), interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
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paid or duly provided for) shall be paid to the Person in whose name that
Convertible Debenture (or one or more Predecessor Securities) is registered
at 5:00 p.m. (New York City time) on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the
case of any Convertible Debenture that is converted prior to any Regular
Record Date, interest whose Stated Maturity is after the date of conversion
of such Convertible Debenture shall not be payable, and the Company shall not
make nor be required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest (including Additional Payments, if
any) on the Convertible Debentures being converted, which shall be deemed to
be paid in full. Subject to any right of the Holder of such Convertible
Debenture or any Predecessor Security to receive interest as provided in this
paragraph and the second paragraph of Clause (a) of Section 1302, the
Company's delivery upon conversion of the fixed number of shares of Sun
Common Stock into which the Convertible Debentures are convertible (together
with the cash payment, if any, in lieu of fractional shares) shall be deemed
to satisfy the Company's obligation to pay the principal amount at Maturity
of the portion of Convertible Debentures so converted and any unpaid interest
(including Additional Payments, if any) accrued on such Convertible
Debentures at the time of such conversion. If any Convertible Debenture
called for redemption is converted, any money deposited with the Trustee or
with any Paying Agent or so segregated and held in trust for the redemption
of such Convertible Debenture shall (subject to any right of the Holder of
such Convertible Debenture or any Predecessor Security to receive interest as
provided in this paragraph) be paid to the Company upon Company Request or,
if then held by the Company, shall be discharged from such trust.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Convertible Debenture for
registration of transfer, the Company, the Trustee and any Agent of the
Company or the Trustee may treat the Person in whose name such Convertible
Debenture is registered as the owner of such Convertible Debenture for the
purpose of receiving payment of principal of and (subject to Section 307)
interest (including Additional Payments, if any) on such Convertible
Debenture and for all other purposes whatsoever, whether or not such
Convertible Debenture be overdue, and neither the Company, the Trustee nor
any Agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. CANCELLATION.
All Convertible Debentures surrendered for payment, redemption,
registration of transfer or exchange or conversion shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company
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may at any time deliver to the Trustee for cancellation any Convertible
Debentures previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Convertible Debentures so
delivered shall be promptly cancelled by the Trustee. No Convertible
Debentures shall be authenticated in lieu of or in exchange for any
Convertible Debentures cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Convertible Debentures
held by the Trustee shall be disposed of as directed by a Company Order;
PROVIDED, HOWEVER, that the Trustee shall not be required to destroy the
certificates representing such cancelled Convertible Debentures.
SECTION 310. RIGHT OF SET OFF.
Notwithstanding anything to the contrary in this Indenture, the
Company shall have the right to set off any payment it is otherwise required
to make hereunder to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
SECTION 311. CUSIP NUMBERS.
The Company in issuing the Convertible Debentures may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; PROVIDED, that
any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Convertible Debentures
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Convertible
Debentures, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 312. OPTION TO EXTEND INTEREST PAYMENT PERIOD.
(a) So long as no Event of Default has occurred and is continuing,
the Company shall have the right at any time during the term of the
Convertible Debentures to defer interest payments (including Additional
Payments) from time to time by extending the interest payment period for
successive periods (each, an "Extension Period") not exceeding 20 consecutive
quarters for each such period; PROVIDED that no Extension Period may extend
beyond the maturity date of the Convertible Debentures. At the end of each
Extension Period, the Company shall pay all interest then accrued and unpaid
(including Additional Interest and Liquidated Damages) together with interest
thereon compounded quarterly at the rate specified for the Convertible
Debentures to the extent permitted by applicable law ("Compounded Interest");
PROVIDED that during any Extension Period, the Company shall (i)
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not declare or pay dividends on, or make a distribution with respect to, or
redeem or purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than (A) purchases or acquisitions of shares
of Sun Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Sun Common Stock, (B) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged (or make any guarantee payments with respect to the foregoing),
(ii) not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued
by the Company that rank PARI PASSU with or junior to the Convertible
Debentures (except by conversion into or exchange for shares of its capital
stock) and (iii) not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee). Prior to the termination
of any such Extension Period, the Company may further extend such Extension
Period; PROVIDED that such Extension Period, together with all such previous
and further extensions thereof, may not exceed 20 consecutive quarters or
extend beyond the maturity date of the Convertible Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. No interest during an Extension Period, except at the end
thereof, shall be due and payable.
(b) If the Property Trustee is the sole Holder of the Convertible
Debentures at the time the Company selects an Extension Period, the Company
shall give written notice to the Administrative Trustees and the Property
Trustee of its selection of such Extension Period at least one Business Day
prior to the earlier of (i) the date the distributions on the Convertible
Preferred Securities are payable or (ii) if the Convertible Preferred
Securities are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Trust is required to give notice to the New
York Stock Exchange or other applicable self-regulatory organization or to
holders of the Convertible Preferred Securities of the record date or the
date such distributions are payable, but in any event not less than 10
Business Days prior to such record date. The Company shall cause the Trust
to give notice of the Company's selection of such Extension Period to the
holders of the Convertible Preferred Securities.
(c) If the Property Trustee is not the sole holder of the
Convertible Debentures at the time the Company selects an Extension Period,
the Company shall give the Holders of the Convertible Debentures and the
Trustee written notice of its selection of such
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Extension Period at least 10 Business Days prior to the earlier of (i) the
next succeeding Interest Payment Date or (ii) if the Convertible Preferred
Securities are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Company is required to give notice to the
New York Stock Exchange or other applicable self-regulatory organization or
to holders of the Convertible Debentures on the record or payment date of
such related interest payment, but in any event not less than two Business
Days prior to such record date.
(d) The quarter in which any notice is given pursuant to
paragraphs (b) and (c) hereof shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under paragraph (a)
hereof.
SECTION 313. PAYING AGENT, SECURITY REGISTRAR AND CONVERSION AGENT.
The Trustee will initially act as Paying Agent, Security Registrar
and Conversion Agent. The Company may change any Paying Agent, Security
Registrar, co-registrar or Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity. The Trustee
is entitled to the protections of Article VI in its capacity as Paying Agent,
Registrar and Conversion Agent.
SECTION 314. GLOBAL SECURITY.
(a) In connection with a Dissolution Event,
(1) the Convertible Debentures in book-entry certificated
form may be presented to the Trustee by the Property Trustee in exchange for
a global Convertible Debenture in an aggregate principal amount equal to the
aggregate principal amount of all outstanding Convertible Debentures (a
"Global Security"), to be registered in the name of the Depositary, or its
nominee, and delivered by the Trustee to the Depositary for crediting to the
accounts of its participants pursuant to the instructions of the
Administrative Trustees. The Company upon any such presentation shall
execute a Global Security in such aggregate principal amount and deliver the
same to the Trustee for authentication and delivery in accordance with this
Indenture. Payments on the Convertible Debentures issued as a Global
Security will be made to the Depositary; and
(2) if any Convertible Preferred Securities are held in non
book-entry certificated form, the Convertible Debentures in certificated form
may be presented to the Trustee by the Property Trustee and any Preferred
Security Certificate which represents Convertible Preferred Securities other
than Convertible Preferred Securities held by the
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Depositary or its nominee ("Non Book-Entry Preferred Securities") will be
deemed to represent beneficial interests in Convertible Debentures presented
to the Trustee by the Property Trustee having an aggregate principal amount
equal to the aggregate liquidation amount of the Non Book-Entry Preferred
Securities until such Preferred Security Certificates are presented to the
Security Registrar for transfer or reissuance at which time such Convertible
Preferred Security Certificates will be cancelled and a Convertible
Debenture, registered in the name of the holder of the Convertible Preferred
Security Certificate or the transferee of the holder of such Preferred
Security Certificate, as the case may be, with an aggregate principal amount
equal to the aggregate liquidation amount of the Convertible Preferred
Security Certificate cancelled, will be executed by the Company and delivered
to the Trustee for authentication and delivery in accordance with this
Indenture. On issue of such Convertible Debentures, Convertible Debentures
with an equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be deemed to have been cancelled.
(b) A Global Security may be transferred, in whole but not in
part, only to another nominee of the Depositary, or to a nominee of such
successor Depositary.
(c) If (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a depositary for such Global Security and
no successor depositary shall have been appointed, (ii) the Depositary, at
any time, ceases to be a clearing agency registered under the Exchange Act at
which time the Depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed, (iii) the
Company, in its sole discretion, determines that such Global Security shall
be so exchangeable or (iv) there shall have occurred an Event of Default with
respect to such Convertible Debentures, as the case may be, the Company will
execute, and, subject to Article Three of this Indenture, the Trustee, upon
written notice from the Company and receipt of a Company Order, will
authenticate and deliver the Convertible Debentures in definitive registered
form without coupons, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global Security in
exchange for such Global Security. In addition, upon an Event of Default or
if the Company may at any time determine that the Convertible Debentures
shall no longer be represented by a Global Security, in such event the
Company will execute, and subject to Section 305 of this Indenture, the
Trustee, upon receipt of an Officers' Certificate evidencing such
determination by the Company, will authenticate and make available for
delivery the Convertible Debentures in definitive registered form without
coupons, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such
Global Security. Upon the exchange of the Global Security for such
Convertible Debentures in definitive registered form without coupons, in
authorized denominations, the Global Security shall be cancelled
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by the Trustee. Such Convertible Debentures in definitive registered form
issued in exchange for the Global Security shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Convertible Debentures
to the Depositary for delivery to the Persons in whose names such Convertible
Debentures are so registered.
(d) Every Global Security authenticated and delivered hereunder shall
bear a legend in substantially the following form, in capital letters and
bold-face type:
THIS CONVERTIBLE DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
A DEPOSITARY OR A NOMINEE THEREOF. THIS CONVERTIBLE DEBENTURE MAY NOT
BE EXCHANGED IN WHOLE OR IN PART FOR A CONVERTIBLE DEBENTURE
REGISTERED, AND NO TRANSFER OF THIS CONVERTIBLE DEBENTURE IN WHOLE OR
IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
(e) If the Depositary is The Depository Trust Company, the Global
Security authenticated and delivered hereunder shall also bear a legend in
substantially the following form, in capital letters and bold-face type:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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(f) The Convertible Debentures may not be transferred except in
compliance with the Restricted Securities Legend unless otherwise determined
by the Company in accordance with applicable law. Upon any distribution of
the Convertible Debentures to the holders of the Convertible Preferred
Securities in accordance with the Declaration, the Company and the Trustee
shall enter into a supplemental indenture pursuant to Section 901(f) to
provide for transfer procedures and restrictions with respect to the
Convertible Debentures substantially similar to those contained in the
Declaration to the extent applicable in the circumstances existing at the
time of such distribution.
ARTICLE IV
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to
any surviving rights of conversion, registration of transfer or exchange of
Convertible Debentures herein expressly provided for), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(a) either
(i) all Convertible Debentures theretofore authenticated
and delivered (other than (A) Convertible Debentures which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 306 and (B) Convertible Debentures for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(ii) all such Convertible Debentures not theretofore
delivered to the Trustee for cancellation have become due and payable,
and the Company has deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount sufficient
to pay and discharge the entire indebtedness on such Convertible
Debentures not theretofore delivered to the Trustee for cancellation,
for principal and interest (including Additional Payments, if any) to
the date of such deposit (in the case of Convertible
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Debentures which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be, along with, if requested by the
Trustee, an accountant's (or investment or commercial bank's)
certificate stating such funds are sufficient to pay principal and
interest on the Convertible Debentures when and as due;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of
Clause (a) of this Section, the obligations of the Trustee under Section 402
and the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Convertible
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
All moneys deposited with the Trustee pursuant to Section 401 (and held by it
or any Paying Agent) for the payment of Convertible Debentures subsequently
converted shall be returned to the Company upon Company Request.
ARTICLE V
Remedies
SECTION 501. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and
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whether it shall be occasioned by the provisions of Article Twelve or be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) failure for 30 days to pay interest on the Convertible
Debentures, including any Additional Interest and Compounded Interest, in
respect thereof, when due; PROVIDED that a valid extension of an interest
payment period will not constitute a default in the payment of interest
(including Additional Interest or Compounded Interest, if any) for this
purpose;
(b) failure to pay principal of or premium, if any, on the
Convertible Debentures when due, whether at maturity, upon redemption, by
Declaration or otherwise;
(c) failure by the Company to deliver shares of Sun Common Stock
upon an election by a holder of Convertible Preferred Securities to convert
such Convertible Preferred Securities;
(d) failure to observe or perform any other covenant contained in
the Indenture for 90 days after notice to the Company by the Trustee or by
the holders of not less than 25% in aggregate outstanding principal amount of
the Convertible Debentures;
(e) entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of substantially all of the
property of the Company, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days;
(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by the Company or to the
entry of a decree or order for relief in respect of itself in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company, or the
filing by the Company of a
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petition or answer or consent seeking reorganization or relief under any
applicable federal or state law, or the consent by the Company to the filing
of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of substantially all of the property of
the Company, or the making by the Company of an assignment for the benefit of
creditors, or the admission by the Company in writing of its inability to pay
its debts generally as they become due, or the taking of corporate action by
the Company in furtherance of any such action; or
(g) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the distribution of
Convertible Debentures to holders of Convertible Preferred Securities in
liquidation of the Trust upon the redemption of all of the outstanding
Convertible Preferred Securities of the Trust or (ii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Convertible Debentures may declare the principal of all
the Convertible Debentures and any other amounts payable hereunder to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal
and all accrued interest shall become immediately due and payable.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as provided in this Article, the Holders of a
majority in aggregate principal amount of the Outstanding Convertible
Debentures, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest (including Additional Payments, if
any) on all Convertible Debentures,
(ii) the principal of any Convertible Debentures which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Convertible Debentures, and
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(iii) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(b) all Events of Default, other than the non-payment of the
principal of Convertible Debentures which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if:
(a) default is made in the payment of any interest (including
Additional Interest and Compounded Interest, if any) on any Convertible
Debenture when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of any
Convertible Debenture at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Convertible Debentures, the whole amount then due and
payable on such Convertible Debentures for principal and interest (including
Additional Interest and Compounded Interest, if any) and, to the extent that
payment thereof shall be legally enforceable, interest on any overdue
principal and on any overdue interest (including Additional Interest and
Compounded Interest, if any), at the rate borne by the Convertible
Debentures, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement
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in this Indenture or in aid of the exercise of any power granted herein, or
to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Convertible Debentures), its property or its
creditors, the Trustee shall be entitled and empowered, by intervention in
such proceeding or otherwise, to take any and all actions authorized under
the Trust Indenture Act in order to have claims of the Holders and the
Trustee allowed in any such proceeding. In particular, the Trustee shall be
authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Convertible Debentures or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CONVERTIBLE
DEBENTURES.
All rights of action and claims under this Indenture or the
Convertible Debentures may be prosecuted and enforced by the Trustee without
the possession of any of the Convertible Debentures or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Convertible Debentures in respect of which such judgment has been recovered.
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SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money
on account of principal or interest (including Additional Payments, if any),
upon presentation of the Convertible Debentures and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of all Senior Indebtedness of the
Company to the extent required by Article Twelve;
THIRD: To the payment of the amounts then due and unpaid for
principal of and interest (including Additional Payments, if any) on
the Convertible Debentures in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Convertible Debentures for principal and interest (including
Additional Payments, if any), respectively; and
FOURTH: To the payment of the remainder, if any, to the
Company.
SECTION 507. LIMITATION ON SUITS.
Subject to Section 516, no Holder of any Convertible Debenture shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) if the Trust is not the sole holder of Convertible Debentures,
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Convertible Debentures shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
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(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Convertible Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST
AND CONVERT.
Notwithstanding any other provision in this Indenture, the Holder
of any Convertible Debenture shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject to Section
307) interest (including Additional Payments, if any) on such Convertible
Debenture on the respective Stated Maturities expressed in such Convertible
Debenture (or, in the case of redemption, on the Redemption Date) and to
convert such Convertible Debenture in accordance with Article Thirteen and to
institute suit for the enforcement of any such payment and right to convert,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
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SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Convertible Debentures in the
last paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Convertible Debenture to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Convertible Debentures shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; PROVIDED, that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
Subject to Sections 502 and 902 hereof, the Holders of not less
than a majority in principal amount of the Outstanding Convertible Debentures
may on behalf of the Holders of all the Convertible Debentures waive any past
default hereunder and its consequences, except a default
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(a) in the payment of the principal of, premium, if any, or
interest (including Additional Payments, if any) on any Convertible Debenture
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee); or
(b) in respect of a covenant or provision hereof that under
Article Nine cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected; PROVIDED, HOWEVER, that if the
Convertible Debentures are held by the Trust or a trustee of the Trust, such
waiver shall not be effective until the holders of a majority in liquidation
amount of Trust Securities shall have consented to such waiver; PROVIDED,
FURTHER, that if the consent of the Holder of each outstanding Convertible
Debenture is required, such waiver shall not be effective until each holder
of the Trust Securities shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, a court may require any party litigant in such
suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent
provided in the Trust Indenture Act; PROVIDED, that neither this Section nor
the Trust Indenture Act shall be deemed to authorize any court to require
such an undertaking or to make such an assessment in any suit instituted by
the Company or the Trustee or in any suit for the enforcement of the right to
receive the principal of and interest (including Additional Payments, if any)
on any Convertible Debenture or to convert any Convertible Debenture in
accordance with Article Thirteen.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
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advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 516. ENFORCEMENT BY HOLDERS OF CONVERTIBLE PREFERRED SECURITIES.
Notwithstanding the foregoing, if an Event of Default has occurred
and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the
date such interest or principal is otherwise payable, the Company
acknowledges that, in such event, a holder of Convertible Preferred
Securities may institute a Direct Action for payment on or after the
respective due date specified in the Convertible Debentures. The Company may
not amend this Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of all the holders of Convertible
Preferred Securities. Notwithstanding any payment made to such holder of
Convertible Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of and
interest on the Convertible Debentures (including Additional Payments, if
any) held by the Trust or the Property Trustee and the Company shall be
subrogated to the rights of the holder of such Convertible Preferred
Securities with respect to payments on the Convertible Preferred Securities
to the extent of any payments made by the Company to such holder in any
Direct Action. The holders of Convertible Preferred Securities will not be
able to exercise directly any other remedy available to the Holders of the
Convertible Debentures.
ARTICLE VI
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided
by the Trust Indenture Act. Notwithstanding the foregoing, no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Indenture
or indemnity reasonably satisfactory to the Trustee against such risk or
liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 601.
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SECTION 602. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any Event of Default
hereunder as and to the extent provided by the Trust Indenture Act; PROVIDED,
HOWEVER, that in the case of any default of the character specified in
Section 501(d), no such notice to Holders shall be given until at least 30
days after the occurrence thereof. For all purposes hereof, the Trustee
shall not be deemed to have notice or knowledge of any default described in
Section 501(e), (f) or (g) unless a Responsible Officer assigned to and
working in the Corporate Trust Office has actual knowledge thereof or unless
written notice thereof is received at the Corporate Trust Office.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security
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or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to reasonable examination of the books, records and
premises of the Company, personally or by Agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any Agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without gross
negligence or wilful misconduct, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CONVERTIBLE
DEBENTURES.
The recitals contained herein and in the Convertible Debentures,
except the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Convertible Debentures. The
Trustee shall not be accountable for the use or application by the Company of
the Convertible Debentures or the proceeds thereof.
SECTION 605. MAY HOLD CONVERTIBLE DEBENTURES.
The Trustee, any Paying Agent, any Security Registrar or any other
Agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Convertible Debentures and, subject to Sections 608 and
613, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Paying Agent, Security Registrar, or such other Agent.
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SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(a) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder;
(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, fees, disbursements
and advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee and any predecessor Trustee for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(f) or Section 501(g), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency
or other similar law.
The provisions of this Section shall survive the termination of
this Indenture.
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SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of conditions and has its
Corporate Trust Office in New York, New York. If such Person publishes
reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Convertible Debentures,
delivered to the Trustee and to the Company. If an instrument of acceptance
by a successor Trustee shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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(d) If at any time:
(i) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Convertible Debenture for at least six months,
or
(ii) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request therefor by
the Company or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by Board Resolution may remove the
Trustee, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Convertible Debenture for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Convertible Debentures delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede
the successor Trustee appointed by the Company. If no successor Trustee
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a
bona fide Holder of a Convertible Debenture for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner
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provided in Section 106. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee;
PROVIDED, that on request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments required to more fully and certainly vest in
and confirm to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act
on the part of any of the parties hereto. In case any Convertible Debentures
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the
Convertible Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Convertible Debentures.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Convertible Debentures), the Trustee
shall be subject to the provisions
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of the Trust Indenture Act regarding the collection of claims against the
Company (or any such other obligor).
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a date not more than 15 days prior
to the delivery thereof to the extent such list is not already held by the
Trustee, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in
its capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Convertible
Debentures, and the corresponding rights and duties of the Trustee, shall be
as provided by the Trust Indenture Act.
(c) Every Holder of Convertible Debentures, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any Agent of either of them shall be held
accountable by reason of any disclosure of information as to names and
addresses of Holders made pursuant to the Trust Indenture Act.
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SECTION 703. REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year, commencing May 15,
1999 (unless a report is required to be transmitted before such date by the
TIA, in which case before such date so as to comply with the TIA), the
Trustee shall transmit by mail to Holders such reports concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Convertible Debentures are listed, with the Commission and
with the Company. The Company will notify the Trustee when the Convertible
Debentures are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; PROVIDED, that any
such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed
with the Commission.
Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall
not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
The Company shall also provide to the Trustee on a timely basis
such information as the Trustee requires to enable the Trustee to prepare and
file any form required to be submitted by the Company with the Internal
Revenue Service and the Holders of the Convertible Debentures relating to
original issue discount, if any, including, without limitation, Form 1099-OID
or any successor form.
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ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge with or into any
other Person or, directly or indirectly, convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis to any
Person, unless:
(a) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease, all or substantially all of the properties and assets of the Company
on a consolidated basis shall be a corporation, partnership or trust, shall
be organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the due and punctual
payment of the principal of (and premium, if any) and interest (including
Additional Payments, if any) on all the Convertible Debentures and the
performance or observance of every covenant of this Indenture on the part of
the Company to be performed or observed and shall have provided for
conversion rights in accordance with Article Thirteen;
(b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or a
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article and that all conditions precedent herein provided
for relating to such transaction have been complied with.
This Section shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor.
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SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company on a consolidated
basis in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named as
the Company herein, and thereafter the predecessor Person shall be relieved
of all obligations and covenants under this Indenture and the Convertible
Debentures.
ARTICLE IX
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Convertible Debentures; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article Thirteen; or
(d) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture; PROVIDED, that such action pursuant to this Clause (d) shall not
adversely affect in any material respect the interests of the Holders of the
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Convertible Debentures or, so long as any of the Convertible Preferred
Securities shall remain outstanding, the holders of the Convertible Preferred
Securities; or
(e) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if any, to
be placed on Convertible Debentures, and all other matters required pursuant
to Sections 305 and 314 or otherwise necessary, desirable or appropriate in
connection with the issuance of Convertible Debentures to holders of
Convertible Preferred Securities in the event of a distribution of
Convertible Debentures by the Trust if a Special Event occurs and is
continuing.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Convertible Debentures, by Act of said
Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under this
Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected
thereby,
(a) extend the Stated Maturity of the principal of, or any
installment of interest (including Additional Payments, if any) on, any
Convertible Debenture, or reduce the principal amount thereof, or reduce the
rate or extend the time for payment of interest thereon (other than pursuant
to terms hereof on the date of the first issuance of the Convertible
Debentures hereunder), or extend the Extension Period, or reduce any premium
payable upon the redemption thereof, or change the place of payment to a
location outside the United States where, or the coin or currency in which,
any Convertible Debenture or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or adversely affect the right to convert any Convertible
Debenture as provided in Article Thirteen (except as permitted by Section
901(c) and (f)), or modify the provisions of this Indenture with respect to
the subordination of the Convertible Debentures in a manner adverse to the
Holders, or
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(b) reduce the percentage in principal amount of the Outstanding
Convertible Debentures, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
modify any of the provisions of this Section or Section 513, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder
of each Outstanding Security affected thereby;
PROVIDED that if the Convertible Debentures are held by the Trust or a
trustee of the Trust, such supplemental indenture shall not be effective
until the holders of a majority in liquidation amount of Trust Securities
shall have consented to such supplemental indenture; PROVIDED, FURTHER, that
if the consent of the Holder of each Outstanding Security is required, such
supplemental indenture shall not be effective until each holder of the Trust
Securities of the Trust shall have consented to such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and only such Persons,
shall be entitled to consent to such supplemental indenture, whether or not
such Holders remain Holders after such record date; PROVIDED that unless such
consent shall have become effective by virtue of the requisite percentage
having been obtained prior to the date which is 90 days after such record
date, any such consent previously given shall automatically and without
further action by any Holder be cancelled and of no further effect.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
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SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Convertible Debentures theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby. No such
supplemental indenture shall directly or indirectly modify the provisions of
Article Twelve in any manner which might terminate or impair the rights of
the Senior Indebtedness pursuant to such subordination provisions.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN CONVERTIBLE DEBENTURES TO SUPPLEMENTAL INDENTURES.
Convertible Debentures authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Convertible Debentures so modified as to
conform, in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Convertible Debentures.
ARTICLE X
Covenants; Representations and Warranties
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of and
interest on the Convertible Debentures and Additional Payments, if any, in
accordance with the terms of the Convertible Debentures and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the United States an office or agency
where Convertible
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Debentures may be presented or surrendered for payment, where Convertible
Debentures may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the
Convertible Debentures and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its Agent to receive
all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Convertible Debentures
may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the United States for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 1003. MONEY FOR CONVERTIBLE DEBENTURE PAYMENTS TO BE HELD
IN TRUST.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of or interest on any of
the Convertible Debentures, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Convertible
Debentures, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture
Act applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Convertible Debentures)
in the making of any payment in respect of the Convertible Debentures, upon
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the written request of the Trustee, forthwith pay to the Trustee all sums
held in trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of or interest
on (including Additional Payments, if any) any Convertible Debenture and
remaining unclaimed for two years after such principal or interest has become
due and payable shall be paid to the Company on Company Request, or (if then
held by the Company) shall be discharged from such trust; and the Holder of
any such Convertible Debenture shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance
of any of the material terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
SECTION 1005. LIMITATION ON DIVIDENDS; COVENANTS AS TO THE TRUST.
(a) The Company covenants that so long as the Convertible
Debentures are outstanding, if (i) there shall have occurred and be
continuing any event that with the giving of notice or the lapse of time or
both, would constitute an Event of Default, (ii) the Company shall be in
default with respect to its payment of any obligations under the Guarantee,
or (iii) the Company has exercised its option to defer interest payments on
the Convertible Debentures by extending the interest payment period and such
period, or any extension
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thereof, shall be continuing, then the Company shall (A) not declare or pay
dividends on, or make a distribution with respect to, or redeem or purchase
or acquire, or make a liquidation payment with respect to, any of its capital
stock (other than (x) purchases or acquisitions of shares of Sun Common Stock
in connection with the satisfaction by the Company of its obligations under
any employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security requiring the Company to
purchase shares of Sun Common Stock, (y) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock or (z) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
(or make any guarantee payments with respect to the foregoing), (B) not make
any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank PARI PASSU with or junior to the Convertible Debentures
(except by conversion into or exchange for shares of its capital stock) and
(C) not make any guarantee payments with respect to the foregoing (other than
pursuant to the Guarantee).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common Securities of
the Trust; PROVIDED, HOWEVER, that any permitted successor of the Company
hereunder may succeed to the Company's ownership of such Common Securities
and (ii) that it shall use its reasonable efforts, consistent with the terms
and provisions of the Declaration, to cause the Trust (x) to remain a
statutory business trust, except in connection with the distribution of the
Convertible Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (y) to otherwise continue to be classified as a grantor
trust for United States Federal income tax purposes.
SECTION 1006. PAYMENT OF EXPENSES OF THE TRUST.
In connection with the offering, sale and issuance of the
Convertible Debentures to the Property Trustee in connection with the sale of
the Trust Securities by the Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the offering,
sale and issuance of the Convertible Debentures, including commissions,
discounts and expenses payable pursuant to the Purchase Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 607 of the Indenture;
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(b) be responsible for and pay for all debts and obligations
(other than with respect to the Trust Securities) of the Trust, pay for all
costs and expenses of the Trust (including, but not limited to, costs and
expenses relating to the organization of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions, discounts and
expenses in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying
Agent(s), registrar(s), transfer Agent(s), duplicating, travel and telephone
and other telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of Trust assets);
and
pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
SECTION 1007. REGISTRATION RIGHTS.
The holders of the Convertible Preferred Securities, the Holders of
Convertible Debentures, the holders of the Guarantee and the shares of Sun
Common Stock issuable upon conversion of the Convertible Debentures are
entitled to the benefits of the Registration Rights Agreement as of May 4,
1998 between the Company and the Initial Purchasers (the "REGISTRATION RIGHTS
AGREEMENT").
ARTICLE XI
Redemption of Convertible Debentures
SECTION 1101. OPTIONAL REDEMPTION.
(a) The Company shall have the right to redeem the Convertible
Debentures, in whole or in part, at any time or from time to time after
May 3, 2001 upon not less than 30 nor more than 60 days notice, at the optional
redemption prices (expressed as a percentage of the principal amount of
Convertible Debentures to be redeemed) shown below, plus any accrued and
unpaid interest (including Additional Payments, if any) to the Redemption
Date, if redeemed during the 12-month period beginning May 3:
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<TABLE>
<CAPTION>
Percentage of
Principal
Year Amount
---- -------------
<S> <C>
2001.................................. 104.000%
2002.................................. 103.000%
2003.................................. 102.000%
2004.................................. 101.000%
2005 and thereafter................... 100.000%
</TABLE>
If the Company has deferred interest payments, all unpaid interest must be
paid in cash prior to any notice of redemption. Any redemption pursuant to
this Section 1101 shall be made pursuant to the provisions of Sections 1103
through 1108 hereof.
(b) If a partial redemption of the Convertible Debentures would
result in the delisting of the Convertible Preferred Securities issued by the
Trust from any national securities exchange or other organization on which
the Convertible Preferred Securities are listed, the Company shall not be
permitted to effect such partial redemption and may only redeem the
Convertible Debentures in whole.
SECTION 1102. TAX EVENT OPTIONAL REDEMPTION.
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Administrative
Trustees shall have been informed by tax counsel rendering the Dissolution
Tax Opinion that a No Recognition Opinion cannot be delivered to the Trust,
then, notwithstanding Section 1101(a) but subject to Section 1101(b), the
Company shall have the right upon not less than 30 days nor more than 60 days
notice to the Holders of the Convertible Debentures to redeem the Convertible
Debentures in whole (but not in part) for cash at a redemption price equal to
100% of the principal amount of the Convertible Debentures plus accrued and
unpaid interest (including Additional Payments) if any, within 90 days
following the occurrence of such Tax Event (the "90-Day Period"); PROVIDED,
HOWEVER, that if, at the time there is available to the Company or the Trust
the opportunity to eliminate within the 90-Day Period, the Tax Event by
taking some ministerial action ("Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable measure
which, in the sole judgment of the Company, has or will cause no adverse
effect on the Company, the Trust or the Holders
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of the Trust Securities and will involve no material cost, the Company or the
Trust shall pursue such Ministerial Action or other measure in lieu of
redemption, and PROVIDED, FURTHER, that the Company shall have no right to
redeem the Convertible Debentures while the Trust is pursuing any Ministerial
Action or other similar measure pursuant to its obligations under the
Declaration.
SECTION 1103. APPLICABILITY OF ARTICLE.
Redemption of Convertible Debentures at the election of the
Company, as permitted by Sections 1101 and 1102, shall be made in accordance
with such provision and this Article.
SECTION 1104. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem Convertible Debentures
pursuant to Section 1101 or 1102 shall be evidenced by a Board Resolution.
In case of any redemption at the election of the Company, the Company shall,
at least 45 days and no more than 90 days prior to the Redemption Date fixed
by the Company, notify the Trustee in writing of such Redemption Date and of
the principal amount of Convertible Debentures to be redeemed and provide a
copy of the notice of redemption given to Holders of Convertible Debentures
to be redeemed pursuant to Section 1105.
SECTION 1105. SELECTION BY TRUSTEE OF CONVERTIBLE DEBENTURES TO BE REDEEMED.
If less than all the Convertible Debentures are to be redeemed
(unless such redemption affects only a single Convertible Debenture), the
particular Convertible Debentures to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Convertible Debentures not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 or any
integral multiple thereof) of the principal amount of the Convertible
Debentures.
The Trustee shall promptly notify the Company in writing of the
Convertible Debentures selected for redemption as aforesaid and, in case of
any Convertible Debentures selected for partial redemption as aforesaid, the
principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Convertible Debenture,
whether such Convertible Debenture is to be redeemed in whole or in part.
In the case of any such redemption in part,
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the unredeemed portion of the principal amount of the Convertible Debenture
shall be in an authorized denomination (which shall not be less than the
minimum authorized denomination) for such Convertible Debenture.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Convertible Debentures
shall relate, in the case of any Convertible Debentures redeemed or to be
redeemed only in part, to the portion of the principal amount of such
Convertible Debentures which has been or is to be redeemed.
SECTION 1106. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Convertible Debentures to be redeemed, at
such Holder's address appearing in the Security Register.
All notices of redemption shall identify the Convertible Debentures
to be redeemed (including, if relevant, CUSIP number or ISIN) and shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) that on the Redemption Date the Redemption Price will become
due and payable upon each such Convertible Debenture to be redeemed and that
interest thereon will cease to accrue on and after said date, and
(d) the place or places where such Convertible Debentures are to
be surrendered for payment of the Redemption Price.
Notice of redemption of Convertible Debentures to be redeemed at
the election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the
Company.
SECTION 1107. DEPOSIT AND PAYMENT OF REDEMPTION PRICE.
Prior to 10:30 a.m. (New York City time) on the Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount
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of money sufficient to pay the Redemption Price of, plus (except if the
Redemption Date shall be an Interest Payment Date) accrued and unpaid
interest (including Additional Payments, if any) on all the Convertible
Debentures which are to be redeemed on that date. If the Convertible
Debentures or the Convertible Preferred Securities are held by a Depository,
such redemption payment shall be made to the Holders prior to 12:00 noon (New
York City time) on the Redemption Date or such earlier time as the Company
determines.
If any Convertible Debenture called for redemption is converted,
any money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Convertible Debenture
shall (subject to any right of the Holder of such Convertible Debenture or
any Predecessor Security to receive interest as provided in the last
paragraph of Section 307) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.
SECTION 1108. CONVERTIBLE DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the
Convertible Debentures so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified, and from
and after such date (unless the Company shall default in the payment of the
Redemption Price and accrued and unpaid interest, including Additional
Payments, if any) such Convertible Debentures shall cease to bear interest.
Upon surrender of any such Convertible Debenture for redemption in accordance
with said notice, such Convertible Debenture shall be paid by the Company at
the Redemption Price, together with accrued and unpaid interest (including
Additional Payments, if any) to the Redemption Date; PROVIDED, HOWEVER, that
installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Convertible
Debentures, or one or more Predecessor Convertible Debentures, registered as
such at 5:00 p.m. (New York City time) on the relevant Record Dates according
to the terms and the provisions of Section 307.
If any Convertible Debenture called for redemption shall not be so
paid upon surrender thereof for redemption, the principal shall, until paid,
bear interest from the Redemption Date at the rate borne by the Convertible
Debenture.
SECTION 1109. CONVERTIBLE DEBENTURES REDEEMED IN PART.
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Convertible
Debenture during a period beginning at 9:00 a.m. (New York City time)
15 Business Days before any selection for
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redemption of Convertible Debentures and ending 5:00 p.m. (New York City
time) on the earliest date in which the relevant notice of redemption is
deemed to have been given to all holders of Convertible Debentures to be so
redeemed or (ii) register the transfer of or exchange any Convertible
Debentures so selected for redemption, in whole or in part, except for the
unredeemed portion of any Convertible Debentures being redeemed in part.
Any Convertible Debenture which is to be redeemed only in part
shall be surrendered at a place of payment therefor (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and make available
for delivery to the Holder of such Convertible Debenture without service
charge, a new Convertible Debenture or Convertible Debentures, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal
of the Convertible Debenture so surrendered.
SECTION 1110. NO SINKING FUND.
The Convertible Debentures are not entitled to the benefit of any
sinking fund.
SECTION 1111. MANDATORY REDEMPTION.
Upon (i) repayment at maturity or (ii) as a result of acceleration
upon the occurrence and continuation of an Event of Default, the Company
shall redeem the Outstanding Convertible Debentures in whole but not in part,
at a redemption price equal to 100% of the principal amount of such
Convertible Debentures plus any accrued and unpaid interest, including any
Additional Payments, to the date fixed for redemption. Any payment pursuant
to this section shall be made prior to 12:00 noon, New York City time, on the
date of such repayment or acceleration or at such other time on such earlier
date as the parties thereto shall agree.
SECTION 1112. EXCHANGE OF TRUST SECURITIES FOR CONVERTIBLE DEBENTURES.
At any time, the Company shall have the right to dissolve the Trust
and cause the Convertible Debentures to be distributed to the holders of the
Convertible Preferred Securities in dissolution of the Trust after
satisfaction of liabilities to creditors of the Trust in accordance with
Section 314 and as provided by applicable law.
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ARTICLE XII
Subordination of Convertible Debentures
SECTION 1201. AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each Holder of Convertible
Debentures by such Holder's acceptance thereof likewise covenants and agrees,
that all Convertible Debentures shall be issued subject to the provisions of
this Article Twelve; and each Holder of a Convertible Debenture, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to
be bound by such provisions. The payment by the Company of the principal of,
premium, if any, and interest (including Additional Payments, if any) on all
Convertible Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment
to the prior payment in full of all existing and future Senior Indebtedness,
whether outstanding at the date of this Indenture or thereafter incurred;
PROVIDED HOWEVER, that no provision of this Article Twelve shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 1202. DEFAULT ON SENIOR INDEBTEDNESS.
(a) No payment (by set-off or otherwise) shall be made by or on
behalf of the Company on account of the principal of, premium, if any, or
interest on the Convertible Debentures (including any repurchases of
Convertible Debentures), or on account of the redemption provisions of the
Convertible Debentures, for cash or property (other than Junior Convertible
Debentures or from a Defeasance Trust), (i) upon the maturity of any Senior
Indebtedness of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and the
interest on such Senior Indebtedness are first paid in full in cash or Cash
Equivalents (or such payment is duly provided for) or otherwise to the extent
holders accept satisfaction of amounts due by settlement in other than cash
or Cash Equivalents, or (ii) in the event of default in the payment of any
principal of, premium, if any, or interest on Senior Indebtedness of the
Company having an aggregate principal amount outstanding in excess of $5.0
million when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "PAYMENT DEFAULT"),
unless and until (in the case of both (i) and (ii)) such Payment Default has
been cured or waived or otherwise has ceased to exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holder of Senior Indebtedness to declare
such Senior Indebtedness to be due and payable and (ii) written notice of
such event of default given to the Company
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and the Trustee by the Representative under the Credit Agreement or the
holders of an aggregate of at least $50 million principal amount outstanding
of any other Senior Indebtedness, which Senior Indebtedness is designated by
the Company ("Designated Senior Indebtedness") or their representative
(a "PAYMENT NOTICE"), then, unless and until such event of default has been
cured or waived or otherwise has ceased to exist, no payment (by set-off or
otherwise) may be made by or on behalf of the Company which is an obligor
under such Designated Senior Indebtedness on account of the principal of,
premium, if any, or interest on the Convertible Debentures (including any
repurchases of any of the Convertible Debentures), or on account of the
redemption provisions of the Convertible Debentures, in any such case, other
than payments made with Junior Convertible Debentures or from a Defeasance
Trust. Notwithstanding the foregoing, unless the Designated Senior
Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "PAYMENT BLOCKAGE PERIOD") (and
such declaration has not been rescinded or waived), at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to
the Holders of the Convertible Debentures during the Payment Blockage Period
due to the foregoing prohibitions and to resume all other payments as and
when due on the Convertible Debentures. Any number of Payment Notices may be
given; PROVIDED that (i) not more than one Payment Notice shall be given
within a period of any 360 consecutive days, and (ii) no default that existed
upon the date of such Payment Notice or the commencement of such Payment
Blockage Period (whether or not such event of default is on the same issue of
Senior Indebtedness) shall be made the basis for the commencement of any
other Payment Blockage Period unless such other Payment Blockage Period is
commenced by a Payment Notice from the Representative under the Credit
Agreement and such event of default shall have been cured or waived for a
period of at least 90 consecutive days.
(c) Upon any distribution of assets of the Company upon any
dissolution, winding up, total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors or any marshalling of assets or liabilities, the provisions of
Section 1203 of this Indenture shall apply.
The subordination provisions hereof shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any
Senior Indebtedness is rescinded or must otherwise be returned by any holder
of such Senior Indebtedness upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, all as though such payment has not been made.
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SECTION 1203. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution of assets of the Company or upon any
dissolution, winding up, total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors or any marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company, will
first be entitled to receive payment in full in cash or Cash Equivalents (or
have such payment duly provided for to the satisfaction of such holders) or
otherwise to the extent holders accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents before the Holders are
entitled to receive any payment on account of the principal of, premium, if
any, and interest on the Convertible Debentures or any Obligation in respect
of the Convertible Debentures (other than Junior Convertible Debentures or
from a Defeasance Trust);
(b) any payment or distribution of assets of the Company of any
kind or character from any source, whether in cash, property or securities
(other than Junior Convertible Debentures or from a Defeasance Trust) to
which the Holders or the Trustee on behalf of the Holders would be entitled
(by set-off or otherwise), except for the provisions of this Article Twelve,
shall be paid by the liquidating trustee or Agent or other person making such
a payment or distribution directly to the holders of such Senior Indebtedness
or their representative to the extent necessary to make payment in full (or
have such payment duly provided for) on all such Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company (other than Junior Convertible
Debentures or from a Defeasance Trust) shall be received by the Trustee or
the Holders at a time when such payment or distribution is prohibited by the
foregoing provisions, such payment or distribution shall be held in trust for
the benefit of the holders of such Senior Indebtedness, and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders
of such Senior Indebtedness remaining unpaid or unprovided for or to their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Indebtedness
held or represented by each, for application to the payment of all such
Senior Indebtedness remaining unpaid, to the extent necessary to pay all such
Senior Indebtedness in full in cash or Cash Equivalents or otherwise to the
extent holders accept
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satisfaction of amounts due by settlement in other than cash or Cash
Equivalents after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
SECTION 1204. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness of the Company as provided herein, the Holders of
Convertible Debentures shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of
the Company applicable to the Senior Indebtedness until all amounts owing on
the Convertible Debentures shall be paid in full, and for the purpose of such
subrogation no such payments or distributions to the holders of such Senior
Indebtedness by or on behalf of the Company, or by or on behalf of the
Holders by virtue of this Article Twelve, which otherwise would have been
made to the Holders shall, as between the Company and the Holders, be deemed
to be payment by the Company or on account of such Senior Indebtedness, it
being understood that the provisions of this Article Twelve are and are
intended solely for the purpose of defining the relative rights of the
Holders, on the one hand, and the holders of such Senior Indebtedness, on the
other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Twelve shall have
been applied, pursuant to the provisions of this Article Twelve, to the
payment of amounts payable under Senior Indebtedness of the Company, then the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable
under or in respect of such Senior Indebtedness in full in cash or Cash
Equivalents.
SECTION 1205. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of Convertible Debentures by such Holder's acceptance
thereof authorizes and directs the Trustee on such Holder's behalf to take
such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Twelve and appoints the Trustee as
such Holder's attorney-in-fact for any and all such purposes.
SECTION 1206. NOTICE BY THE COMPANY.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Convertible Debentures pursuant to the
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provisions of this Article Twelve. Notwithstanding the provisions of this
Article Twelve or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment of monies to or by the Trustee in respect
of the Convertible Debentures pursuant to the provision of this Article
Twelve, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office of the Trustee
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 603 hereof, shall be entitled
in all respects to assume that no such facts exist; PROVIDED, HOWEVER, that
if the Trustee shall not have received the notice provided for in this
Section 1206 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
(including Additional Payments, if any) on any Convertible Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to
the purposes for which they were received, and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 603, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or a trustee on behalf of any such holder
or holders. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any
other facts pertinent to the right of such Person under this Article Twelve,
and, if such evidence is not furnished, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 1207. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Twelve in respect of any Senior Indebtedness
at any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any
of its rights as such holder.
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With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform or to observe only such of its covenants
and obligations as are set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Section 603, the
Trustee shall not be liable to any holder of such Senior Indebtedness if it
shall pay over or deliver to Holders of Convertible Debentures, the Company
or any other Person money or assets to which any holder of such Senior
Indebtedness shall be entitled by virtue of this Article Twelve or otherwise.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants or obligations as are
specifically set forth in this Article Twelve and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 1208. SUBORDINATION MAY NOT BE IMPAIRED.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof which any
such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of
the Convertible Debentures, without incurring responsibility to the holders
of the Convertible Debentures and without impairing or releasing the
subordination provided in this Article Twelve or the obligations hereunder of
the Holders of the Convertible Debentures to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable
in any manner for the collection of such Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.
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ARTICLE XIII
Conversion of Convertible Debentures
SECTION 1301. CONVERSION RIGHTS.
Subject to and upon compliance with the provisions of this Article,
the Convertible Debentures are convertible, at the option of the Holder, at
any time after June 28, 1998 and on or prior to 5:00 p.m. (New York City
time) on the Business Day immediately preceding the date of repayment of such
Convertible Debentures, whether at maturity or upon redemption (either at the
option of the Company or pursuant to a Tax Event), into fully paid and
nonassessable shares of Sun Common Stock of the Company at an initial
conversion rate of 1.2419 shares of Sun Common Stock for each $25 in
aggregate principal amount of Convertible Debentures (equal to a conversion
price of $20.13 per share of Sun Common Stock), subject to adjustment as
described in this Article Thirteen. A Holder of Convertible Debentures may
convert any portion of the principal amount of the Convertible Debentures
into that number of fully paid and nonassessable shares of Sun Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) obtained
by dividing the principal amount of the Convertible Debentures to be
converted by such conversion price. In case a Convertible Debenture or
portion thereof is called for redemption, such conversion right in respect of
the Convertible Debenture or portion so called shall expire at 5:00 p.m. (New
York City time) on the Business Day immediately preceding the corresponding
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
SECTION 1302. CONVERSION PROCEDURES.
(a) In order to convert all or a portion of the Convertible
Debentures, the Holder thereof shall deliver to the Conversion Agent an
irrevocable Notice of Conversion setting forth the principal amount of
Convertible Debentures to be converted, together with the name or names, if
other than the Holder, in which the shares of Sun Common Stock should be
issued upon conversion and, if such Convertible Debentures are definitive
Convertible Debentures, surrender to the Conversion Agent the Convertible
Debentures to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Convertible Preferred Securities may
exercise its right under the Declaration to convert such Convertible
Preferred Securities into Sun Common Stock by delivering to the Conversion
Agent an irrevocable Notice of Conversion setting forth the information
called for by the preceding sentence and directing the Conversion Agent (i)
to exchange such Convertible Preferred Security for a portion of the
Convertible Debentures held by the Trust
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(at an exchange rate of $25 liquidation amount of Convertible Debentures for
each Convertible Preferred Security) and (ii) to immediately convert such
Convertible Debentures, on behalf of such holder, into Sun Common Stock of
the Company pursuant to this Article Thirteen and, if such Convertible
Preferred Securities are in definitive form, surrendering such Convertible
Preferred Securities, duly endorsed or assigned to the Company or in blank.
So long as any Convertible Preferred Securities are outstanding, the Trust
shall not convert any Convertible Debentures except pursuant to a Notice of
Conversion delivered to the Conversion Agent by a holder of Convertible
Preferred Securities.
If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the subsequent Interest Payment Date, the Holder
will be entitled to receive the interest payable on the subsequent Interest
Payment Date on the portion of Convertible Debentures to be converted
notwithstanding the conversion thereof prior to such Interest Payment Date.
Except as otherwise provided in the immediately preceding sentence, in the
case of any Convertible Debenture which is converted, interest whose Stated
Maturity is after the date of conversion of such Convertible Debenture shall
not be payable, and the Company shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but unpaid
interest (including Additional Payments, if any) on the Convertible
Debentures being converted, which shall be deemed to be paid in full. If any
Convertible Debenture called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust
for the redemption of such Convertible Debenture shall (subject to any right
of the Holder of such Convertible Debenture or any Predecessor Security to
receive interest as provided in the last paragraph of Section 307 and this
paragraph) be paid to the Company upon Company Request or, if then held by
the Company, shall be discharged from such trust.
Each conversion shall be deemed to have been effected immediately
prior to 5:00 p.m. (New York City time) on the day on which the Notice of
Conversion was received (the "Conversion Date") by the Conversion Agent from
the Holder or from a holder of the Convertible Preferred Securities effecting
a conversion thereof pursuant to its conversion rights under the Declaration,
as the case may be. The Person or Persons entitled to receive the Sun Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Sun Common Stock as of the Conversion Date.
As promptly as practicable on or after the Conversion Date, the Company shall
issue and deliver at the office of the Conversion Agent, unless otherwise
directed by the Holder in the Notice of Conversion, a certificate or
certificates for the number of full shares of Sun Common Stock issuable upon
such conversion, together with the cash payment, if any, in lieu of any
fraction of any share to the Person or Persons entitled to receive the same.
The Conversion Agent shall deliver such certificate or certificates to such
Person or Persons.
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(b) Subject to any right of the Holder of such Convertible
Debenture or any Predecessor Security to receive interest as provided in the
last paragraph of Section 307 and the second paragraph of Clause (a) of
Section 1302, the Company's delivery upon conversion of the fixed number of
shares of Sun Common Stock into which the Convertible Debentures are
convertible (together with the cash payment, if any, in lieu of fractional
shares) shall be deemed to satisfy the Company's obligation to pay the
principal amount at Maturity of the portion of Convertible Debentures so
converted and any unpaid interest (including Additional Payments, if any)
accrued on such Convertible Debentures at the time of such conversion.
(c) No fractional shares of Sun Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the last reported sale price of such fractional interest on the date on which
the Convertible Debentures or Convertible Preferred Securities, as the case
may be, were duly surrendered to the Conversion Agent for conversion, or, if
such day is not a Trading Day, on the next Trading Day, and the Conversion
Agent in turn will make such payment, if any, to the Holder of the
Convertible Debentures or the holder of the Convertible Preferred Securities
so converted.
(d) In the event of the conversion of any Convertible Debenture in
part only, a new Convertible Debenture or Convertible Debentures for the
unconverted portion thereof will be issued in the name of the Holder thereof
upon the cancellation thereof in accordance with Section 305.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as Agent of the holders of
Convertible Preferred Securities (in the exchange of Convertible Preferred
Securities for Convertible Debentures) and as Agent of the Holders of
Convertible Debentures (in the conversion of Convertible Debentures into Sun
Common Stock), as the case may be, directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Convertible Debentures held by the Trust from time to time for Convertible
Preferred Securities in connection with the conversion of such Convertible
Preferred Securities in accordance with this Article Thirteen and (ii) to
convert all or a portion of the Convertible Debentures into Sun Common Stock
and thereupon to deliver such shares of Sun Common Stock in accordance with
the provisions of this Article Thirteen and to deliver to the Trust a new
Convertible Debenture or Convertible Debentures for any resulting unconverted
principal amount.
(f) Except as provided in Section 202, all shares of Sun Common
Stock delivered upon any conversion of Restricted Securities shall bear a
Restrictive Securities Legend substantially in the form of the legend
required to be set forth on such Convertible
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Debentures and shall be subject to the restrictions on transfer provided in
such legend and in Section 314 hereof. Neither the Trustee nor the
Conversion Agent shall have any responsibility for the inclusion or content
of any such Restrictive Securities Legend on such Sun Common Stock; PROVIDED,
HOWEVER, that the Trustee or the Conversion Agent shall have provided to the
Company or to the Company's transfer Agent for such Sun Common Stock, prior
to or concurrently with a request to the Company to deliver to such
Conversion Agent certificates for such Sun Common Stock, written notice that
the Convertible Debentures delivered for conversion are Restricted Securities.
SECTION 1303. CONVERSION PRICE ADJUSTMENTS.
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Convertible
Debentures are outstanding, (i) pay a dividend or make a distribution with
respect to its Sun Common Stock in shares of Sun Common Stock, (ii) subdivide
its outstanding shares of Sun Common Stock, (iii) combine its outstanding
shares of Sun Common Stock into a smaller number of shares or (iv) issue by
reclassification of its shares of Sun Common Stock any shares of capital
stock of the Company, the conversion price in effect immediately prior to
such action shall be adjusted so that the Holder of any Convertible
Debentures thereafter surrendered for conversion shall be entitled to receive
the number of shares of capital stock of the Company which he would have
owned immediately following such action had such Convertible Debentures been
converted immediately prior thereto. An adjustment made pursuant to this
Section 1303(a) shall become effective immediately after the record date in
the case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination or
reclassification (or immediately after the record date if a record date shall
have been established for such event). If, as a result of an adjustment made
pursuant to this Section 1303(a), the Holder of any Convertible Debenture
thereafter surrendered for conversion shall become entitled to receive shares
of two or more classes or series of capital stock of the Company, the Board
of Directors (whose determination shall be conclusive and shall be described
in a Board Resolution filed with the Trustee) shall determine the allocation
of the adjusted conversion price between or among shares of such classes or
series of capital stock.
(b) In case the Company shall, while any of the Convertible
Debentures are outstanding, issue rights or warrants to all holders of its
Sun Common Stock entitling them (for a period expiring within 45 days after
the record date mentioned in this Section 1303(b)) to subscribe for or
purchase shares of Sun Common Stock at a price per share less than the
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current market price per share of Sun Common Stock (as determined pursuant to
1303(f) below) on such record date, the conversion price for the Convertible
Debentures shall be adjusted so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the date of issuance of such rights or warrants by a fraction of which the
numerator shall be the number of shares of Sun Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
for subscription or purchase would purchase at such current market price, and
of which the denominator shall be the number of shares of Sun Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Sun Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. For the purposes of this subsection, the number of
shares of Sun Common Stock at any time outstanding shall not include shares
held in the treasury of the Company. The Company shall not issue any rights
or warrants in respect of shares of Sun Common Stock held in the treasury of
the Company. In case any rights or warrants referred to in this subsection
in respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the same shall have been distributed or
issued by the Company, the conversion price shall be readjusted at the time
of such expiration to the conversion price that would have been in effect if
no adjustment had been made on account of the distribution or issuance of
such expired rights or warrants. In determining whether any rights, options
or warrants entitle the holder to subscribe for or purchase Sun Common Stock
at less than the Current Market Price, and in determining the aggregate
offering price of such shares of Sun Common Stock, there shall be taken into
account any consideration received for such rights, options or warrants, the
value of such consideration, if other than cash, to be determined by the
Board of Directors. Notwithstanding this Article XIII, no adjustment will
be made pursuant to this Article if the Company makes proper provision for
each Holder of Convertible Preferred Securities who converts a Convertible
Preferred Security to receive, in addition to the Sun Common Stock issuable
upon such conversion, the kind and amount of assets (including securities) if
such Holder had been a holder of the Common Stock at the time of the
distribution of such assets or securities. Rights, options or warrants
distributed by the Company to all holders of the Sun Common Stock that
entitle the holders thereof to purchase shares of the Company's capital stock
and that, until the occurrence of an event (a "Triggering Event"), (i) are
deemed to be transferred with the Sun Common Stock, (ii) are not exercisable
and (iii) are also issued in respect of future issuances of Sun Common Stock,
shall not be deemed to be distributed until the occurrence of the Triggering
Event.
(c) Subject to the last sentence of this Section 1303(c), in case
the Company shall, by dividend or otherwise, distribute to all holders of its
Sun Common Stock evidences
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of its indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any rights or warrants referred
to in Section 1303(b) and dividends and distributions in connection with the
liquidation, dissolution or winding up of the Company and dividends and
distributions paid exclusively in cash and any dividend or distribution
referred to in Section 1303(a)), the conversion price shall be reduced so
that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the conversion
price reduction contemplated by this Section 1303(c) by a fraction of which
the numerator shall be the current market price per share (determined as
provided in Section 1303(f)) of Sun Common Stock on the date fixed for the
payment of such distribution (the "Reference Date") less the fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Sun Common Stock and the denominator shall be such
current market price per share of the Sun Common Stock, such reduction to
become effective immediately prior to the opening of business on the day
following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the conversion price shall again be
adjusted to be the conversion price which would then be in effect if such
dividend or distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 1303(c) by reference to the actual or when issued trading market for
any securities comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing the current
market price per share of Sun Common Stock (determined as provided in Section
1303(f)). For purposes of this Section 1303(c), any dividend or distribution
that includes shares of Sun Common Stock or rights or warrants to subscribe
for or purchase shares of Sun Common Stock shall be deemed instead to be (1)
a dividend or distribution of the evidences of indebtedness, shares of
capital stock, cash or assets other than such shares of Sun Common Stock or
such rights or warrants (making any conversion price reduction required by
this Section 1303(c)) immediately followed by (2) a dividend or distribution
of such shares of Sun Common Stock or such rights or warrants (making any
further conversion price reduction required by Section 1303(a) or 1303(b)),
except (A) the Reference Date of such dividend or distribution as defined in
this 1303(c) shall be substituted as (a) "the record date in the case of a
dividend or other distribution," and (b) "the record date for the
determination of stockholders entitled to receive such rights or warrants"
and (c) "the date fixed for such determination" within the meaning of
Sections 1303(a) and 1303(b) and (B) any shares of Sun Common Stock included
in such dividend or distribution shall not be deemed outstanding for purposes
of computing any adjustment of the conversion price in Section 1303(a).
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(d) In case the Company shall pay or make a dividend or other
distribution on its Sun Common Stock exclusively in cash (excluding any cash
portion of distributions referred to in Section 1303(c) or in connection with
a consolidation, merger or sale of assets of the Company as referred to in
Section 1304(c)), excluding cash dividends if such dividends (and other
distributions) together with all other such all-cash dividends and
distributions made within the preceding 12 months in respect of which no
adjustment has been made do not exceed 20% of the Company's current
capitalization (being the product of the then current market price per share
determined as provided in Section 1303(f) of Sun Common Stock times the
number of shares of Sun Common Stock then outstanding) on the Trading Day
immediately preceding the date of declaration of such dividend, the
conversion price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the effectiveness of the conversion price reduction contemplated by this
Section 1303(d) by a fraction of which the numerator shall be the current
market price per share (determined as provided in Section 1303(f)) of the Sun
Common Stock on the date fixed for the payment of such distribution less the
amount of cash so distributed and not excluded as provided applicable to one
share of Sun Common Stock and the denominator shall be such current market
price per share of the Sun Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for the payment of such distribution; PROVIDED, HOWEVER, that in the
event the portion of the cash so distributed applicable to one share of Sun
Common Stock is equal to or greater than the current market price per share
(as defined in Section 1303(f)) of the Sun Common Stock on the record date
mentioned above, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder of Convertible Debentures shall have the
right to receive upon conversion the amount of cash such Holder would have
received had such Holder converted each Convertible Debenture immediately
prior to the record date for the distribution of the cash. In the event that
such dividend or distribution is not so paid or made, the conversion price
shall again be adjusted to be the conversion price which would then be in
effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Sun Common Stock shall expire and such tender or exchange
offer shall involve the payment by the Company or such Subsidiary of
consideration per share of Sun Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) at the
last time (the "Expiration Time") tenders or exchanges may be made pursuant
to such tender or exchange offer (as it shall have been amended) that exceeds
110% of the current market price per share (determined as provided in Section
1303(f)) of the Sun Common Stock on the Trading Day next succeeding the
Expiration Time, the conversion price shall be reduced so
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that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the conversion
price reduction contemplated by this Section 1303(e) by a fraction of which
the numerator shall be the number of shares of Sun Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time
multiplied by the current market price per share (determined as provided in
Section 1303(f)) of the Sun Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Sun Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the
current market price per share (determined as provided in Section 1303(f)) of
the Sun Common Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the opening of
business on the day following the Expiration Time.
(f) For the purpose of any computation under Section 1303(b),
1303(c), 1303(d) or 1303(e), the current market price per share of Sun Common
Stock on any date in question shall be deemed to be the average of the daily
Closing Prices for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than,
the earlier of the day in question or, if applicable, the day before the "ex"
date with respect to the issuance or distribution requiring such computation;
PROVIDED, HOWEVER, that if another event occurs that would require an
adjustment pursuant to Section 1303(a) through (e), inclusive, the Board of
Directors may make such adjustments to the Closing Prices during such five
Trading Day period as it deems appropriate to effectuate the intent of the
adjustments in this Section 1303, in which case any such determination by the
Board of Directors shall be set forth in a Board Resolution and shall be
conclusive. For purposes of this paragraph, the term "ex" date, (i) when
used with respect to any issuance or distribution, means the first date on
which the Sun Common Stock trades regular way on the New York Stock Exchange
or on such successor securities exchange as the Sun Common Stock may be
listed or in the relevant market from which the Closing Prices were obtained
without the right to receive such issuance or distribution, and (ii) when
used with respect to any tender or exchange offer, means the first date on
which the Sun Common Stock trades regular way on such securities exchange or
in such market after the Expiration Time of such offer.
(g) The Company may make such reductions in the conversion price, in
addition to those required by Sections 1303 (a) through (e), as it considers to
be advisable to
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avoid or diminish any income tax to holders of Sun Common Stock or rights to
purchase Sun Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for
income tax purposes. The Company from time to time may reduce the conversion
price by any amount for any period of time if the period is at least 20 days,
the reduction is irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such reduction would be in
the best interest of the Company, which determination shall be conclusive.
Whenever the conversion price is reduced pursuant to the preceding sentence,
the Company shall mail to holders of record of the Convertible Debentures a
notice of the reduction at least 15 days prior to the date the reduced
conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
(h) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
conversion price; PROVIDED, HOWEVER, that any adjustments which by reason of
this Section 1303(h) are not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(i) If any action would require adjustment of the conversion price
pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the Holder of the
Convertible Debentures.
(j) Except as stated above, the conversion price will not be
adjusted for the issuance of Sun Common Stock or any securities convertible
into or exchangeable into Sun Common Stock or carrying the right to purchase
any of the foregoing.
SECTION 1304. FUNDAMENTAL CHANGE.
(a) In the event that the Company is party to any transaction
(including, without limitation, a merger other than a merger that does not
result in a reclassification, conversion, exchange or cancellation of Sun Common
Stock), consolidation, sale of all or substantially all of the assets of the
Company, recapitalization or reclassification of Sun Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination of Sun Common Stock) or
any compulsory share exchange (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which shares of Sun Common Stock
shall be converted into the right to receive, or shall be exchanged for, (i) in
the case of any Transaction other than a Transaction involving a Common Stock
Fundamental Change (and
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subject to funds being legally available for such purpose under applicable
law at the time of such conversion), securities, cash or other property, each
Convertible Preferred Security shall thereafter be convertible into the kind
and, in the case of a Transaction which does not involve a Fundamental
Change, amount of securities, cash and other property receivable upon the
consummation of such Transaction by a holder of that number of shares of Sun
Common Stock into which a Convertible Preferred Security was convertible
immediately prior to such Transaction, or (ii) in the case of a Transaction
involving a Common Stock Fundamental Change, common stock, each Convertible
Preferred Security shall thereafter be convertible (in the manner described
therein) into common stock of the kind received by holders of Sun Common
Stock (but in each case after giving effect to any adjustment discussed below
relating to a Fundamental Change if such Transaction constitutes a
Fundamental Change). The holders of Convertible Preferred Securities will
have no voting rights with respect to any Transaction.
(b) If any Fundamental Change occurs, then the conversion price in
effect will be adjusted immediately after such Fundamental Change as
described below. In addition, in the event of a Common Stock Fundamental
Change, each Convertible Preferred Security shall be convertible solely into
common stock of the kind received by holders of Sun Common Stock as a result
of such Common Stock Fundamental Change.
(c) The conversion price in the case of any Transaction involving
a Fundamental Change will be adjusted immediately after such Fundamental
Change:
(i) in the case of a Non-Stock Fundamental Change, the
conversion price of the Convertible Preferred Securities will
thereupon become the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, and (B) the greater of the Applicable Price or
the then applicable Reference Market Price plus any then-accrued and
unpaid distributions on one Convertible Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the
conversion price of the Convertible Preferred Securities in effect
immediately prior to such Common Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, will thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator will be the
Purchaser Stock Price and the denominator will be the Applicable
Price; provided, however, that in the event of a Common Stock
Fundamental Change in which (A) 100% of the value of the
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consideration received by a holder of Sun Common Stock is common
stock of the successor, acquirer, or other third party (and cash,
if any, is paid only with respect to any fractional interests in
such common stock resulting from such Common Stock Fundamental
Change) and (B) all Sun Common Stock will be have been exchanged
for, converted into, or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquirer, or
other third party, the conversion price of the Convertible
Preferred Securities in effect immediately prior to such Common
Stock Fundamental Change will thereupon be adjusted by multiplying
such conversion price by a fraction of which the numerator will be
one and the denominator will be the number of shares of common
stock of the successor, acquirer, or other third party received by
a holder of one share of Sun Common Stock as a result of such
Common Stock Fundamental Change.
The Company or the Person formed by such consolidation or resulting
from such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article Thirteen. The above provisions shall similarly apply to
successive transactions of the foregoing type.
SECTION 1305. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer Agent for the Convertible Preferred Securities and the Convertible
Debentures; and
(b) a notice stating the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as practicable be
mailed by the Company to all record holders of Convertible Preferred Securities
and the Convertible Debentures at their last addresses as they appear upon the
stock transfer books of the Company and the Trust.
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<PAGE>
SECTION 1306. PRIOR NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Sun Common Stock, other than (A) a dividend payable in
shares of Sun Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 1303(c) or 1303(d), or (ii) authorize
a tender or exchange offer that would require an adjustment pursuant to Section
1303(e);
(b) the Company shall authorize the granting to all holders of Sun
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or warrants;
(c) of any reclassification of Sun Common Stock (other than a
subdivision or combination of the outstanding Sun Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company shall be required, or of
the sale or transfer of all or substantially all of the assets of the Company or
of any compulsory share exchange whereby the Sun Common Stock is converted into
other securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (1) if any Convertible Preferred Securities are
outstanding, cause to be filed with the transfer Agent for the Convertible
Preferred Securities, and shall cause to be mailed to the holders of record of
the Convertible Preferred Securities, at their last addresses as they shall
appear upon the stock transfer books the Trust or (2) shall cause to be mailed
to all Holders at their last addresses as they shall appear in the Security
Register, at least 15 days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Sun Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Sun Common Stock of record shall be entitled to
exchange their shares of Sun Common Stock for securities, cash
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or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding
up (but no failure to mail such notice or any defect therein or in the
mailing thereof shall affect the validity of the corporate action required to
be specified in such notice).
SECTION 1307. CERTAIN DEFINED TERMS.
The following definitions shall apply to terms used in this Article
Thirteen:
(a) "CLOSING PRICE" of any Sun Common Stock on any day shall mean
the reported last sale price on such day or in case no sale takes place on
such day, the average of the reported closing bid and asked prices in each
case on the New York Stock Exchange Consolidated Transactions Tape or, if the
stock is not listed or admitted to trading on the New York Stock Exchange, on
the principal national securities exchange on which such stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm, selected by the
Debenture Trustee for that purpose.
(b) "TRADING DAY" shall mean a day on which securities are traded
on the national securities exchange or quotation system used to determine the
Closing Price.
SECTION 1308. DIVIDEND OR INTEREST REINVESTMENT PLANS.
Notwithstanding the foregoing provisions, the issuance of any
shares of Sun Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Company
and the investment of additional optional amounts in shares of Sun Common
Stock under any such plan, and the issuance of any shares of Sun Common Stock
or options or rights to purchase such shares pursuant to any employee benefit
plan or program of the Company or pursuant to any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the date
the Convertible Debentures were first issued, shall not be deemed to
constitute an issuance of Sun Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment
provisions described above applies. There shall also be no adjustment of the
conversion price in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the Company except as
specifically described in this Article Thirteen.
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<PAGE>
SECTION 1309. CERTAIN ADDITIONAL RIGHTS.
In case the Company shall, by dividend or otherwise, declare or
make a distribution on its Sun Common Stock referred to in Section 1303(c) or
1303(d) (including, without limitation, dividends or distributions referred
to in the last sentence of Section 1303(c)), the Holder of the Convertible
Debentures, upon the conversion thereof subsequent to 5:00 p.m. (New York
City time) on the date fixed for the determination of stockholders entitled
to receive such distribution and prior to the effectiveness of the conversion
price adjustment in respect of such distribution, shall also be entitled to
receive for each share of Sun Common Stock into which the Convertible
Debentures are converted, the portion of the shares of Sun Common Stock,
rights, warrants, evidences of indebtedness, shares of capital stock, cash
and assets so distributed applicable to one share of Sun Common Stock;
PROVIDED, HOWEVER, that, at the election of the Company (whose election shall
be evidenced by a resolution of the Board of Directors) with respect to all
Holders so converting, the Company may, in lieu of distributing to such
Holder any portion of such distribution not consisting of cash or securities
of the Company, pay such Holder an amount in cash equal to the fair market
value thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors). If any conversion of Convertible Debentures described in the
immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Sun Common Stock which the Holder of Convertible
Debentures so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Sun Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets to which
such Holder is so entitled, PROVIDED, that such due bill (i) meets any
applicable requirements of the principal national securities exchange or
other market on which the Sun Common Stock is then traded and (ii) requires
payment or delivery of such shares of Sun Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets no later
than the date of payment or delivery thereof to holders of shares of Sun
Common Stock receiving such distribution.
SECTION 1310. RESTRICTIONS ON SUN COMMON STOCK ISSUABLE UPON CONVERSION.
(a) Shares of Sun Common Stock to be issued upon conversion of a
Convertible Debenture in respect of Restricted Convertible Preferred
Securities shall bear the following legend (the "Restricted Common Stock
Legend") unless the Company determines otherwise in accordance with
applicable law.
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THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
THEREOF UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE)
(THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO SUN HEALTHCARE GROUP,
INC. (THE "COMPANY") (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(b) If shares of Sun Common Stock to be issued upon conversion of
a Convertible Debenture in respect of Restricted Convertible Preferred
Securities are to be registered in a name other than that of the Holder of
such Convertible Preferred Security, then the Person in whose name such
shares of Sun Common Stock are to be registered must deliver to the
Conversion Agent a certificate satisfactory to the Company and signed by such
Person, as to compliance with the restrictions on transfer applicable to such
Convertible Preferred Security. Neither the Trustee nor any Conversion Agent
or Registrar shall be
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required to register in a name other than that of the Holder shares of Sun
Common Stock issued upon conversion of any such Convertible Debenture in
respect of such Convertible Preferred Securities not so accompanied by a
properly completed certificate.
SECTION 1311. TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION PRICE OR
ADJUSTMENTS.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Convertible Debenture
to determine whether any facts exist which may require any adjustment of the
conversion price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any Conversion Agent shall be accountable with
respect to the validity or value (or the kind of account) of any shares of
Sun Common Stock or of any securities or property, which may at any time be
issued or delivered upon the conversion of any Convertible Debenture; and
neither the Trustee nor any Conversion Agent makes any representation with
respect thereto. Neither the Trustee nor any Conversion Agent shall be
responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of Sun Common Stock or stock
certificates or other securities or property upon the surrender of any
Convertible Debenture for the purpose of conversion, or, except as expressly
herein provided, to comply with any of the covenants of the Company contained
in Article Ten or this Article Thirteen.
ARTICLE XIV
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Convertible Debenture, or for any claim based
thereon or otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer or director, past, present or future as
such, of the Company or of any predecessor or successor corporation, either
directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders,
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officers or directors as such, of the Company or of any predecessor or
successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the
Convertible Debentures or implied therefrom; and that any and all such
personal liability of every name and nature, either at common law or in
equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, stockholder, officer or director as
such, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Convertible Debentures or implied therefrom, are
hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of such
Convertible Debentures.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
SUN HEALTHCARE GROUP, INC.,
as Issuer
By: /s/ Robert D. Woltil
----------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary LaGumina
----------------------------------
Name: Mary LaGumina
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURE
[FACE OF CONVERTIBLE DEBENTURE]
[Include if Convertible Debenture is in global form:
THIS CONVERTIBLE DEBENTURE IS A GLOBAL CERTIFICATE WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE THEREOF. THIS CONVERTIBLE DEBENTURE MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A CONVERTIBLE DEBENTURE
REGISTERED, AND NO TRANSFER OF THIS CONVERTIBLE DEBENTURE IN WHOLE OR
IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]
[Include if Convertible Debenture is in global form and The Depository
Trust Company is the Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURI-
<PAGE>
TIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE) (THE "RESALE
RESTRICTION TERMINATION DATE") ONLY (A) TO SUN HEALTHCARE GROUP, INC.,
(THE "COMPANY") (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (C) OR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN
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<PAGE>
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT, THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE>
7% Convertible Junior Subordinated Debenture Due 2028
No. 1
$_____
Sun Healthcare Group, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Sun
Financing I, or registered assigns, the principal sum of
______________________ Dollars ($___________) on May 1, 2028 and to pay
interest thereon from May 4, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may
be, payable quarterly (subject to deferral as set forth in the Indenture), in
arrears, on February 1, May 1, August 1 and November 1 (each an "Interest
Payment Date") of each year, commencing August 1, 1998, until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Convertible Debenture is registered at 5:00 p.m.
(New York City time) on the regular record date for such interest
installment, which shall be the close of business on the Business Day next
preceding such Interest Payment Date (provided that the Company has not set a
new record date pursuant to the Indenture) (the "Regular Record Date").
Reference is hereby made to the further provisions of this
Convertible Debenture set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Convertible Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated: May 4, 1998
SUN HEALTHCARE GROUP, INC.
By:
----------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
[Seal]
Attest:
-------------------------
Name: Robert F. Murphy
Title: Secretary
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures referred to in the
within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK, as Trustee
By:
--------------------------------
Authorized Signatory
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<PAGE>
[FORM OF REVERSE OF CONVERTIBLE DEBENTURE]
This Convertible Debenture is one of a duly authorized issue of
securities of the Company designated as its 7% Convertible Junior
Subordinated Debenture Due 2028 (herein called the "Convertible
Debentures"), in aggregate principal amount of $355,670,131.25, issued and to
be issued under an Indenture, dated as of May 4, 1998 (herein called the
"Indenture"), between the Company and The Bank of New York, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Convertible Debentures, and of the terms upon
which the Convertible Debentures are, and are to be, authenticated and
delivered. The terms of the Convertible Debentures include those stated in
the Indenture and those made part of the Indenture by the Trust Indenture Act
of 1939 (15 U.S.C. Sections 77aaa-77bbbb) ("TIA") as in effect on the date
of the Indenture. The Convertible Debentures are subject to, and qualified
by, all such terms, certain of which are summarized hereon, and holders are
referred to the Indenture and the TIA for a statement of such terms. No
reference herein to the Indenture and no provision of this Convertible
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Convertible Debenture at the times, place and rate, and in
the coin or currency, herein prescribed or to convert this Convertible
Debenture as provided in the Indenture. All terms used in this Convertible
Debenture which are defined in the Indenture shall have the meanings assigned
to them in the Indenture. The Company will furnish to any Holder upon
written request and without charge a copy of the Indenture.
(1) INTEREST. The Convertible Debentures shall bear interest at
the rate of 7% per annum, from May 4, 1998 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the
case may be, payable quarterly (subject to deferral as set forth herein), in
arrears, on February 1, May 1, August 1 and November 1 (each an "Interest
Payment Date") of each year, commencing August 1, 1998, until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Convertible Debenture is registered at 5:00 p.m.
(New York City time) on the regular record date for such interest
installment, which shall be the close of business on the Business Day next
preceding such Interest Payment Date (provided that the Company has not set a
new record date pursuant to the Indenture) (the "Regular Record Date").
Interest will compound quarterly and will accrue at the rate of 7% per annum
on any interest installment in arrears for more than one quarter or during an
extension of an interest payment period as set forth below.
-7-
<PAGE>
The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest in computed, will be computed
on the basis of the actual number of days elapsed per 90-day quarter. In the
event that any date on which interest is payable on the Convertible
Debentures is not a Business Day, then payment of interest payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
If at any time while the Property Trustee is the Holder of any
Convertible Debentures, the Trust or the Property Trustee is required to pay
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States, or any other
taxing authority, then, in any such case, the Company shall pay as additional
interest ("Additional Interest") on the Convertible Debentures held by the
Property Trustee, such amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after paying any
such taxes, duties, assessments or other governmental charges will be not
less than the amounts the Trust and the Property Trustee would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
The principal of and interest on the Convertible Debentures shall
be payable [insert, if global security is issued to the Depositary Trust
Company or its nominee] [insert, if securities in definitive form are issued
at the corporate office of the Indenture Trustee in the City of New York or
at the office or agency of the Paying Agent in the United States maintained
for such purpose] in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; PROVIDED, HOWEVER, that at the option of the Company payment of
interest may be made by (i) check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register, or
(ii) by wire transfer to an account maintained by the Person entitled thereto
as specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date.
(2) OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company shall
have the right at any time during the term of the Convertible Debentures to
defer interest payments (including Additional Payments) from time to time by
extending the interest payment period for successive periods (each, an
"Extension Period") not exceeding 20 consecutive quarters for each such
period; PROVIDED, no Extension Period may extend beyond the maturity date of
the
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<PAGE>
Convertible Debentures. At the end of each Extension Period, the Company
shall pay all interest then accrued and unpaid (including Additional
Interest) together with interest thereon compounded quarterly at the rate
specified for the Convertible Debentures to the extent permitted by
applicable law ("Compounded Interest"); PROVIDED, that during any Extension
Period, the Company shall (i) not declare or pay dividends on, or make a
distribution with respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (A)
purchases or acquisitions of shares of Sun Common Stock in connection with
the satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Sun Common
Stock, (B) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock or (C) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged) or make any guarantee payments
with respect to the foregoing, (ii) not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank PARI PASSU
with or junior to the Convertible Debentures (except by conversion into or
exchange for shares of its capital stock) and (iii) not make any guarantee
payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the
Company may further extend such Extension Period; PROVIDED, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
date of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a
new Extension Period, subject to the above requirements. No interest during
an Extension Period shall be due and payable. Notwithstanding anything to
the contrary, the Company shall not have the right at any time to defer any
Additional Interest, including by extending the interest payment period.
If the Property Trustee is the sole Holder of the Convertible
Debentures at the time the Company selects an Extension Period, the Company
shall give written notice to the Administrative Trustees, the Property
Trustee and the Trustee of its selection of such Extension Period at least
one Business Day prior to the earlier of (i) the date the distributions on
the Convertible Preferred Securities are payable or (ii) if the Convertible
Preferred Securities are listed on the New York Stock Exchange or other stock
exchange or quotation system, the date the Trust is required to give notice
to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Convertible Preferred Securities of the
record date or the date such distributions are payable, but in any event not
less than 10 Business Days prior to such record date.
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<PAGE>
If the Property Trustee is not the sole holder of the Convertible
Debentures at the time the Company selects an Extension Period, the Company
shall give the Holders of the Convertible Debentures and the Trustee written
notice of its selection of such Extension Period at least ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
if the Convertible Preferred Securities are listed on the New York Stock
Exchange or other stock exchange or quotation system, the date the Company is
required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Convertible Debentures on
the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.
The quarter in which any notice is given pursuant to paragraphs
second and third of this Section 2 shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under paragraph one of
this Section 2.
(3) PAYING AGENT AND SECURITY REGISTRAR. The Trustee will act as
Paying Agent, Security Registrar and Conversion Agent. The Company may
change any Paying Agent, Security Registrar, co-registrar or Conversion Agent
without prior notice. The Company or any of its Affiliates may act in any
such capacity.
(4) REDEMPTION. The Company shall have the right to redeem the
Convertible Debentures, in whole or in part, at any time or from time to time
after May 3, 2001 upon not less than 30 nor more than 60 days' notice, at
the optional redemption prices (expressed as a percentage of the principal
amount of Convertible Debentures to be redeemed) shown below, plus any
accrued and unpaid interest (including Additional Payments, if any) to the
Redemption Date, if redeemed during the 12-month period beginning May 3,:
<TABLE>
<CAPTION>
Percentage of
Principal
Year Amount
---- -------------
<S> <C>
2001 . . . . . . . . . . . . . . . . 104.000%
2002 . . . . . . . . . . . . . . . . 103.000%
2003 . . . . . . . . . . . . . . . . 102.000%
2004 . . . . . . . . . . . . . . . . 101.000%
2005 and thereafter . . . . . . . . 100.000%
</TABLE>
If the Company has deferred interest payments, all unpaid interest
must be paid in cash prior to redemption. Any redemption pursuant to this
Section 1101 shall be made pursuant to the provisions of Sections 1103
through 1108 hereof.
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<PAGE>
The Convertible Debentures are subject to redemption in whole (but
not in part), at any time within 90 days, if a Tax Event (as defined in the
Declaration) shall occur and be continuing, at a redemption price equal to
100% of the principal amount thereof plus accrued but unpaid interest
(including Additional Payments, if any) to the Redemption Date. On and after
the Redemption Date, interest ceases to accrue on the Convertible Debentures
or portions of them called for redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Convertible Debentures to be redeemed, at
such Holder's address appearing in the Security Register. The Convertible
Debentures in denominations larger than $25 may be redeemed in part but only
in integral multiples of $25. In the event of a redemption of less than all
of the Convertible Debentures, the Convertible Debentures will be chosen for
redemption by the Trustee in accordance with the Indenture.
If this Convertible Debenture is redeemed subsequent to a Regular
Record Date with respect to any Interest Payment Date specified above and on
or prior to such Interest Payment Date, then any accrued interest will be
paid to the person in whose name this Convertible Debenture is registered at
the close of business on such record date.
(5) SINKING FUND. The Convertible Debentures are not entitled to
the benefit of any sinking fund.
(6) SUBORDINATION. The payment of the principal of, premium, if
any, and interest (including Additional Payments, if any) on all Convertible
Debentures is subordinated and junior in right of payment to the prior
payment in full of all existing and future Senior Indebtedness, whether
outstanding at the date of this Indenture or thereafter incurred. Each
holder, by accepting a Convertible Debenture, agrees to such subordination
and authorizes and directs the Trustee on its behalf to take such action as
may be necessary or appropriate to effectuate the subordination so provided
and appoints the Trustee as its attorney-in-fact for such purpose.
"SENIOR CREDIT FACILITY" means that certain Credit Agreement, dated
as of October 8, 1997, as amended by the First Amendment thereto dated
November 12, 1997 and the Second Amendment thereto dated March 27, 1998, by
and among the Company and NationsBank of Texas, N.A. and the other banks that
are parties thereto, providing for availability of up to $1.2 billion of
loans to the Company in the following components: (a) a revolving credit
facility of up to $500.0 million and (b) three term loans in the amounts of
$200.0 million, $250.0 million and $250.0 million, respectively, including
any related notes,
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<PAGE>
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, increased, modified, extended,
renewed, refunded, replaced or refinanced, in whole or in part, from time to
time.
"SENIOR INDEBTEDNESS" means in respect of the Company: (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor,
including, without limitation, in the case of Sun, all indebtedness, and all
obligations of Sun to pay fees and other amounts, under the Senior Credit
Facility or under the indentures with respect to the Company's outstanding
9 1/2% notes due 2007 (the "2007 Notes") and the Company's 9 3/8% Senior
Subordinated Notes due 2008, and any refinancing of the Senior Credit
Facility in the bank credit market (including institutional participants
therein), including interest accruing on or after a bankruptcy or other
similar event, whether or not an allowed claim therein, (ii) all capital
lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under
any title retention agreement (but excluding trade accounts payable arising
in the ordinary course of business), (iv) all obligations of such obligor for
the reimbursement of any letter of credit, banker's acceptance, security
purchase facility or similar credit transaction, (v) all obligations of the
type referred to in clauses (i) through (iv) above of other Persons for the
payment of which such obligor is responsible or liable as obligor, guarantor
or otherwise, and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other Persons secured by any lien on any property or
asset of such obligor (whether or not such obligation is assumed by such
obligor), except for (1) any such indebtedness that is by its terms
subordinated to or PARI PASSU with the Convertible Debentures and (2) any
indebtedness between or among such obligor or its affiliates, including all
other debt securities and guarantees in respect of those debt securities
issued to any trust, or a trustee of such trust, partnership, or other entity
affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company (a "Financing Entity") in connection with the issuance
by such Financing Entity of Convertible Preferred Securities or other
securities which rank PARI PASSU with, or junior to, the Convertible
Preferred Securities, unless otherwise provided in the terms of such debt
securities. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness, except as otherwise provided in the exception clauses
above.
(7) CONVERSION. The Holder of any Convertible Debenture has the
right, exercisable at any time on or before 5:00 p.m. (New York City time) on
the Business Day immediately preceding the date of repayment of such
Convertible Debentures, whether at maturity or upon redemption (either at the
option of the Company or pursuant to a Tax Event),
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<PAGE>
to convert the principal amount thereof (or any portion thereof that is an
integral multiple of $25) into fully paid and nonassessable shares of Sun
Common Stock of the Company at an initial conversion rate of 1.2419 shares of
Sun Common Stock for each $25 in aggregate principal amount of Convertible
Debentures (equal to a conversion price of $20.13 per share of Sun Common
Stock), subject to adjustment under certain circumstances as set forth in
Section 1303 and 1304. The number of shares issuable upon conversion of a
Convertible Debenture is determined by dividing the principal amount of the
Convertible Debenture converted by the conversion price in effect on the
Conversion Date. No fractional shares will be issued upon conversion but a
cash adjustment will be made for any fractional interest. The outstanding
principal amount of any Convertible Debenture shall be reduced by the portion
of the principal amount thereof converted into shares of Sun Common Stock.
To convert a Convertible Debenture, a Holder must (i) complete and
sign a conversion notice substantially in the form attached hereto,
(ii) surrender the Convertible Debenture to a Conversion Agent, (iii) furnish
appropriate endorsements or transfer documents if required by the Security
Registrar or Conversion Agent and (iv) pay any transfer or similar tax, if
required. If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the subsequent Interest Payment Date, the Holder
will be entitled to receive the interest payable on the subsequent Interest
Payment Date on the portion of Convertible Debentures to be converted
notwithstanding the conversion thereof prior to such Interest Payment Date.
Except as otherwise provided in the immediately preceding sentence, in the
case of any Convertible Debenture which is converted, interest whose Stated
Maturity is after the date of conversion of such Convertible Debenture shall
not be payable, and the Company shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but unpaid
interest (including Additional Payments, if any) on the Convertible
Debentures being converted, which shall be deemed to be paid in full. If any
Convertible Debenture called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust
for the redemption of such Convertible Debenture shall (subject to any right
of the Holder of such Convertible Debenture or any Predecessor Security to
receive interest as provided in the last paragraph of Section 307 and this
paragraph) be paid to the Company upon Company Request or, if then held by
the Company, shall be discharged from such trust.
(8) REGISTRATION RIGHTS. The holders of the Convertible Preferred
Securities, the Convertible Debentures issuable in respect of the Convertible
Preferred Securities, the shares of Sun Common Stock issuable upon conversion
of the Convertible Preferred Securities and the Convertible Debentures, and
the Guarantee (collectively, the "REGISTRABLE SECURITIES") are entitled to
the benefits of a Registration Rights Agreement, dated as of May 4, 1998,
between the Company and the Initial Purchasers (the "REGISTRATION RIGHTS
AGREEMENT").
-13-
<PAGE>
Pursuant to the Registration Rights Agreement, the Company has agreed for the
benefit of the holders of Registrable Securities that (i) it will, at its
cost, use its reasonable best efforts within 90 days after the date of
original issuance of the Registrable Securities, to file a shelf registration
statement (the "SHELF REGISTRATION STATEMENT") with the Commission with
respect to the resales of the Registrable Securities, (ii) it will use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission within 150 days after the date of
issuance of the Registrable Securities and (iii) it will use its reasonable
best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act until two years after the date of original
issuance of the Convertible Preferred Securities (or such earlier date as the
holders of Registrable Securities are able to sell all Registrable Securities
immediately without restriction, whether pursuant to Rule 144(k) under the
Securities Act or any successor rule thereto or otherwise) (the
"EFFECTIVENESS PERIOD") or such holders have sold all such Registrable
Securities pursuant to an effective Registration Statement. The Trust and
the Company will be permitted to suspend the use of the prospectus (which is
a part of the Shelf Registration Statement) in connection with sales of
Registrable Securities by holders during certain periods of time under
certain circumstances relating to pending corporate developments relating to
the Company and public filings with the Commission and similar events.
If (i) on or prior to 90 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not
been filed with the Commission or (ii) on or prior to the 150th day
following the original issuance of the Registrable Securities, such
Shelf Registration Statement has not been declared effective (each
such event a "REGISTRATION DEFAULT"), additional interest ("LIQUIDATED
DAMAGES") will accrue on the Convertible Debentures and, accordingly,
additional distributions will accrue on the Convertible Preferred
Securities, from and including the day following such Registration
Default until such time as such Shelf Registration Statement is filed
or such Shelf Registration Statement is declared effective, as the
case may be. Liquidated Damages will be paid quarterly in arrears
(subject to the Company's ability to defer payment of Liquidated
Damages during any Extension Period), with the first quarterly payment
due on the first Interest Payment Date following the date on which
such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional 0.25% of the principal amount or
liquidation amount, as applicable, to and including the 90th day
following such Registration Default and 0.50% thereof from and after
the 91st day following such Registration Default. The curing of any
Registration Default will reset the rate at which Liquidated Damages
begin to accrue for any subsequent new Registration Default to a rate
per annum equal to an additional one-quarter of one percent (0.25%) of
the
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<PAGE>
principal amount or liquidation amount, as applicable, to and
including the 90th day following such Registration Default and
one-half of one percent (0.50%) thereof from and after the 91st day
following such new Registration Default. The Guarantor shall have the
right to suspend the Shelf Registration Statement under certain
circumstances for up to 90 consecutive days. In the event that during
the Effectiveness Period the Shelf Registration Statement ceases to be
effective for more than 90 consecutive days or any 120 days, whether
or not consecutive, during any 12-month period then the interest rate
borne by the Debentures and the distribution rate borne by the
Convertible Preferred Securities will each increase by an additional
0.25% per annum from such 91st or 121st day, as applicable, of the
applicable 12-month period such Shelf Registration Statement ceases to
be effective until the earlier of such time as (i) the Shelf
Registration Statement again becomes effective or (ii) the
Effectiveness Period expires.
The summary of certain provisions of the Registration Rights
Agreement in this Section 8 is subject to, and is qualified in its entirety,
by reference to the Registration Rights Agreement.
(9) REGISTRATION, TRANSFER, EXCHANGE AND DENOMINATIONS. As
provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Convertible Debenture is registrable in the
Security Register, upon surrender of this Convertible Debenture for
registration of transfer at the office or agency of the Company in New York,
New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Convertible Debentures, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Convertible Debentures are issuable only in registered form
without coupons in denominations of $25 and integral multiples thereof. No
service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. Prior
to due presentment of this Convertible Debenture for registration of
transfer, the Company, the Trustee and any Agent of the Company or the
Trustee may treat the Person in whose name this Convertible Debenture is
registered as the owner hereof for all purposes, whether or not this
Convertible Debenture be overdue, and neither the Company, the Trustee nor
any such Agent shall be affected by notice to the contrary. In the event of
redemption or conversion of this Convertible Debenture in part only, a new
Convertible Debenture or Convertible Debentures
-15-
<PAGE>
for the unredeemed or unconverted portion hereof will be issued in the name
of the Holder hereof upon the cancellation hereof.
(10) PERSONS DEEMED OWNERS. Except as provided in the Indenture,
the registered Holder of a Convertible Debenture may be treated as its owner
for all purposes.
(11) UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent
shall pay the money back to the Company at its written request. After that,
Holders of Convertible Debentures entitled to the money must look to the
Company for payment unless an abandoned property law designates another
Person and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
(12) DEFAULTS AND REMEDIES. The Convertible Debentures shall have
the Events of Default as set forth in Section 501 of the Indenture. Subject
to certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least
25% in aggregate principal amount of the then outstanding Convertible
Debentures by notice to the Company and the Trustee may declare all the
Convertible Debentures to be due and payable immediately.
The Holders of a majority in principal amount of the Convertible
Debentures then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due
solely because of the acceleration. Holders may not enforce the Indenture or
the Convertible Debentures except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Convertible Debentures issued under the Indenture may direct the
Trustee in its exercise of any trust or power. The Convertible Debentures
are unsecured general obligations of the Company. The Company must furnish
annually compliance certificates to the Trustee. The above description of
Events of Default and remedies is qualified by reference to, and subject in
its entirety by, the more complete description thereof contained in the
Indenture.
(13) AMENDMENTS, SUPPLEMENTS AND WAIVERS. The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of
the Holders of the Convertible Debentures under the Indenture at any time by
the Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Convertible Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
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<PAGE>
specified percentages in aggregate principal amount of the Convertible
Debentures at the time Outstanding, on behalf of the Holders of all the
Convertible Debentures, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this
Convertible Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this Convertible Debenture and of any Convertible
Debenture issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Convertible Debenture.
(14) TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Convertible Debentures and may otherwise deal with the Company or an
Affiliate with the same rights it would have, as if it were not Trustee,
subject to certain limitations provided for in the Indenture and in the TIA.
Any Agent may do the same with like rights.
(15) NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Debentures or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder of the Convertible Debentures by accepting a
Convertible Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Convertible
Debentures.
(16) GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO
CONFLICT OF LAW PROVISIONS THEREOF.
(17) AUTHENTICATION. The Convertible Debentures shall not be valid
until authenticated by the manual signature of an authorized officer of the
Trustee or an authenticating Agent.
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible
Debenture to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Convertible Debenture on the books of the Company. The
Agent may substitute another to act for him or her.
Date: ________________________
_____________________________________________
(Sign exactly as your name appears on the
other side of this Convertible Debenture)
Signature Guarantee:* _______________________
______________
* Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
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[Include the following if the Convertible Debenture bears a Restricted
Securities Legend -
In connection with any transfer of any of the Convertible Debentures evidenced
by this certificate, the undersigned confirms that such Convertible Debentures
are being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer; or
(2) / / transferred to a "qualified institutional buyer" pursuant to and
in compliance with Rule 144A under the Securities Act; or
(3) / / transferred to an institutional "accredited investor"; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act; or
(5) / / transferred pursuant to an effective Registration Statement under
the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Convertible Debentures evidenced by this certificate in the name of
any person other than the registered Holder thereof; PROVIDED, HOWEVER, that
if box (2), (3) or (4) is checked, the Trustee may require, prior to
registering any such transfer of the Convertible Debentures such legal
opinions, certifications and other information as the Company has reasonably
requested in writing and directed the Trustee to require confirmation that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act, such as the exemption provided by Rule 144 under such Act; PROVIDED,
FURTHER, that after the date that a Shelf Registration Statement under the
Securities Act has been filed and so long as such Shelf Registration
Statement continues to be effective, the Trustee may only permit transfers
for which box (5) has been checked.
______________________
Signature
Signature Guarantee:*
______________
Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee
programs acceptable to the Trustee.
______________
* Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
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<PAGE>
____________________________________ ____________________________________
Signature must be guaranteed Signature
________________________________________________________________________________
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Convertible Debenture for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated: _________________________ _________________________________________
NOTICE: To be executed by an executive officer]
[TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Convertible Debenture for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is
an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act.
Dated: _________________________ _________________________________________
NOTICE: To be executed by an executive officer]
-20-
<PAGE>
NOTICE OF CONVERSION
To:
The undersigned owner of this Convertible Debenture hereby
irrevocably exercises the option to convert this Convertible Debenture, or
the portion below designated, into common stock of Sun Healthcare Group, Inc.,
a Delaware corporation (the "Company") (the "Sun Common Stock") in accordance
with the terms of the Indenture, between the Company and The Bank of New York
as Trustee, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a different
name has been indicated in the assignment below. If shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto.
Any Holder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Debenture,
agrees to be bound by the terms of the Registration Rights Agreement relating
to the Sun Common Stock issuable upon conversion of the Convertible Debenture.
Date: ________________________
Number of Convertible Debentures to be converted ($25 or integral
multiples thereof): ______________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Sun Common Stock are to be
issued, along with the address or addresses of such person or persons.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________
(Sign exactly as your name appears on the
the Convertible Debenture) (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
________________________________________________
________________________________________________
________________________________________________
________________________________________________
Signature Guarantee:*___________________________
______________
* Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.*
-21-
<PAGE>
Exhibit 10.5
====================================
CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT
SUN HEALTHCARE GROUP, INC.
DATED AS OF MAY 4, 1998
====================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation. . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application. . . . . . . . . . 5
SECTION 2.2. List of Holders of Securities . . . . . . . . . . . 6
SECTION 2.3. Reports by the Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.4. Periodic Reports to the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . . 6
SECTION 2.5. Evidence of Compliance with
Conditions Precedent. . . . . . . . . . . . . . . 6
SECTION 2.6. Event of Default; Waiver. . . . . . . . . . . . . . 7
SECTION 2.7. Event of Default; Notice. . . . . . . . . . . . . . 7
SECTION 2.8. Conflicting Interests . . . . . . . . . . . . . . . 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . . 7
SECTION 3.2. Certain Rights of the Preferred
Guarantee Trustee . . . . . . . . . . . . . . . . 10
SECTION 3.3. Not Responsible for Recitals or
Issuance of Guarantee . . . . . . . . . . . . . . 12
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee;
Eligibility . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 4.2. Appointment, Removal and Resignation
of Preferred Guarantee Trustees . . . . . . . . . 13
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.2. Subordination . . . . . . . . . . . . . . . . . . . 14
SECTION 5.3. Waiver of Notice and Demand . . . . . . . . . . . . 14
SECTION 5.4. Obligations Not Affected. . . . . . . . . . . . . . 15
SECTION 5.5. Rights of Holders . . . . . . . . . . . . . . . . . 16
SECTION 5.6. Guarantee of Payment. . . . . . . . . . . . . . . . 16
SECTION 5.7. Subrogation . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.8. Independent Obligations . . . . . . . . . . . . . . 17
SECTION 5.9. Conversion. . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions. . . . . . . . . . . . . 17
SECTION 6.2. Ranking . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
TERMINATION
SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.2. Indemnification . . . . . . . . . . . . . . . . . . 19
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns. . . . . . . . . . . . . . . 20
ii
<PAGE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 9.2. Amendments. . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9.4. Benefit . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.5. Governing Law . . . . . . . . . . . . . . . . . . . 21
</TABLE>
iii
<PAGE>
CROSS REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
- ---------------- ----------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c), 2.8
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.5, 3.2
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.6, 5.5
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
318(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
</TABLE>
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
iv
<PAGE>
CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of May 4, 1998, is executed and delivered by
Sun Healthcare Group, Inc., a Delaware corporation (the "Guarantor"), and The
Bank of New York, as trustee (the "Preferred Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Preferred
Securities (as defined herein) of Sun Financing I, a Delaware statutory
business trust (the "Trust");
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of May 4, 1998, among the trustees of the
Trust named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust
is issuing on the date hereof 13,800,000 convertible preferred securities,
having a liquidation amount of $25 per preferred security, designated the 7%
Convertible Trust Issued Preferred Securities (the "Convertible Preferred
Securities");
WHEREAS, as incentive for the Holders to purchase the Convertible
Preferred Securities, the Guarantor desires irrevocably and unconditionally
to agree, to the extent set forth in this Convertible Preferred Securities
Guarantee, to guarantee the obligations of the Trust to the Holders of the
Convertible Preferred Securities on the terms and conditions set forth herein;
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical
terms to this Convertible Preferred Securities Guarantee for the benefit of
the holders of the Common Securities (as defined herein), except that if an
event of default (as defined in the Indenture (as defined herein)) (an
"Indenture Event of Default"), has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments (as defined in
the Common Securities Guarantee) under the Common Securities Guarantee shall
be subordinated to the rights of Holders of Convertible Preferred Securities
to receive Guarantee Payments (as defined herein) under this Convertible
Preferred Securities Guarantee; and
NOW, THEREFORE, in consideration of the purchase by each Holder of
Convertible Preferred Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this
Convertible Preferred Securities Guarantee for the benefit of the Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION.
In this Convertible Preferred Securities Guarantee, unless the
context otherwise requires:
(a) Capitalized terms used in this Convertible Preferred
Securities Guarantee but not defined in the preamble above have the
respective meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date hereof have
the same meaning when used in this Convertible Preferred Securities Guarantee
unless otherwise defined in this Convertible Preferred Securities Guarantee;
(c) a term defined anywhere in this Convertible Preferred
Securities Guarantee has the same meaning throughout;
(d) all references to "the Convertible Preferred Securities
Guarantee" or "this Convertible Preferred Securities Guarantee" are to this
Convertible Preferred Securities Guarantee as modified, supplemented or
amended from time to time;
(e) all references in this Convertible Preferred Securities
Guarantee to Articles and Sections are to Articles and Sections of this
Convertible Preferred Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Convertible Preferred Securities Guarantee, unless
otherwise defined in this Convertible Preferred Securities Guarantee or
unless the context otherwise requires;
(g) a reference to the singular includes the plural and vice
versa;
(h) a reference to any Person shall include its successors and
assigns;
(i) a reference to any agreement or instrument shall mean such
agreement or instrument, as supplemented, modified, amended, or amended and
restated, and in effect from time to time; and
(j) a reference to any statute, law, rule or regulation, shall
include any amendments thereto applicable to the relevant Person, and any
successor statute, law, rule or regulation.
2
<PAGE>
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Business Day" means any day other than a day on which banking
institutions in New York, New York or in Wilmington, Delaware are authorized
or required by any applicable law or executive order to close.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.
"Convertible Debentures" means the 7% Convertible Debentures due
May 4, 2028 of the Guarantor held by the Property Trustee (as defined in the
Declaration).
"Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Agreement is located at 101
Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate
Trust Trustee, Administration.
"Covered Person" means any Holder or beneficial owner of
Convertible Preferred Securities.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Convertible Preferred Securities
Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Convertible Preferred Securities, to
the extent not paid or made by the Trust: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
the Convertible Preferred Securities to the extent the Trust has funds
available therefor, (ii) the redemption price, with respect to any
Convertible Preferred Securities called for redemption by the Trust (the
"Redemption Price"), to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Convertible Debentures to the Holders of Convertible Preferred Securities or
the redemption of all the Convertible Preferred Securities (as provided in
the Declaration)), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the Convertible Preferred
Securities to the date of payment to the extent the Trust has funds available
therefor and (b) the amount of assets of the Trust remaining available for
3
<PAGE>
distribution to Holders of Convertible Preferred Securities upon the
liquidation of the Trust (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and
records of the Trust of any Convertible Preferred Securities; provided,
however, that in determining whether the holders of the requisite percentage
of Convertible Preferred Securities have given any request, notice, consent
or waiver hereunder, "Holder" shall not include the Guarantor or any
Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of May 4, 1998 , among the
Guarantor and The Bank of New York, as trustee, pursuant to which the
Convertible Debentures are to be issued to the Property Trustee of the Trust.
"Indenture Trustee" means the Person acting as trustee under the
Indenture, initially The Bank of New York.
"Majority in liquidation amount of the Convertible Preferred
Securities" means, except as provided by the Trust Indenture Act, a vote by
Holder(s) of Convertible Preferred Securities, voting separately as a class,
of more than 50% of the liquidation amount of all Convertible Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Convertible Preferred Securities Guarantee shall
include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definition relating
thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
4
<PAGE>
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other
entity of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted
such appointment pursuant to the terms of this Convertible Preferred
Securities Guarantee and thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee, including any vice president, any assistant vice
president, any secretary, any assistant secretary, the treasurer, any
assistant treasurer or other officer of the Corporate Trust Office of the
Preferred Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee
Trustee possessing the qualifications to act as Preferred Guarantee Trustee
under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.
(a) This Convertible Preferred Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be part of
this Convertible Preferred Securities Guarantee and shall, to the extent
applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Convertible
Preferred Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
5
<PAGE>
SECTION 2.2. LIST OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee
with a list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Convertible
Preferred Securities ("List of Holders") as of such date, (i) within 14
Business Day after each record date for payment of Distributions, as of such
record date, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more
than 14 days before such List of Holders is given to the Preferred Guarantee
Trustee, PROVIDED that the Guarantor shall not be obligated to provide such
List of Holders at any time (x) the List of Holders does not differ from the
most recent List of Holders given to or held by the Preferred Guarantee
Trustee by the Guarantor or (y) the Convertible Preferred Securities are
represented by one or more Global Securities (as defined in the Indenture).
The Preferred Guarantee Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Section 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3. REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Convertible Preferred Securities
such reports as are required by Section 313 of the Trust Indenture Act, if
any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Preferred Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. PERIODIC REPORTS TO THE PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314, if any, and
the compliance certificate required by Section 314 of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Convertible Preferred Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
6
<PAGE>
SECTION 2.6. EVENT OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Convertible
Preferred Securities may, by vote, on behalf of the Holders of all of the
Convertible Preferred Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Convertible Preferred Securities Guarantee, but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
SECTION 2.7. EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Convertible Preferred Securities, notices of all
Events of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice; PROVIDED that the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the Preferred
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders of the Convertible Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8. CONFLICTING INTERESTS.
The Declaration shall be deemed to be specifically described in this
Convertible Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Convertible Preferred Securities Guarantee shall be held
by the Preferred Guarantee Trustee for the benefit of the Holders of the
Convertible Preferred Securities, and the
7
<PAGE>
Preferred Guarantee Trustee shall not transfer this Convertible Preferred
Securities Guarantee to any Person except a Holder exercising his or her rights
pursuant to Section 5.5(b) or to a Successor Preferred Guarantee Trustee
on acceptance by such Successor Preferred Guarantee Trustee of its appointment
to act as Successor Preferred Guarantee Trustee. The right, title and interest
of the Preferred Guarantee Trustee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall
be effective whether or not conveyancing documents have been executed
and delivered pursuant to the appointment of such Successor Preferred
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall, to the extent required pursuant to the terms
hereof, take any action requested by the holders of a majority in Liquidation
Amount of the Convertible Preferred Securities, enforce this Convertible
Preferred Securities Guarantee for the benefit of the Holders of the Convertible
Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Convertible Preferred Securities Guarantee, and no implied
covenants shall be read into this Convertible Preferred Securities Guarantee
against the Preferred Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Convertible Preferred Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(d) No provision of this Convertible Preferred Securities
Guarantee shall be construed to relieve the Preferred Guarantee Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that
may have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Convertible Preferred
Securities Guarantee, and the Preferred Guarantee
Trustee shall not be liable except for the perfor-
mance of such duties and obligations as are
specifically set forth in this Convertible Preferred
Securities Guarantee, and no implied covenants
8
<PAGE>
or obligations shall be read into this Convertible
Preferred Securities Guarantee against the Preferred
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Convertible
Preferred Securities Guarantee; but in the case
of any such certificates or opinions that by any
provision hereof are specifically required to be
furnished to the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they
conform on their face to the requirements of this
Convertible Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall
be proved that the Preferred Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders
of not less than a Majority in liquidation amount of the
Convertible Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee, or exercising
any trust or power conferred upon the Preferred Guarantee
Trustee under this Convertible Preferred Securities
Guarantee; and
(iv) no provision of this Convertible Preferred Securi-
ties Guarantee shall require the Preferred Guarantee Trustee
to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the
Preferred Guarantee Trustee shall have reasonable grounds
for believing that the repayment of such funds or liability
is not reasonably assured to it under the terms of this
Convertible Preferred Securities Guarantee or indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee,
against such risk or liability is not reasonably assured to
it.
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SECTION 3.2. CERTAIN RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely,
and shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Convertible Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Convertible
Preferred Securities Guarantee, the Preferred Guarantee Trustee
shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered
by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel
of its selection, and the written advice or opinion of such
counsel with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may include
any of its employees. The Preferred Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Convertible Preferred Securities Guarantee
from any court of competent jurisdiction.
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(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it
by this Convertible Preferred Securities Guarantee at the request
or direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against the costs, expenses (including attorneys' fees
and expenses) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Preferred
Guarantee Trustee; PROVIDED that nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by
this Convertible Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Preferred Guarantee Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters
as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Convertible
Preferred Securities, and the signature of the Preferred
Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be
required to inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Convertible Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Convertible
Preferred Securities Guarantee the Preferred Guarantee Trustee
shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions
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from the Holders of a Majority in liquidation amount
of the Convertible Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until
such instructions are received and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(xi) The Preferred Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this
Convertible Preferred Securities Guarantee.
(b) No provision of this Convertible Preferred Securities
Guarantee shall be deemed to impose any duty or obligation on the Preferred
Guarantee Trustee to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it in any jurisdiction in which it shall
be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Preferred Guarantee Trustee shall be construed to
be a duty.
SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Convertible Preferred Securities
Guarantee shall be taken as the statements of the Guarantor, and the Preferred
Guarantee Trustee does not assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representation as to the validity or
sufficiency of this Convertible Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to act
as an institutional trustee under the Trust
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Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least
50 Million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred
to above, then, for the purposes of this Section 4.1(a)(ii),
the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall
hold office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
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(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to the Guarantor of an instrument of removal or
resignation, the resigning or removed Preferred Guarantee Trustee may
petition any court of competent jurisdiction for appointment of a Successor
Preferred Guarantee Trustee. Such court may thereupon, after prescribing
such notice, if any, as it may deem proper, appoint a Successor Preferred
Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Convertible Preferred Securities
Guarantee or removal or resignation of the Preferred Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the Preferred
Guarantee Trustee all amounts accrued to the date of such termination,
removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert, the Guarantee Payments, without duplication. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
SECTION 5.2. SUBORDINATION.
If an Indenture Event of Default has occurred and is continuing,
the rights of Holders of Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinate to the rights of
Convertible Preferred Securities to receive Guarantee Payments under this
Convertible Preferred Securities Guarantee.
SECTION 5.3. WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this
Convertible Preferred Securities Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before
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proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 5.4. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor
under this Convertible Preferred Securities Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of
the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Convertible Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Convertible
Preferred Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the
Convertible Preferred Securities (other than an extension of time for payment
of Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period on the
Convertible Debentures or any extension of the maturity date of the
Convertible Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Convertible Preferred Securities, or any action on the part of the Trust
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the
Convertible Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.4 that the
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obligations of the Guarantor hereunder shall be absolute and unconditional
under any and all circumstances.
There shall be no obligation of the Holders or any other Persons to
give notice to, or obtain consent of, the Guarantor with respect to the
happening of any of the foregoing.
SECTION 5.5. RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the
Convertible Preferred Securities have the right to direct the time, method
and place of conducting of any proceeding for any remedy available to the
Preferred Guarantee Trustee in respect of this Convertible Preferred
Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Preferred Guarantee Trustee under this Convertible
Preferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce such
Convertible Preferred Securities Guarantee, any Holder may directly institute
a legal proceeding against the Guarantor to enforce the obligations of the
Guarantor under this Convertible Preferred Securities Guarantee without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee or any other Person. The Company has waived any right or remedy to
require that any action be brought just against the Trust, or any other
person or entity, before proceeding directly against the Company.
(c) If an event of default with respect to the Convertible
Debentures constituting the failure to pay interest or principal on the
Convertible Debentures on the date such interest or principal is otherwise
payable has occurred and is continuing, then a Holder of Convertible
Preferred Securities may directly, at any time, institute a proceeding for
enforcement of payment to such Holder of the principal of or interest on the
Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Convertible Preferred Securities of such Holder on
or after the respective due date specified in the Convertible Debentures.
The Holders of Convertible Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Convertible
Debentures unless the Property Trustee (as defined in the Indenture) fails to
do so.
SECTION 5.6. GUARANTEE OF PAYMENT.
This Convertible Preferred Securities Guarantee creates a guarantee
of payment and not of collection.
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SECTION 5.7. SUBROGATION.
The Guarantor shall be subrogated to all, if any, rights of the
Holders against the Trust in respect of any amounts paid to such Holders by
the Guarantor under this Convertible Preferred Securities Guarantee;
PROVIDED, HOWEVER, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise
any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Convertible Preferred Securities Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Convertible Preferred
Securities Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.8. INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Convertible
Preferred Securities, and that the Guarantor shall be liable as principal and
as debtor hereunder to make Guarantee Payments pursuant to the terms of this
Convertible Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (g) inclusive, of Section
5.4 hereof.
SECTION 5.9. CONVERSION.
The Guarantor acknowledges its obligation to issue and deliver
common stock of the Guarantor upon the conversion of the Convertible
Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. LIMITATION OF TRANSACTIONS.
So long as any Convertible Preferred Securities remain outstanding,
if (i) the Company has exercised its option to defer interest payments on the
Convertible Debentures by extending the interest payment period and such
extension shall be continuing, (ii) if there shall have occurred any Event of
Default under this Convertible Preferred Securities Guarantee, or (iii) there
shall have occurred and be continuing any event that, with the giving of
notice or the lapse of time or both, would constitute an Indenture Event of
Default, then the Guarantor has agreed (a) not to declare or pay dividends
on, or make a distribution with respect to, or redeem, purchase acquire or
make a liquidation payment with respect to, any of its capital stock (other
than (i) purchases or acquisitions of shares of common stock in connection
with the satisfaction by the Guarantor of its obligations under any employee
benefit plans or the satisfaction by the Guarantor of its obligations
pursuant to
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any contract or security requiring the Guarantor to purchase shares of common
stock, (ii) as a result of a reclassification of the Guarantor's capital
stock or the exchange or conversion of one class or series of the Guarantor's
capital stock for another class or series of the Guarantor's capital stock or
(iii) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged (or make any
guarantee payments with respect to the foregoing)), and (b) not to make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company that rank PARI PASSU with or junior
to the Convertible Debentures (except by conversion into or exchange for
shares of its capital stock, and (c) not to make any guarantee payments with
respect to the foregoing (other than pursuant to this Convertible Preferred
Securities Guarantee).
SECTION 6.2. RANKING.
(a) This Convertible Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior to all other liabilities of the Guarantor except any
liabilities that may be PARI PASSU expressly by their terms, (ii) PARI PASSU
with the most senior preferred stock issued from time to time by the
Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock or preferred
securities of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
(b) The holders of any obligations of the Guarantor that are
senior in priority to the obligations under this Convertible Preferred
Securities Guarantee will be entitled to all of the rights inuring to the
holders of "Senior Indebtedness" under Article 12 of the Indenture, and the
Holders of the Convertible Preferred Securities will be subject to all of the
terms and conditions of such Article 12 with respect to any claims or rights
hereunder with the same effect as though fully set forth herein.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION.
This Convertible Preferred Securities Guarantee will terminate as
to each Holder upon (i) full payment of the Redemption Price of all
Convertible Preferred Securities; (ii) distribution of the Convertible
Debentures held by the Trust to the Holders; (iii) liquidation of the Trust,
or (iv) upon the distribution of Guarantor's common stock to such Holder in
respect of conversion of such Holder's Convertible Preferred Securities into
common stock of the Guarantor. The Guarantee also will terminate completely
upon full payment of the amounts payable in accordance with the Declaration.
This Convertible Preferred Securities Guarantee will continue to be effective
or will be reinstated,
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as the case may be, if at any time any Holder must restore payment of any
sums paid under such Convertible Preferred Securities or under this
Convertible Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. EXCULPATION.
(a) Subject to Section 3.1(d), no Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Guarantor
or any Covered Person for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Indemnified Person in good faith
in accordance with this Convertible Preferred Securities Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the
scope of the authority conferred on such Indemnified Person by this
Convertible Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence or willful
misconduct with respect to such acts or omissions.
(b) Subject to Section 3.1(d), an Indemnified Person shall be
fully protected in relying in good faith upon the records of the Guarantor
and upon such information, opinions, reports or statements presented to the
Guarantor by any Person as to matters the Indemnified Person reasonably
believes are within such other Person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Guarantor,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Convertible Preferred Securities might properly be paid.
SECTION 8.2. INDEMNIFICATION.
Subject to Section 3.1(d), the Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without gross negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 8.2 shall survive the
termination of this Convertible Preferred Securities Guarantee.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Convertible
Preferred Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit
of the Holders of the Convertible Preferred Securities then outstanding.
Except in connection with any permitted merger or consolidation of the
Guarantor with or into another entity or any permitted sale, transfer or
lease of the Guarantor's assets to another entity as described in the
Indenture, the Guarantor may not assign its rights or delegate its
obligations under this Convertible Preferred Securities Guarantee without the
prior approval of the Holders of at least a Majority of the aggregate stated
liquidation amount of the Convertible Preferred Securities then outstanding.
SECTION 9.2. AMENDMENTS.
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no vote will be required), this
Convertible Preferred Securities Guarantee may be amended only with the prior
approval of the Holders of at least a Majority in liquidation amount of all
the outstanding Convertible Preferred Securities. The provisions of Section
11.2 of the Declaration with respect to meetings of Holders of the
Convertible Preferred Securities apply to the giving of such approval.
SECTION 9.3. NOTICES.
All notices provided for in this Convertible Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice,
and shall be delivered, sent by facsimile or courier or mailed by registered
or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred Guarantee Trustee may give notice of to the Holders
of the Convertible Preferred Securities):
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee, Administration
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(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give
notice of to the Holders of the Convertible Preferred Securities):
Sun Healthcare Group, Inc.
101 Sun Avenue, N.E.
Albuquerque, New Mexico 87109
Attention: Robert F. Murphy, Esq.
Senior Vice President, General Counsel and Secretary
(c) If given to any Holder at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by registered or
certified first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 9.4. BENEFIT.
This Convertible Preferred Securities Guarantee is solely for the
benefit of the Holders of the Convertible Preferred Securities and, subject
to Section 3.1(a), is not separately transferable from the Convertible
Preferred Securities.
SECTION 9.5. GOVERNING LAW.
THIS CONVERTIBLE PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD
TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
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THIS CONVERTIBLE PREFERRED SECURITIES GUARANTEE is executed as of the
day and year first above written.
SUN HEALTHCARE GROUP, INC.,
as Guarantor
By: /s/ Robert D. Woltil
-------------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
THE BANK OF NEW YORK,
as Preferred Guarantee Trustee
By: /s/ Mary LaGumina
-------------------------------------
Name: Mary LaGumina
Title: Assistant Vice President
<PAGE>
Exhibit 10.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 4, 1998
BY AND AMONG
SUN HEALTHCARE GROUP, INC.
AS ISSUER,
THE GUARANTORS NAMED HEREIN
AND
BEAR, STEARNS & CO. INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
J.P. MORGAN SECURITIES INC.,
NATIONSBANC MONTGOMERY SECURITIES LLC
AND
SCHRODER & CO. INC.
AS INITIAL PURCHASERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of May 4, 1998, among SUN HEALTHCARE GROUP, INC., a Delaware
corporation (the "Issuer"), the Guarantors named herein, and BEAR, STEARNS &
CO. INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, J.P. MORGAN
SECURITIES INC., NATIONSBANC MONTGOMERY SECURITIES LLC and SCHRODER & CO.
INC. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
April 29, 1998, among the Issuer, the Guarantors and the Initial Purchasers
(the "Purchase Agreement"), which provides for the sale by the Issuer to the
Initial Purchasers of $125,000,000 (or up to $150,000,000 if the Initial
Purchasers exercise the over-allotment option) aggregate principal amount of
9 3/8% Senior Subordinated Notes due 2008 and the related guarantees by the
Guarantors (collectively, the "Notes"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuer and the
Guarantors have agreed to provide to the Initial Purchasers and their
respective direct and indirect transferees, among other things, the
registration rights for the Notes set forth in this Agreement. The execution
of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein without definition shall have the respective meanings ascribed to them
by the Purchase Agreement):
APPLICABLE PERIOD: See Section 2(b) hereof.
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
EFFECTIVENESS TARGET DATE: See Section 4(a)(ii) hereof.
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EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2(a) hereof.
GUARANTORS: As defined in the Indenture.
HOLDER: Any holder of Transfer Restricted Securities.
INDEMNIFIED PARTY: See Section 7 hereof.
INDEMNIFIED PERSON: See Section 7 hereof.
INDEMNIFYING PERSON: See Section 7 hereof.
INDENTURE: The Indenture, dated as of the date hereof, by and
among the Issuer, the Guarantors and First Trust National Association as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraphs to this
Agreement.
INSPECTORS: See Section 3(m) hereof.
ISSUE DATE: As defined in the Offering Memorandum.
ISSUER: See the introductory paragraphs to this Agreement.
LIQUIDATED DAMAGES: See Section 4(a) hereof.
NOTES: See the introductory paragraphs to this Agreement.
OFFERING MEMORANDUM: The final Offering Memorandum dated April 29,
1998 related to the sale of the Notes.
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PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON or PERSON: An individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association, union,
business association, limited liability company, limited liability
partnership, firm or other legal entity.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Exchange Notes and/or the Transfer Restricted Securities (as
applicable), covered by such Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
RECORDS: See Section 4(m) hereof.
REGISTRATION DEFAULT: See Section 4(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Issuer
and the Guarantors, including, but not limited to, the Exchange Offer
Registration Statement or a registration statement of the Issuer and the
Guarantors that otherwise covers any of the Transfer Restricted Securities
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
RULE 144A: Rule 144A promulgated pursuant to the Securities Act,
as currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
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RULE 415: Rule 415 promulgated pursuant to the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder.
TRANSFER RESTRICTED SECURITIES: The Notes upon original issuance
thereof and at all times subsequent thereto, until (i) a Registration
Statement covering such Notes has been declared effective by the SEC and such
Notes have been disposed of in accordance with such effective Registration
Statement, (ii) such Notes are sold in compliance with Rule 144 or are
eligible for sale under Rule 144(k), (iii) such Notes cease to be outstanding
or (iv) if the Security has otherwise been transferred and a new Security not
subject to transfer restrictions under the Securities Act has been delivered
by or on behalf of the Issuer in accordance with the Indenture.
TRUSTEE: The trustee under the Indenture and, if existent, under any
indenture governing the Exchange Notes.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration
in which securities of the Issuer or a Guarantor are sold to an underwriter
for reoffering to the public.
2. EXCHANGE OFFER
(a) To the extent not prohibited by applicable law or applicable
interpretations of the Staff of the SEC, the Issuer and the Guarantors agree
to file with the SEC within 90 days after the Issue Date a registration
statement under the Securities Act with respect to an offer to exchange (the
"Exchange Offer") any and all of the Transfer Restricted Securities for a
like aggregate principal amount of debt
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securities of the Issuer and the Guarantors (the "Exchange Notes"), which
Exchange Notes will be (i) substantially identical in all material respects
to the Notes, except that such Exchange Notes will not contain terms with
respect to transfer restrictions and the identity of the Guarantors may
change in accordance with the terms of the Indenture and, (ii) entitled to
the benefits of the Indenture or a trust indenture which is identical to the
Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC
to effect or maintain the qualification thereof under the TIA), and which, in
either case, has been qualified under the TIA, and (iii) registered pursuant
to an effective Registration Statement in compliance with the Securities Act.
The Exchange Offer will be registered pursuant to the Securities Act on an
appropriate form of Registration Statement (the "Exchange Offer Registration
Statement"), and will comply with all applicable tender offer rules and
regulations promulgated pursuant to the Exchange Act and shall be duly
registered or qualified pursuant to all applicable state securities or Blue
Sky laws. The Exchange Offer shall not be subject to any condition, other
than that the Exchange Offer does not violate any applicable law, policy or
interpretation of the staff of the SEC. No securities shall be included in
the Exchange Offer Registration Statement other than the Transfer Restricted
Securities and the Exchange Notes. The Issuer and the Guarantors agree to
use their reasonable best efforts to cause such Exchange Offer Registration
Statement to be declared effective under the Securities Act within 180 days
after the Issue Date. Promptly after the Exchange Offer Registration
Statement is declared effective, the Issuer and Guarantors will commence the
offer of Exchange Notes in exchange for properly tendered Notes. The Issuer
and Guarantors will keep the Exchange Offer open for not less than 20
business days (or such longer period required by applicable law) after the
date that the notice of the Exchange Offer referred to below is mailed to
Holders. For each Note validly tendered pursuant to the Exchange Offer, the
holder of such Note will receive the Exchange Notes having a principal amount
at maturity equal to that of the tendered Note.
Each Holder who participates in the Exchange Offer will be required
to represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes, and that such Holder is not an
"affiliate" of the Issuer within the meaning of Rule 405 of the Securities
Act (or that if it is such an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable). Each Holder that is not a Participating Broker-Dealer will be
required
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to represent that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes. Each Holder that (i) is a Participating
Broker-Dealer and (ii) will receive Exchange Notes for its own account in
exchange for the Transfer Restricted Securities that it acquired as the
result of market-making or other trading activities will be required to
acknowledge that it will deliver a Prospectus as required by law in
connection with any resale of such Exchange Notes. The Issuer shall allow
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use the Prospectus included in the
Exchange Offer Registration Statement in connection with the resale of the
Exchange Notes. Upon consummation of the Exchange Offer in accordance with
this Agreement, the Issuer and the Guarantors shall have no further
obligation to register Transfer Restricted Securities pursuant to Section 3
of this Agreement.
(b) The Issuer and the Guarantors shall include within the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), of Exchange Notes received by such broker-dealer in the Exchange Offer
(a "Participating Broker-Dealer"). Such "Plan of Distribution" section shall
also allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
The Issuer and the Guarantors shall use their reasonable best
efforts to keep the Exchange Offer Registration Statement effective under the
Securities Act and to amend and supplement the Prospectus contained therein,
in order to permit such Prospectus to be lawfully delivered by all persons
subject to the prospectus delivery requirements of the Securities Act for
such period of time as such persons must comply with such requirements in
order to resell the Exchange Notes; PROVIDED that such period shall not
exceed 90 days after consummation of the Exchange Offer (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
In connection with the Exchange Offer, the Issuer and the Guarantors
shall:
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(a) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(c) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Exchange Offer shall remain open by sending to the
institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice, a telegram, telex,
facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Transfer Restricted Securities
delivered for exchange and a statement that such Holder is
withdrawing his or her election to have such Transfer Restricted
Securities exchanged.
As soon as practicable after the close of the Exchange Offer, the
Issuer and the Guarantors shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes equal in principal amount to the Notes of
such Holder so accepted for exchange.
(c) If (1) prior to the consummation of the Exchange Offer, any
change in law or in the applicable interpretations of the staff of the SEC do
not permit the Issuer and the Guarantors to effect the Exchange Offer, or (2)
if for any other reason the Exchange Offer is not consummated (but the
registration statement with respect to the Exchange Offer has been declared
effective) within 225 days of the Issue Date, then the Issuer shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice"), and the Issuer and the Guarantors shall file a Registration
Statement pursuant to Section 3 hereof. Following the delivery of a Shelf
Notice to the Holders of Transfer Restricted Securities, the Issuer and the
Guarantors shall not
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have any further obligation to conduct the Exchange Offer pursuant to this
Section 2, PROVIDED that the Issuer and the Guarantors shall have the right,
nonetheless, to proceed to consummate the Exchange Offer notwithstanding
their obligations pursuant to this Section 2(c) (and, upon such consummation,
their obligation to consummate a Shelf Registration shall terminate).
3. SHELF REGISTRATION
If the Issuer and the Guarantors are required to deliver a Shelf
Notice as contemplated by Section 2(c) hereof, then:
SHELF REGISTRATION. The Issuer and the Guarantors shall prepare
and file with the SEC, within 60 days after such filing obligation arises, a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Transfer Restricted Securities (the
"Shelf Registration Statement"). The Shelf Registration shall be on Form S-3
or another appropriate form permitting registration of the Transfer
Restricted Securities for resale by the Holders in the manner or manners
reasonably designated by the Holders of a majority in aggregate principal
amount of the outstanding Transfer Restricted Securities (including, without
limitation, an underwritten offering). The Issuer and the Guarantors shall
not permit any securities other than the Transfer Restricted Securities to be
included in the Shelf Registration Statement. The Issuer and the Guarantors
shall use their reasonable best efforts to cause the Shelf Registration
Statement to be declared effective pursuant to the Securities Act on or prior
to 60 days after the filing of such Shelf Registration Statement and to keep
the Shelf Registration Statement continuously effective under the Securities
Act until the earlier of (i) the date which is 24 months after the Issue
Date, (ii) the date that all Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement or (iii) the date that there
ceases to be outstanding any Transfer Restricted Securities (the
"Effectiveness Period"); PROVIDED, HOWEVER, that no Holder shall be entitled
to have the Transfer Restricted Securities held by it covered by such Shelf
Registration Statement unless such Holder is in compliance with Section 5(s).
4. LIQUIDATED DAMAGES
(a) The Issuer, the Guarantors and the Initial Purchasers agree
that the Holders of Transfer Restricted Securities will suffer damages if the
Issuer or the Guarantors fail to fulfill their obligations pursuant to
Section 2 or Section 3 hereof and
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that it would not be possible to ascertain the extent of such damages.
Accordingly, in the event of such failure by the Issuer or the Guarantors to
fulfill such obligations, the Issuer hereby agrees to pay liquidated damages
("Liquidated Damages") to each Holder of Transfer Restricted Securities under
the circumstances and to the extent set forth below:
(i) if either the Exchange Offer Registration Statement or the Shelf
Registration Statement has not been filed with the SEC on or prior to the
date specified for such filing; or
(ii) if either the Exchange Offer Registration Statement or the
Shelf Registration Statement is not declared effective by the SEC on
or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"); or
(iii) if an Exchange Offer Registration Statement becomes
effective, and the Issuer and the Guarantors fail to consummate the
Exchange Offer within 45 days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement; or
(iv) the Shelf Registration Statement is declared effective by
the SEC and such Shelf Registration Statement ceases to be effective
or usable in connection with resales of Notes during the
Effectiveness Period;
(any of the foregoing, a "Registration Default"), then the Issuer shall pay
Liquidated Damages to each Holder, during the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder. Upon a Registration Default, Liquidated Damages will
accrue at the rate specified above until such Registration Default is cured
and the amount of Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Transfer Restricted Securities during
each subsequent 90-day period, up to a maximum amount of Liquidated Damages
of $.25 per week per $1,000 principal amount of Transfer Restricted
Securities (regardless of whether one or more than one Registration Default
is outstanding). The Issuer shall only be required to pay Liquidated Damages
for the number of weeks during which there is a Registration Default.
Following the cure of any Registration Default relating to any Transfer
Restricted Securities, the accrual of Liquidated Damages with respect to such
Registration Default will cease and, if there is a subsequent Registration
Default, the 90-day period used for calculating the amount of Liquidated
Damages shall be as if no Registration Default had occurred.
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A Registration Default under clause (i) above shall be cured on the date that
either the Exchange Offer Registration Statement or the Shelf Registration
Statement is filed with the SEC; a Registration Default under clause (ii)
above shall be cured on the date that either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective by the
SEC; a Registration Default under clause (iii) above shall be cured on the
earlier of the date (A) the Exchange Offer is consummated or (B) the Issuer
and the Guarantors deliver a Shelf Notice to the Holders of Transfer
Restricted Securities; and a Registration Default under clause (iv) above
shall be cured on the earlier of (A) the date the Shelf Registration
Statement is declared effective, (B) the Effectiveness Period expires or (C)
the date of the consummation of the Exchange Offer.
(b) The Issuer shall promptly notify the Trustee after each and
every date on which a Registration Default first occurs. Accrued and unpaid
Liquidated Damages shall be paid by the Issuer to the Holders in the same
manner interest and principal payments are made pursuant to the Indenture by
wire transfer of immediately available funds to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts
have been specified on each interest payment date provided in the Indenture
(whether or not any interest is then payable on the Notes) and on each
payment date provided in the Indenture including, without limitation, whether
upon redemption, maturity (by acceleration or otherwise), purchase upon a
change of control or purchase upon a sale of assets. Each obligation to pay
Liquidated Damages with respect to any Registration Default shall be deemed
to commence accruing on the date of such Registration Default and to cease
accruing when such Registration Default has been cured. In no event shall
the Issuer pay Liquidated Damages in excess of the applicable maximum weekly
amount set forth above, regardless of whether one or multiple Registration
Defaults exist.
(c) The parties hereto agree that the Liquidated Damages provided
for in this Section 4 constitute a reasonable estimate of the damages that
will be suffered by Holders by reason of the failure to file the Exchange
Offer Registration Statement or the Shelf Registration Statement, the failure
of the Exchange Offer Registration Statement or the Shelf Registration
Statement to be declared effective, the failure to consummate the Exchange
Offer or the failure of the Shelf Registration Statement to remain effective,
as the case may be, in accordance with this Agreement.
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5. REGISTRATION PROCEDURES
In connection with the registration of any Exchange Notes or
Transfer Restricted Securities pursuant to Sections 2 or 3 hereof, the Issuer
and the Guarantors shall effect such registration to permit the sale of such
Exchange Notes or Transfer Restricted Securities (as applicable) in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Issuer and the Guarantors shall:
(a) prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and
to use their reasonable best efforts to cause such Registration Statement to
become effective and remain effective as provided herein; PROVIDED that if
(1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to
Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before going effective on any Registration Statement or
Prospectus or filing any amendments or supplements thereto, the Issuer and
the Guarantors shall furnish to and afford the Initial Purchasers and their
counsel (and, in the case of a Shelf Registration Statement, the Holders of
the Transfer Restricted Securities covered thereby and their counsel and the
managing underwriters, if any) a reasonable opportunity to review copies of
all such documents filed or proposed to be filed. Such documents shall be so
furnished at least 3 business days prior to going effective or such later
date as is reasonable under the circumstances. The Issuer and the Guarantors
shall not file any Registration Statement or Prospectus or any amendments or
supplements thereto if the Initial Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities covered by
such Registration Statement and their counsel, or the managing underwriters,
if any), shall reasonably object on a timely basis (except that documents
filed as exhibits that are incorporated by reference or deemed to be
incorporated by reference shall not be subject to such objections);
(b) prepare and file with SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the
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related Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder with respect to the disposition
of all securities covered by such Registration Statement, as so amended, or
in such Prospectus, as so supplemented, and with respect to the subsequent
resale of any Notes being sold by a Participating Broker-Dealer covered by
any such Prospectus; the Issuer and the Guarantors shall be deemed not to
have used their reasonable best efforts to keep a Registration Statement
effective during the Applicable Period or the Effectiveness Period, as the
case may be, if they voluntarily take any action that would result in selling
Holders of the Transfer Restricted Securities covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Transfer Restricted Securities or such Exchange Notes during such
Period, unless (i) such action is required by applicable law, or (ii) such
action is taken by them in good faith and for valid business reasons (not
including avoidance of their obligations hereunder), including the
acquisition or divestiture of assets;
(c) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, the Company shall
notify the selling Holders of Transfer Restricted Securities that have
provided in writing to the Company a telephone or facsimile number and
address for notices, or each Participating Broker-Dealer that has provided in
writing to the Company a telephone or facsimile number and address for
notices, as the case may be, their counsel if such counsel has provided in
writing to the Company a telephone or facsimile number and address for
notices and the managing underwriters, if any, promptly and, if requested,
confirm such notice in writing, (i) when a Prospectus, any prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective (including in any such written notice a statement that any
Holder may, upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) of the receipt by the Issuer or any
Guarantor of any
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notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Transfer
Restricted Securities or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation of any
proceeding for such purpose, (iv) of the happening of any material event or
any material information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (v) of the Issuer's and the Guarantors' reasonable
determination that sales under the Registration Statement need to be
terminated to comply with applicable law or that a post-effective amendment
to a Registration Statement would be appropriate;
(d) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, use their
reasonable best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus and, if any such order is issued, to use
their reasonable best efforts to obtain the withdrawal of any such order at
the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section
3 hereof and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold in connection with an underwritten offering,
(i) promptly incorporate in a prospectus supplement or post-effective
amendment such information relating to underwriters, if any, any Holder of
Transfer Restricted Securities or the plan of distribution of the Transfer
Restricted Securities as the managing underwriter, if any, or such Holders
may reasonably request to be included therein, (ii) make all required filings
of such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Issuer has received notification of the
matters to be incorporated
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in such prospectus supplement or post-effective amendment pursuant to clause
(i), and (iii) supplement or make amendments to such Registration Statement
with such information as is required in connection with any request made
pursuant to clause (i);
(f) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, furnish to each
selling Holder of Transfer Restricted Securities and to each such
Participating Broker-Dealer who so requests and to each managing underwriter,
if any, without charge, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, deliver to each
selling Holder, or each such Participating Broker-Dealer, as the case may be,
its counsel, and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of preliminary
Prospectus), and each amendment or supplement thereto and any documents
incorporated by reference therein, as such Persons may reasonably request;
and, subject to the last paragraph of this Section 5 hereof, the Issuer and
the Guarantors hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders or, during the
Applicable Period, each such Participating Broker-Dealer, as the case may be,
and their underwriters or agents, if any, and dealers, if any, in connection
with the offering and sale of the Transfer Restricted Securities covered by
or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to
such Prospectus and any amendment or supplement thereto;
(h) prior to any public offering of Transfer Restricted Securities
or any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, use their reasonable best efforts to register
or qualify, and to cooperate with the selling Holders of Transfer Restricted
Securities or each such Participating Broker-Dealer, as the case may be, the
underwriters, if any, and their
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respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Transfer
Restricted Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions as any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request in writing;
keep each such registration or qualification (or exemption therefrom),
effective during the period such Registration Statement is required to be
kept effective and do any and all other acts or things reasonably necessary
or advisable to enable the disposition in such jurisdictions of the Exchange
Notes held by Participating Broker-Dealers or the Transfer Restricted
Securities covered by the applicable Registration Statement; PROVIDED that
the Issuer and the Guarantors shall not be required to (A) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where
they are not then so qualified, (B) take any action that would subject them
to general service of process in any such jurisdiction where they are not
then so subject or (C) subject themselves to taxation in any such
jurisdiction where they are not then so subject;
(i) if a Shelf Registration Statement is filed pursuant to Section
3 hereof, cooperate with the selling Holders of Transfer Restricted
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"), and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the managing underwriters, if
any, or Holders may reasonably request at least two business days prior to
any sale of the Transfer Restricted Securities;
(j) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(iv) or 5(c)(v) as
promptly as practicable, to prepare and (subject to Section 5(a) hereof),
file with the SEC, at the expense of the Issuer, a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Transfer Restricted Securities
being sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or
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omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
(k) prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, (i) provide the
Trustee with certificates for the Transfer Restricted Securities in a form
eligible for deposit with DTC and (ii) use its reasonable best efforts to
provide a CUSIP number for the Transfer Restricted Securities;
(l) in connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into
an underwriting agreement as is customary in underwritten offerings and take
all other customary and appropriate actions as are reasonably requested by
the managing underwriters in order to expedite or facilitate the registration
or the disposition of such Transfer Restricted Securities, and in such
connection, (i) make such representations and warranties to the underwriters,
with respect to the business of the Issuer, the Guarantors and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings; (ii)
use their reasonable best efforts to obtain opinions of counsel to the Issuer
and Guarantors and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested
by underwriters; (iii) use their reasonable best efforts to obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent certified
public accountants of the Issuer and the Guarantors (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Issuer or the Guarantors or of any business acquired by any of them for which
financial statements and financial data are, or are required to be, included
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings
and such other matters as are reasonably requested by underwriters as
permitted by STATEMENT ON AUDITING STANDARDS NO. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 7 hereof with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
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(m) if (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Transfer Restricted Securities being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Transfer Restricted
Securities, if any, and any attorney, accountant or other agent retained by
any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Issuer, the
Guarantors and their subsidiaries (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Issuer, the Guarantors and their subsidiaries to supply all relevant
information reasonably requested by any such Inspector in connection with
such Registration Statement as is customary for due diligence examinations;
provided, however, that the foregoing inspection and information gathering
shall, to the extent reasonably possible, be coordinated on behalf of the
Inspectors by one counsel designated by and on behalf of all such Inspectors.
Records which the Issuer determines, in good faith, to be confidential and
any Records which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors, unless (i) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction and only to the extent required thereby or (ii) the information
in such Records has been made generally available to the public, other than
as a result of the disclosure or failure to safeguard by such Inspector;
(n) provide an indenture trustee for the Transfer Restricted
Securities or the Exchange Notes, as the case may be, and cause the Indenture
to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Transfer Restricted
Securities, to effect such changes to such indenture as may be required for
such indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their reasonable best efforts to cause such trustee to
execute, all customary documents as may be required to effect such changes,
and all other forms and documents required to be filed with the SEC to enable
such indenture to be so qualified in a timely manner;
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(o) use their reasonable best efforts to comply with all
applicable rules and regulations of the SEC and, as soon as reasonably
practicable after the effective date of the applicable Registration
Statement, make generally available to the holders of Exchange Notes and the
Holders, if any, a consolidated earning statement of the Issuer that
satisfies the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(p) if an Exchange Offer is to be consummated, upon delivery of
the Transfer Restricted Securities by Holders to the Issuer (or to such other
Person as directed by the Issuer), in exchange for the Exchange Notes, mark,
or cause to be marked, on such Transfer Restricted Securities that such
Transfer Restricted Securities are being cancelled in exchange for the
Exchange Notes; in no event shall such Transfer Restricted Securities be
marked as paid or otherwise satisfied;
(q) cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD");
(r) use their reasonable best efforts to take all other steps
necessary to effect the registration of the Transfer Restricted Securities
covered by a Registration Statement contemplated hereby; and
(s) The Issuer and the Guarantors may require each seller of
Transfer Restricted Securities or Participating Broker-Dealer as to which any
registration is being effected to furnish to the Issuer such information
regarding such seller or Participating Broker-Dealer and the distribution of
such Transfer Restricted Securities or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, as the Issuer may, from time
to time, reasonably request. The Issuer may exclude from such registration
the Transfer Restricted Securities or Exchange Notes of any seller or
Participating Broker-Dealer, as the case may be, who fails to furnish such
information within a reasonable time after receiving such request.
Each Holder of Transfer Restricted Securities and each
Participating Broker-Dealer agrees by acquisition of such Transfer Restricted
Securities or Exchange Notes to be sold by such Participating Broker-Dealer,
as the case may be, that, upon receipt of any notice from the Issuer of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv),
5(c)(v) or 5(c)(vi) hereof, such Holder
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shall forthwith discontinue disposition of such Transfer Restricted
Securities covered by such Registration Statement or Prospectus or such
Exchange Notes to be sold by such Participating Broker-Dealer, as the case
may be, until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is
advised in writing by the Issuer that the use of the applicable Prospectus
may be resumed, and has received copies of any amendments or supplements
thereto.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer and the Guarantors shall be
borne by the Issuer and the Guarantors, whether or not the Exchange Offer or
a Shelf Registration Statement is filed or becomes effective, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with
Blue Sky qualifications of the Transfer Restricted Securities or Exchange
Notes), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Transfer Restricted Securities or Exchange Notes in
a form eligible for deposit with DTC and of printing Prospectuses, (iii) fees
and disbursements of counsel for the Issuer and the Guarantors, (iv) fees and
disbursements of all independent certified public accountants referred to in
Section 5(l)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (v) the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the By-laws of the NASD, (vi) rating
agency fees, (vii) fees and expenses of all other Persons retained by the
Issuer and the Guarantors, (viii) internal expenses of the Issuer and the
Guarantors (including, without limitation, all salaries and expenses of
officers and employees of the Issuer and the Guarantors performing legal or
accounting duties), (ix) the expense of any annual audit and (x) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange. Nothing contained in this Section 6
shall create an obligation on the part of the Issuer or any Guarantor to pay
or reimburse any Holder for any underwriting commission or discount
attributable to any such Holder's Transfer Restricted Securities included in
an underwritten offering pursuant to a Registration Statement filed in
accordance with the terms of this Agreement, or to guarantee such Holder any
profit or proceeds from the sale of such Notes.
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(b) In connection with any Shelf Registration Statement hereunder,
the Issuer and the Guarantors shall reimburse the Holders of the Transfer
Restricted Securities being registered in such registration for the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities to be included in such Registration Statement.
7. INDEMNIFICATION
In connection with any Registration Statement, the Issuer and the
Guarantors jointly and severally agree to indemnify and hold harmless (i) the
Initial Purchasers, (ii) each Holder covered thereby and, with respect any
Prospectus delivery as contemplated by the second paragraph of Section 2(b),
each Participating Broker-Dealer, (iii) each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), any such Person (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person"), and (iv) the
respective officers, directors, partners, employees, representatives and
agents of any of such Person or any controlling person (any person referred
to in clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"Indemnified Person"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with defending
and investigating any matter, including any action that could give rise to
any such losses, claims, damages, liabilities or judgments) directly or
indirectly based upon or arising out of any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
or any Prospectus (as amended or supplemented if the Issuer shall have
furnished to such Indemnified Person any amendments or supplements thereto),
or any preliminary prospectus, arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities arise out of or are based upon
(i) any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information relating to any
Indemnified Person furnished to the Issuer or any underwriter in writing by
such Indemnified Person expressly for use therein, or (ii) any untrue
statement contained in or omission from a preliminary Prospectus or
Prospectus if a copy of the Prospectus (as then amended or supplemented, if
the Issuer shall have furnished to or on behalf of the Holder participating
in the distribution relating to the relevant Registration Statement any
amendments or supplements thereto) was not sent or given
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by or on behalf of such Holder to the person asserting any such losses,
liabilities, claims, damages or expenses who purchased Notes, if such
Prospectus (or Prospectus as amended or supplemented), is required by law at
or prior to the written confirmation of the sale of such Notes to such person
and the untrue statement contained in or omission from such preliminary
Prospectus or Prospectus was corrected in the Prospectus (or the Prospectus
as amended or supplemented) or (iii) the Holder has not complied with the
last paragraph of Section 5 of this Agreement.
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, each Guarantor, each person who controls the Issuer
or the Guarantors within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the respective partners, directors,
officers, representatives, employees and agents of such person or controlling
person to the same extent as the foregoing indemnity from the Issuer and the
Guarantors to each Indemnified Person, but only with reference to information
relating to such Holder furnished to the Issuer in writing by or on behalf of
such Holder expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto, or any preliminary Prospectus. The
liability of any Indemnified Person pursuant to this paragraph shall in no
event exceed the net proceeds received by such Indemnified Person from sales
of Transfer Restricted Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "Indemnified
Party"), shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person"), in writing (enclosing a copy of all
papers served on such indemnified party), and the Indemnifying Person, upon
request of the Indemnified Party, shall assume promptly the defense of such
action, including the employment of counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding. In any such proceeding, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party, unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the Indemnifying Person (ii) the Indemnifying Person failed promptly to
assume the defense and employ counsel
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reasonably satisfactory to the Indemnified Party or (iii) the named parties
to any such action (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Person, or any affiliate of the
Indemnifying Person, and such Indemnified Party shall have been reasonably
advised by counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to the
Indemnifying Person or such affiliate of the Indemnifying Person (in which
case the Indemnifying Person shall not have the right to assume the defense
of such action on behalf of such Indemnified Party). In any such case, the
Indemnifying Person shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel), for all such indemnified parties, which
firm shall be designated in writing by those indemnified parties who sold a
majority in outstanding aggregate principal amount of Transfer Restricted
Securities sold by all such indemnified parties, and any such separate firm
for the Issuer and the Guarantors, their directors, their officers and such
control persons of the Issuer and the Guarantors shall be designated in
writing by the Issuer. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its written consent, which
consent shall not be unreasonably withheld, but if settled with such consent
or if there be a final judgment for the plaintiff, the Indemnifying Person
agrees to indemnify any Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. No Indemnifying Person
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to an Indemnified Party in
respect of any losses, claims, damages, liabilities, judgments, actions or
expenses referred to therein (other than by reason of the exceptions provided
therein), then each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits of the Indemnified Party on the
one hand and the Indemnifying Person(s) on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses or (ii)
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if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Indemnifying Person(s) and the Indemnified Party, as well as any other
relevant equitable considerations. The relative fault of the Issuer and the
Guarantors on the one hand and any Indemnified Party(s) on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuer and the
Guarantors or by such Indemnified Party(s) and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if such indemnified parties were treated as one entity for
such purpose), or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, liabilities, claims, damages, judgments, actions and
expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any reasonable legal
or other expenses actually incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 7, in no event shall an Indemnified Person be
required to contribute any amount in excess of the amount by which proceeds
received by such Indemnified Person from sales of Transfer Restricted
Securities or Exchange Notes exceeds the amount of any damages that such
Indemnified Person has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act), shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
7 will be in addition to any liability which the indemnifying parties may
otherwise have to the indemnified parties referred to above. The Indemnified
Persons' obligations to contribute pursuant to this Section 7 are several in
proportion to the respective principal amount of Notes sold by each of the
Indemnified Persons hereunder and not joint.
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8. RULES 144 AND 144A
The Issuer and the Guarantors covenant that they will file the
reports required to be filed by them pursuant to the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Issuer and the Guarantors are not
required to file such reports, they will, upon the request of any Holder of
Transfer Restricted Securities, make available information required by Rule
144 and Rule 144A under the Securities Act in order to permit sales pursuant
to Rule 144 and Rule 144A. The Issuer and the Guarantors further covenant
that they will take such further action as any Holder of Transfer Restricted
Securities may reasonably request, all to the extent required from time to
time to enable such Holder to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 and Rule 144A or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. UNDERWRITTEN REGISTRATIONS
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in
aggregate principal amount of such Transfer Restricted Securities included in
such offering and shall be reasonably acceptable to the Issuer. The Issuer
and the Guarantors shall not be obligated to arrange for more than one
underwritten offering during the Effectiveness Period.
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder, unless such Holder (a) agrees to sell
such Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters
in an underwritten offering or by a placement agent in a private offering of
the Issuer's or the Guarantors' debt securities, not to effect any private
sale or distribution (including a sale pursuant to Rule 144(k) or Rule 144A
under the Securities Act, but excluding non-public sales to any of its
affiliates, officers, directors, employees and controlling
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persons), of any of the Notes except pursuant to an Exchange Offer, during
the period beginning 10 days prior to, and ending 90 days after, the closing
date of the underwritten offering.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement.
The Issuer and the Guarantors agree not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Issuer or
the Guarantors or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or any Guarantor substantially similar
to the Notes (other than (i) the Notes, (ii) commercial paper issued in the
ordinary course of business, (iii) securities issued in transactions not
registered under the Securities Act (although they may be subject to
registration rights agreements) in connection with acquisitions by the Issuer
or any of its subsidiaries or pursuant to agreements of the Issuer entered
into prior to the 10 day period referred to below which were not entered into
in contemplation of these restrictions, (iv) securities issued pursuant to
employee benefits plans and (v) securities issued upon exercise of stock
options or convertible or exchangeable securities outstanding prior to the 10
day period referred to below), during such reasonable and customary period
beginning 10 days prior to, and ending 60 days after the closing date of each
underwritten offering made pursuant to such Registration Statement as the
managing underwriters therefor request, without the prior written consent of
such managing underwriters of an underwritten offering of Transfer Restricted
Securities covered by a Registration Statement filed pursuant to Section 3
hereof; PROVIDED, HOWEVER, that the Issuer and the Guarantors shall not be
obligated to comply with the last paragraph of this Section 8 more than once
unless certain Holders of Transfer Restricted Securities have not been given
the benefit of this provision because of some action on the part of the
Issuer or a Guarantor (and in no case shall the Issuer and the Guarantors be
obligated to comply with this provision on more than one occasion in any
12-month period.
10. MISCELLANEOUS
(a) OTHER REGISTRATION RIGHTS. The Issuer and the Guarantors may
grant registration rights that would permit any Person that is a third party
the right to piggyback on any Shelf Registration Statement; PROVIDED that if
the managing underwriter, if any, of such offering delivers an opinion to the
selling Holders that the total amount of securities which they and the
holders of such piggyback rights intend
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to include in any Shelf Registration is so large as to materially adversely
affect the success of such offering (including the price at which such
securities can be sold), then only the amount, number or kind of securities
to be offered for the account of the holders of such piggyback rights will
be reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended by
the managing underwriter prior to any reduction in the amount of Transfer
Restricted Securities to be included.
(b) REMEDIES. In the event of a breach by the Issuer or any
Guarantor of any of its obligations under this Agreement, each Holder of
Transfer Restricted Securities, in addition to being entitled to exercise all
rights provided herein, in the Indenture or, in the case of the Initial
Purchasers, in the Purchase Agreement, or granted by law, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement. Subject to Section 4, the Issuer and the Guarantors agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by any of them of any of the provisions of this Agreement
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate.
(c) NO INCONSISTENT AGREEMENTS. The Issuer and the Guarantors
have not, as of the date hereof, and they shall not, after the date of this
Agreement, enter into any agreement with respect to any of their respective
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent
of Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to or departure from the provisions hereof with respect to
a matter that relates exclusively to the rights of Holders whose securities
are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of
other Holders may be given by Holders of at least a majority in aggregate
principal amount of the Transfer Restricted Securities being sold by such
Holders pursuant to such Registration Statement; PROVIDED that the provisions
of this sentence
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may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee),
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or
telecopier:
(i) if to a Holder of Transfer Restricted Securities, at the
most current address given by the Trustee to the Issuer;
(ii) if to the Issuer or the Guarantors, Sun Healthcare Group,
Inc., 101 Sun Avenue, N.E., Albuquerque, New Mexico 87109, Attention:
Chief Financial Officer, with a copy to Shearman & Sterling, 555
California Street, Suite 2000, San Francisco, California 94104,
Attention: William H. Hinman, Esq.; and
(iii) if to any Initial Purchasers, c/o Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, Attention: Syndicate
Department, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP at
300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Jonathan H. Grunzweig, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a nationally recognized next-day
air courier, if made by next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied on a business day on such
business day, if not on a business day, on the first business day thereafter.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee under
the Indenture at the address specified in such Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto, including, without limitation and without the need for an
express assignment, subsequent Holders of Transfer Restricted Securities.
The Issuer and the Guarantors
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agree that the Holders of the Notes shall be third party creditor
beneficiaries to the agreements made hereunder by the Initial Purchasers, the
Issuer and the Guarantors, and each Holder shall have the right to enforce
such agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties hereto that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) NOTES HELD BY THE ISSUER, THE GUARANTORS OR THEIR RESPECTIVE
AFFILIATES. Whenever the consent or approval of Holders of a specified
percentage of Transfer Restricted Securities is required hereunder, Transfer
Restricted Securities held by the Issuer, the Guarantors, or their respective
affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than the Initial Purchasers or
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<PAGE>
subsequent Holders of Transfer Restricted Securities or Exchange Notes if
such subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Transfer Restricted Securities or Exchange Notes), shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(m) SURVIVAL. This Agreement is intended to survive the consummation
of the transactions contemplated by the Purchase Agreement. The indemnification
and contribution obligations under section 7 of this Agreement shall survive the
termination of the Issuer's and the Guarantors' obligations under sections 2 and
3 of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SUN HEALTHCARE GROUP, INC.
By: /s/ Robert D. Woltil
------------------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
GUARANTORS, as listed on Schedule I
to the Purchase Agreement
By: /s/ Robert D. Woltil
------------------------------------
Name: Robert D. Woltil
Title: Authorized Signatory
<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SCHRODER & CO. INC.
By: BEAR, STEARNS & CO. INC.
By: /s/ Curtis Lane
------------------------------------
Name: Curtis Lane
Title: Senior Managing Director
<PAGE>
Exhibit 10.7
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 4, 1998
BY AND AMONG
SUN FINANCING I
AS ISSUER,
SUN HEALTHCARE GROUP, INC.
AS GUARANTOR,
AND
BEAR, STEARNS & CO. INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
J.P. MORGAN SECURITIES INC.,
NATIONSBANC MONTGOMERY SECURITIES LLC
AND
SCHRODER & CO. INC.
AS INITIAL PURCHASERS
- -------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of May 4, 1998, among SUN FINANCING I, a statutory business
trust formed under the laws of the State of Delaware (the "Issuer"), SUN
HEALTHCARE GROUP, INC., a Delaware corporation (the "Guarantor"), and BEAR,
STEARNS & CO. INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, J.P.
MORGAN SECURITIES INC., NATIONSBANC MONTGOMERY SECURITIES LLC and SCHRODER &
CO. INC. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
April 28, 1998, among the Issuer, the Guarantor and the Initial Purchasers
(the "Purchase Agreement"), which provides for the sale by the Issuer to the
Initial Purchasers of up to 13,800,000 7% Convertible Trust Issued Preferred
Securities (liquidation amount $25 per preferred security) (collectively, the
"Convertible Preferred Securities"). The Convertible Preferred Securities
are guaranteed on a subordinated basis by the Guarantor as to the payment of
distributions, and as to payments on liquidation or redemption, to the extent
set forth in a guarantee agreement (the "Guarantee") between the Guarantor
and The Bank of New York, a New York banking corporation, as trustee, and may
be converted or exchanged under certain circumstances into the 7% Convertible
Junior Subordinated Debentures due May 1, 2028 of the Guarantor (the
"Convertible Debentures") held by the Issuer and then into common stock, $.01
par value per share ("Underlying Common Stock"), of the Guarantor's Common
Stock (the "Sun Common Stock") as set forth in the Issuer's Declaration. In
order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Issuer and the Guarantor have agreed to provide to the Initial Purchasers
and their respective direct and indirect transferees, among other things, the
registration rights for the Transfer Restricted Securities set forth in this
Agreement. The execution of this Agreement is a condition to the closing of
the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein
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without definition shall have the respective meanings ascribed to them by the
Purchase Agreement):
CONVERTIBLE DEBENTURES: See the introductory paragraphs to this
Agreement.
CONVERTIBLE PREFERRED SECURITIES: See the introductory paragraphs
to this Agreement.
DECLARATION: As defined in the Offering Memorandum.
EFFECTIVENESS PERIOD: See Section 2(a) hereof.
EFFECTIVENESS TARGET DATE: See Section 3(a)(ii) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
GUARANTEE: See the introductory paragraphs to this Agreement.
GUARANTOR: See the introductory paragraphs to this Agreement.
HOLDER: Any holder of Transfer Restricted Securities.
INDEMNIFIED PARTY: See Section 6 hereof.
INDEMNIFIED PERSON: See Section 6 hereof.
INDEMNIFYING PERSON: See Section 6 hereof.
INDENTURE: The Indenture, dated as of the date hereof, by and
among the Issuer, the Guarantor and the Bank of New York, a New York banking
corporation, as trustee, pursuant to which the Convertible Preferred
Securities are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraphs to this
Agreement.
INSPECTORS: See Section 3(m) hereof.
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ISSUE DATE: The date of the original issuance of the Transfer
Restricted Securities.
ISSUER: See the introductory paragraphs to this Agreement.
LIQUIDATED DAMAGES: See Section 3(a) hereof.
OFFERING MEMORANDUM: The final Offering Memorandum dated April 29,
1998 related to the sale of the Convertible Preferred Securities.
PERSON or PERSON: An individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association, union,
business association, limited liability company, limited liability
partnership, firm or other legal entity.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Transfer Restricted Securities (as applicable), covered by
such Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
RECORDS: See Section 4(m) hereof.
REGISTRATION DEFAULT: See Section 4(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Issuer
and/or the Guarantor that covers the Transfer Restricted Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
RULE 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
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<PAGE>
RULE 144A: Rule 144A promulgated pursuant to the Securities Act,
as currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated pursuant to the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
"SECURITIES" means the Convertible Preferred Securities, the
Convertible Debentures, the Guarantee and the Underlying Common Stock
issuable upon conversion or exchange of the Convertible Preferred Securities
and the Convertible Debentures.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SHELF REGISTRATION STATEMENT: See Section 2(a) hereof.
SUN COMMON STOCK: See the introductory paragraphs to this Agreement.
TIA: The Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder.
TRANSFER RESTRICTED SECURITIES: The Securities upon original
issuance thereof and at all times subsequent thereto, until (i) a
Registration Statement covering such Securities has been declared effective
by the SEC and such Securities have been disposed of in accordance with such
effective Registration Statement, (ii) such Securities are sold in compliance
with Rule 144 or are eligible for sale under Rule 144(k), (iii) such
Securities cease to be outstanding or (iv) if the Security has otherwise been
transferred and a new Security not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Guarantor in
accordance with the Declaration of Indenture, as the case may be.
TRUSTEE: The trustee under the Indenture.
4
<PAGE>
UNDERLYING COMMON SECURITIES: See the introductory paragraphs to
this Agreement.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration
in which securities of the Issuer or the Guarantor are sold to an underwriter
for reoffering to the public.
(b) Wherever there is a reference in this Agreement to a
percentage of the "principal amount" of Transfer Restricted Securities or to
a percentage of Transfer Restricted Securities, the Convertible Preferred
Securities and the Convertible Debentures issuable upon exchange of the
Convertible Preferred Securities will be treated as the same class of
Securities and Underlying Common Stock shall be treated as representing the
liquidation amount of Convertible Preferred Securities or the principal
amount of Convertible Debentures which was surrendered for conversion in
order to receive such number of shares of Underlying Common Stock.
2. SHELF REGISTRATION
(a) The Issuer and the Guarantor shall prepare and file with the
SEC, within 90 days after the Issue Date, a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Transfer Restricted Securities (the "Shelf Registration Statement").
The Shelf Registration Statement shall be on Form S-3 or another appropriate
form permitting registration of the Transfer Restricted Securities for resale
by the Holders in the manner or manners reasonably designated by the Holders
of a majority in aggregate principal amount of the outstanding Transfer
Restricted Securities (including, without limitation, an underwritten
offering). The Issuer and the Guarantor shall not permit any securities
other than the Transfer Restricted Securities to be included in the Shelf
Registration Statement. The Issuer and the Guarantor shall use their
reasonable best efforts to cause the Shelf Registration Statement to be
declared effective (the "Effective Time") pursuant to the Securities Act on
or prior to 60 days after the filing of such Shelf Registration Statement and
to keep the Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (i) the date which is 24 months after the
Issue Date, (ii) the date that all Transfer Restricted Securities covered by
the Shelf Registration Statement have been sold in the manner set forth and
as contemplated in the Shelf Registration Statement, or (iii) the date that
there ceases to be outstanding any Transfer Restricted Securities (the
"Effectiveness Period"); PROVIDED, HOWEVER, that no Holder shall be entitled
to have the Transfer
5
<PAGE>
Restricted Securities held by it covered by such Shelf Registration Statement
unless such Holder is in compliance with Section 4(s).
(b) If at any time prior to the end of the Effectiveness Period,
the Convertible Preferred Securities are convertible into securities other
than Underlying Common Stock, the Issuer and the Guarantor shall cause such
securities to be included in the Shelf Registration Statement no later than
the date on which the Convertible Preferred Securities may first be converted
into such securities.
3. LIQUIDATED DAMAGES
(a) The Issuer, the Guarantor and the Initial Purchasers agree
that the Holders of Transfer Restricted Securities will suffer damages if the
Issuer or the Guarantor fails to fulfill its obligations pursuant to Section
2 hereof and that it would not be possible to ascertain the extent of such
damages. Accordingly, in the event of such failure by the Issuer or the
Guarantor to fulfill such obligations, the Issuer hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Transfer
Restricted Securities under the circumstances and to the extent set forth
below:
If (i) on or prior to 90 days following the Issue Date, a Shelf
Registration Statement has not been filed with the SEC, or (ii) on or prior
to the 150th day following the Issue Date (the "Effectiveness Target Date")
such Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest will accrue on the Convertible
Debentures and, accordingly, additional distributions will accrue on the
Convertible Preferred Securities, in each case from and including the day
following such Registration Default. Liquidated Damages will be paid
quarterly in arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount or liquidation amount, as applicable, to and including the
90th day following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. The curing of any Registration Default will reset the rate at which
Liquidated Damages begin to accrue for any subsequent new Registration
Default to a rate per annum equal to an additional one-quarter of one percent
(0.25%) of the principal amount or liquidation amount, as applicable, to and
including the 90th day following such Registration Default and one-half of
one percent (0.50%) thereof from and after the 91st day following such new
Registration Default. The Guarantor
6
<PAGE>
shall have the right to suspend the Shelf Registration Statement under
certain circumstances for up to 90 consecutive days. In the event that the
Shelf Registration Statement ceases to be effective during the Effectiveness
Period for more than 90 consecutive days or any 120 days, whether or not
consecutive, during any 12-month period, then the interest rate borne by the
Convertible Debentures and the distribution rate borne by the Convertible
Preferred Securities will each increase by an additional one quarter of one
percent (0.25%) per annum from such 91st or 121st day, as applicable, until
such time as (i) the Shelf Registration Statement again becomes effective or
(ii) the Effectiveness Period expires.
(b) The Issuer shall promptly notify the Trustee after each and
every date on which a Registration Default first occurs. Accrued and unpaid
Liquidated Damages shall be paid by the Issuer to the Holders in the same
manner dividends are made pursuant to the Declaration or by wire transfer of
immediately available funds to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified
on each interest payment date provided in the Indenture (whether or not any
interest is then payable on the Convertible Debentures) and on each payment
date provided in the Indenture including, without limitation, whether upon
redemption, maturity (by acceleration or otherwise), purchase upon a change
of control or purchase upon a sale of assets (subject to the Guarantor's
right to defer the payment of Liquidated Damages during any Extension Period
(as defined in the Indenture)). Each obligation to pay Liquidated Damages
with respect to any Registration Default shall be deemed to commence accruing
on the date of such Registration Default and to cease accruing when such
Registration Default has been cured. In no event shall the Issuer pay
Liquidated Damages in excess of the applicable maximum weekly amount set
forth above, regardless of whether one or multiple Registration Defaults
exist.
(c) The parties hereto agree that the Liquidated Damages provided
for in this Section 3 constitute a reasonable estimate of the damages that
will be suffered by Holders by reason of the failure to file the Shelf
Registration Statement, the failure of the Shelf Registration Statement to be
declared effective or the failure of the Shelf Registration Statement to
remain effective, as the case may be, in accordance with this Agreement.
4. REGISTRATION PROCEDURES
In connection with the registration of any Transfer Restricted
Securities pursuant to Section 2 hereof, the Issuer and the Guarantor shall
effect such
7
<PAGE>
registration to permit the sale of such Transfer Restricted Securities (as
applicable) in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Issuer and the Guarantor shall:
(a) prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 hereof, and to use their
reasonable best efforts to cause such Registration Statement to become
effective and remain effective as provided herein; PROVIDED that, before
going effective on any Registration Statement or Prospectus or filing any
amendments or supplements thereto, the Issuer and the Guarantor shall furnish
to and afford the Initial Purchasers and their counsel, the Holders of the
Transfer Restricted Securities covered thereby and their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents filed or proposed to be filed. Such documents shall be so
furnished at least 3 business days prior to going effective, or such later
date as is reasonable under the circumstances. The Issuer and the Guarantor
shall not file any Registration Statement or Prospectus or any amendments or
supplements thereto if the Initial Purchasers and their counsel, the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities covered by such Registration Statement and their counsel, or the
managing underwriters, if any, shall reasonably object on a timely basis
(except that documents filed as exhibits that are incorporated by reference
or deemed to be incorporated by reference shall not be subject to such
objections);
(b) prepare and file with SEC such amendments and post-effective
amendments to each Shelf Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause the
related Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder with respect to the disposition
of all securities covered by such Registration Statement, as so amended, or
in such Prospectus, as so supplemented; the Issuer and the Guarantor shall be
deemed not to have used their reasonable best efforts to keep a Registration
Statement effective during the Effectiveness Period, if they voluntarily take
any action that would result in selling Holders of the Transfer Restricted
Securities covered thereby not being able to sell such Transfer Restricted
Securities during such Period, unless (i) such action is required by
applicable law, or (ii) such action is taken by
8
<PAGE>
them in good faith and for valid business reasons (not including avoidance of
their obligations hereunder), including the acquisition or divestiture of
assets;
(c) if a Shelf Registration Statement is filed pursuant to Section 2
hereof, the Company shall notify the selling Holders of Transfer Restricted
Securities that have provided in writing to the Company a telephone or
facsimile number and address for notices, their counsel if such counsel has
provided in writing to the Company a telephone or facsimile number and
address for notices and the managing underwriters, if any, promptly and, if
requested, confirm such notice in writing, (i) when a Prospectus, any
prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment has
become effective (including in any such written notice a statement that any
Holder may, upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) of the receipt by the Issuer or the
Guarantor of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or
the initiation of any proceeding for such purpose, (iv) of the happening of
any material event or any material information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in
such Registration Statement, Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (v) of the
Issuer's and the Guarantor's reasonable determination that sales under the
Registration Statement need to be terminated to comply with applicable law or
that a post-effective amendment to a Registration Statement would be
appropriate;
(d) if a Shelf Registration Statement is filed pursuant to Section 2
hereof, use their reasonable best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing
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<PAGE>
or suspending the use of a Prospectus and, if any such order is issued, to
use their reasonable best efforts to obtain the withdrawal of any such order
at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 2
hereof and if requested by the managing underwriters, if any, or the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities being sold in connection with an underwritten offering, (i)
promptly incorporate in a prospectus supplement or post-effective amendment
such information relating to underwriters, if any, any Holder of Transfer
Restricted Securities or the plan of distribution of the Transfer Restricted
Securities as the managing underwriter, if any, or such Holders may
reasonably request to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Issuer has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment pursuant to clause (i), and (iii) supplement or make amendments to
such Registration Statement with such information as is required in
connection with any request made pursuant to clause (i);
(f) if a Shelf Registration Statement is filed pursuant to Section 2
hereof, furnish to each selling Holder of Transfer Restricted Securities who
so requests and to each managing underwriter, if any, without charge, one
conformed copy of the Registration Statement or Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits;
(g) if a Shelf Registration Statement is filed pursuant to Section
2 hereof, deliver to each selling Holder, its counsel, and the underwriters,
if any, without charge, as many copies of the Prospectus or Prospectuses
(including each form of preliminary Prospectus), and each amendment or
supplement thereto and any documents incorporated by reference therein, as
such Persons may reasonably request; and, subject to the last paragraph of
this Section 4 hereof, the Issuer and the Guarantor hereby consent to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and their underwriters or agents, if any, and dealers, if
any, in connection with the offering and sale of the Transfer Restricted
Securities covered by such Prospectus and any amendment or supplement thereto;
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<PAGE>
(h) prior to any public offering of Transfer Restricted Securities,
use their reasonable best efforts to register or qualify, and to cooperate
with the selling Holders of Transfer Restricted Securities, the underwriters,
if any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Transfer Restricted Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as any selling Holder, or the managing
underwriters reasonably request in writing; keep each such registration or
qualification (or exemption therefrom), effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; PROVIDED that the Issuer
and the Guarantor shall not be required to (A) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where they are
not then so qualified, (B) take any action that would subject them to general
service of process in any such jurisdiction where they are not then so
subject or (C) subject themselves to taxation in any such jurisdiction where
they are not then so subject;
(i) if a Shelf Registration Statement is filed pursuant to Section
2 hereof, cooperate with the selling Holders of Transfer Restricted
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"), and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the managing underwriters, if
any, or Holders may reasonably request at least two business days prior to
any sale of the Transfer Restricted Securities;
(j) if a Shelf Registration Statement is filed pursuant to Section
2 hereof, upon the occurrence of any event contemplated by paragraph 4(c)(iv)
or 4(c)(v) above, as promptly as practicable prepare and (subject to Section
4(a) hereof), file with the SEC, at the expense of the Issuer, a supplement
or post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Transfer Restricted
Securities being sold thereunder, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
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<PAGE>
(k) prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, (i) provide the Trustee with
certificates for the Transfer Restricted Securities in a form eligible for
deposit with DTC and (ii) use its reasonable best efforts to provide a CUSIP
number for the Transfer Restricted Securities;
(l) in connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into
an underwriting agreement as is customary in underwritten offerings and take
all other customary and appropriate actions as are reasonably requested by
the managing underwriters in order to expedite or facilitate the registration
or the disposition of such Transfer Restricted Securities, and in such
connection, (i) make such representations and warranties to the underwriters,
with respect to the business of the Issuer, the Guarantor and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings; (ii)
use their reasonable best efforts to obtain opinions of counsel to the Issuer
and Guarantor and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested
by underwriters; (iii) use their reasonable best efforts to obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent certified
public accountants of the Issuer and the Guarantor (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Issuer or the Guarantor or of any business acquired by any of them for which
financial statements and financial data are, or are required to be, included
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings
and such other matters as are reasonably requested by underwriters as
permitted by STATEMENT ON AUDITING STANDARDS NO. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 6 hereof with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(m) if a Shelf Registration Statement is filed pursuant to Section 2
hereof, make available for inspection by any selling Holder of such Transfer
Restricted Securities being sold, any underwriter participating in any such
disposition
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of Transfer Restricted Securities, if any, and any attorney, accountant or
other agent retained by any such selling Holder, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Issuer, the Guarantor and their
subsidiaries (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Issuer, the Guarantor and
their subsidiaries to supply all relevant information reasonably requested by
any such Inspector in connection with such Registration Statement as is
customary for due diligence examinations; provided, however, that the
foregoing inspection and information gathering shall, to the extent
reasonably possible, be coordinated on behalf of the Inspectors by one
counsel designated by and on behalf of all such Inspectors. Records which
the Issuer determines, in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall not be disclosed by
the Inspectors, unless (i) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction and only to
the extent required thereby or (ii) the information in such Records has been
made generally available to the public, other than as a result of the
disclosure or failure to safeguard by such Inspector;
(n) provide an indenture trustee for the Transfer Restricted
Securities and cause the Indenture to be qualified under the TIA not later
than the effective date of the Exchange Offer or the first Registration
Statement relating to the Transfer Restricted Securities; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Transfer Restricted Securities, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use their reasonable
best efforts to cause such trustee to execute, all customary documents as may
be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so qualified
in a timely manner;
(o) use their reasonable best efforts to comply with all applicable
rules and regulations of the SEC and, as soon as reasonably practicable after
the effective date of the applicable Registration Statement, make generally
available to the Holders, if any, a consolidated earning statement of the
Issuer that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
13
<PAGE>
(p) cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD");
(q) use their reasonable best efforts to take all other steps
necessary to effect the registration of the Transfer Restricted Securities
covered by a Registration Statement contemplated hereby; and
(r) use their reasonable best efforts to cause the Underlying
Common Stock issuable upon conversion of the Convertible Preferred Securities
to be listed for quotation on the New York Stock Exchange or other stock
exchange or trading system on which the Sun Common Stock primarily trades on
or as promptly as practicable after the Effective Time of the Shelf
Registration Statement hereunder.
(s) The Issuer and the Guarantor may require each seller of
Transfer Restricted Securities as to which any registration is being effected
to furnish to the Issuer such information regarding such seller and the
distribution of such Transfer Restricted Securities as the Issuer may, from
time to time, reasonably request. The Issuer may exclude from such
registration the Transfer Restricted Securities of any seller who fails to
furnish such information within a reasonable time after receiving such
request.
Each Holder of Transfer Restricted Securities agrees by acquisition
of such Transfer Restricted Securities that, upon receipt of any notice from
the Issuer of the happening of any event of the kind described in Section
4(c)(ii), 4(c)(iv), 4(c)(v) or 4(c)(vi) hereof, such Holder shall forthwith
discontinue disposition of such Transfer Restricted Securities covered by
such Registration Statement or Prospectus until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 4(j)
hereof, or until it is advised in writing by the Issuer that the use of the
applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto.
14
<PAGE>
5. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer and the Guarantor shall be borne
by the Issuer and the Guarantor, whether or not a Shelf Registration
Statement is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in connection with
an underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees
and disbursements of counsel in connection with Blue Sky qualifications of
the Transfer Restricted Securities), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Transfer Restricted
Securities in a form eligible for deposit with DTC and of printing
Prospectuses, (iii) fees and disbursements of counsel for the Issuer and the
Guarantor, (iv) fees and disbursements of all independent certified public
accountants referred to in Section 4(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (v) the fees and expenses of
any "qualified independent underwriter" or other independent appraiser
participating in an offering pursuant to Section 3 of Schedule E to the
By-laws of the NASD, (vi) rating agency fees, (vii) fees and expenses of all
other Persons retained by the Issuer and the Guarantor, (viii) internal
expenses of the Issuer and the Guarantor (including, without limitation, all
salaries and expenses of officers and employees of the Issuer and the
Guarantor performing legal or accounting duties), (ix) the expense of any
annual audit and (x) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange.
Nothing contained in this Section 5 shall create an obligation on the part of
the Issuer or the Guarantor to pay or reimburse any Holder for any
underwriting commission or discount attributable to any such Holder's
Transfer Restricted Securities included in an underwritten offering pursuant
to a Registration Statement filed in accordance with the terms of this
Agreement, or to guarantee such Holder any profit or proceeds from the sale
of such Convertible Preferred Securities.
(b) In connection with any Shelf Registration Statement hereunder,
the Issuer and the Guarantor shall reimburse the Holders of the Transfer
Restricted Securities being registered in such registration for the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities to be included in such Registration Statement.
15
<PAGE>
6. INDEMNIFICATION
In connection with any Registration Statement, the Issuer and the
Guarantor jointly and severally agree to indemnify and hold harmless (i) the
Initial Purchasers, (ii) each Holder covered thereby and (iii) each person,
if any, who controls (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act), any such Person (any of the persons
referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iv) the respective officers, directors, partners,
employees, representatives and agents of any of such Person or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Person"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with defending and investigating any matter,
including any action that could give rise to any such losses, claims,
damages, liabilities or judgments) directly or indirectly based upon or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement or any Prospectus (as amended
or supplemented if the Issuer shall have furnished to such Indemnified Person
any amendments or supplements thereto), or any preliminary prospectus,
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities arise out of or are based upon (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Indemnified Person furnished to
the Issuer, the Guarantor or any underwriter in writing by such Indemnified
Person expressly for use therein, or (ii) any untrue statement contained in
or omission from a preliminary Prospectus or Prospectus if a copy of the
Prospectus (as then amended or supplemented, if the Issuer shall have
furnished to or on behalf of the Holder participating in the distribution
relating to the relevant Registration Statement any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to the person
asserting any such losses, liabilities, claims, damages or expenses who
purchased Convertible Preferred Securities, if such Prospectus (or Prospectus
as amended or supplemented), is required by law at or prior to the written
confirmation of the sale of such Convertible Preferred Securities to such
person and the untrue statement contained in or omission from such
preliminary Prospectus or Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented) or (iii) the Holder has not complied
with the last paragraph of Section 4 of this Agreement.
16
<PAGE>
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, each Guarantor, each person who controls the Issuer
or the Guarantor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the respective partners, directors,
officers, representatives, employees and agents of such person or controlling
person to the same extent as the foregoing indemnity from the Issuer and the
Guarantor to each Indemnified Person, but only with reference to information
relating to such Holder furnished to the Issuer in writing by or on behalf of
such Holder expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto, or any preliminary Prospectus. The
liability of any Indemnified Person pursuant to this paragraph shall in no
event exceed the net proceeds received by such Indemnified Person from sales
of Transfer Restricted Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "Indemnified
Party"), shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person"), in writing (enclosing a copy of all
papers served on such indemnified party), and the Indemnifying Person, upon
request of the Indemnified Party, shall assume promptly the defense of such
action, including the employment of counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding. In any such proceeding, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party, unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the Indemnifying Person (ii) the Indemnifying Person failed promptly to
assume the defense and employ counsel reasonably satisfactory to the
Indemnified Party or (iii) the named parties to any such action (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Person, or any affiliate of the Indemnifying Person, and such
Indemnified Party shall have been reasonably advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Person or such affiliate of
the Indemnifying Person (in which case the Indemnifying Person shall not have
the right to assume the defense of such action on behalf of such Indemnified
Party). In any such case, the
17
<PAGE>
Indemnifying Person shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel), for all such indemnified parties, which
firm shall be designated in writing by those indemnified parties who sold a
majority in outstanding aggregate principal amount of Transfer Restricted
Securities sold by all such indemnified parties, and any such separate firm
for the Issuer and the Guarantor, their directors, their officers and such
control persons of the Issuer and the Guarantor shall be designated in
writing by the Guarantor. The Indemnifying Person shall not be liable for
any settlement of any proceeding effected without its written consent, which
consent shall not be unreasonably withheld, but if settled with such consent
or if there be a final judgment for the plaintiff, the Indemnifying Person
agrees to indemnify any Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. No Indemnifying Person
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 6 is unavailable to an Indemnified Party in
respect of any losses, claims, damages, liabilities, judgments, actions or
expenses referred to therein (other than by reason of the exceptions provided
therein), then each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits of the Indemnified Party on the
one hand and the Indemnifying Person(s) on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Indemnifying Person(s) and the
Indemnified Party, as well as any other relevant equitable considerations.
The relative fault of the Issuer and the Guarantor on the one hand and any
Indemnified Party(s) on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer and the
18
<PAGE>
Guarantor or by such Indemnified Party(s) and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by PRO RATA
allocation (even if such indemnified parties were treated as one entity for
such purpose), or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, liabilities, claims, damages, judgments, actions and
expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any reasonable legal
or other expenses actually incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 6, in no event shall an Indemnified Person be
required to contribute any amount in excess of the amount by which proceeds
received by such Indemnified Person from sales of Transfer Restricted
Securities exceeds the amount of any damages that such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act), shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
6 will be in addition to any liability which the indemnifying parties may
otherwise have to the indemnified parties referred to above. The Indemnified
Persons' obligations to contribute pursuant to this Section 6 are several in
proportion to the respective principal amount of Convertible Preferred
Securities sold by each of the Indemnified Persons hereunder and not joint.
7. RULES 144 AND 144A
The Issuer and the Guarantor covenant that they will file the
reports required to be filed by them pursuant to the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Issuer and the Guarantor are not
required to file such reports, they will, upon the request of any Holder of
Transfer Restricted Securities, make available information required by Rule
144 and Rule 144A under the Securities Act in order to permit sales pursuant
to Rule 144 and Rule 144A. The Issuer and the Guarantor
19
<PAGE>
further covenant that they will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 and Rule 144A or (b)
any similar rule or regulation hereafter adopted by the SEC.
8. UNDERWRITTEN REGISTRATIONS
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in
aggregate principal amount of such Transfer Restricted Securities included in
such offering and shall be reasonably acceptable to the Issuer and the
Guarantor. The Issuer and the Guarantor shall not be obligated to arrange for
more than one underwritten offering during the Effectiveness Period.
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder, unless such Holder (a) agrees to sell
such Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters
in an underwritten offering or by a placement agent in a private offering of
the Issuer's or the Guarantor's securities, not to effect any private sale or
distribution (including a sale pursuant to Rule 144(k) or Rule 144A under the
Securities Act, but excluding non-public sales to any of its affiliates,
officers, directors, employees and controlling persons), of any of the
Convertible Preferred Securities, Convertible Debentures or Underlying Common
Stock or securities convertible into or exercisable or exchangeable therefor,
during the period beginning 10 days prior to, and ending 90 days after, the
closing date of the underwritten offering.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement.
20
<PAGE>
The Guarantor agrees not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Issuer or the
Guarantor or any warrants, rights or options to purchase or otherwise acquire
securities of the Guarantor (other than (i) the Convertible Preferred
Securities, (ii) commercial paper issued in the ordinary course of business,
(iii) securities issued in transactions not registered under the Securities
Act (although they may be subject to registration rights agreements) in
connection with acquisitions by the Guarantor or any of its subsidiaries or
pursuant to agreements of the Guarantor entered into prior to the 10 day
period referred to below which were not entered into in contemplation of
these restrictions, (iv) securities issued pursuant to employee benefit plans
and (v) securities issued upon exercise of stock options or convertible or
exchangeable securities outstanding prior to the 10 day period referred to
below ), during such reasonable and customary period beginning 10 days prior
to, and ending 60 days after the closing date of each underwritten offering
made pursuant to such Registration Statement as the managing underwriters
therefor request, without the prior written consent of such managing
underwriters of an underwritten offering of Transfer Restricted Securities
covered by a Registration Statement filed pursuant to Section 2 hereof;
PROVIDED, HOWEVER, that the Guarantor shall not be obligated to comply with
the last paragraph of this Section 8 more than once unless certain Holders of
Transfer Restricted Securities have not been given the benefit of this
provision because of some action on the part of the Guarantor (and in no case
shall the Guarantor be obligated to comply with this provision on more than
one occasion in any 12-month period.
9. MISCELLANEOUS
(a) OTHER REGISTRATION RIGHTS. The Guarantor may grant
registration rights that would permit any Person that is a third party the
right to piggyback on any Shelf Registration Statement; PROVIDED that if the
managing underwriter, if any, of such offering delivers an opinion to the
selling Holders that the total amount of securities which they and the
holders of such piggyback rights intend to include in any Shelf Registration
Statement is so large as to materially adversely affect the success of such
offering (including the price at which such securities can be sold), then
only the amount, number or kind of securities to be offered for the account
of holders of such piggyback rights will be reduced to the extent necessary
to reduce the total amount of securities to be included in such offering to
the amount, number or kind recommended by the managing underwriter prior to
any reduction in the amount of Transfer Restricted Securities to be included.
21
<PAGE>
(b) REMEDIES. In the event of a breach by the Issuer or the
Guarantor of any of its obligations under this Agreement, each Holder of
Transfer Restricted Securities, in addition to being entitled to exercise all
rights provided herein, in the Indenture or, in the case of the Initial
Purchasers, in the Purchase Agreement, or granted by law, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement. Subject to Section 3, the Issuer and the Guarantor agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by any of them of any of the provisions of this Agreement
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate.
(c) NO INCONSISTENT AGREEMENTS. The Issuer and the Guarantor have
not, as of the date hereof, and they shall not, after the date of this
Agreement, enter into any agreement with respect to any of their respective
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent
of Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to or departure from the provisions hereof with respect to
a matter that relates exclusively to the rights of Holders whose securities
are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of
other Holders may be given by Holders of at least a majority in aggregate
principal amount of the Transfer Restricted Securities being sold by such
Holders pursuant to such Registration Statement; PROVIDED that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee),
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or
telecopier:
22
<PAGE>
(i) if to a Holder of Transfer Restricted Securities, at the most
current address given by the Trustee to the Issuer;
(ii) if to the Issuer or the Guarantor, Sun Healthcare Group,
Inc., 101 Sun Avenue, N.E., Albuquerque, New Mexico 87109, Attention:
Chief Financial Officer, with a copy to Shearman & Sterling, 555
California Street, Suite 2000, San Francisco, California 94104,
Attention: William H. Hinman, Esq.; and
(iii) if to any Initial Purchasers, c/o Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, New York 10167, Attention: Syndicate
Department, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP at
300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Jonathan H. Grunzweig, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a nationally recognized next-day
air courier, if made by next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied on a business day on such
business day, if not on a business day, on the first business day thereafter.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee under
the Indenture at the address specified in such Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto, including, without limitation and without the need for an
express assignment, subsequent Holders of Transfer Restricted Securities.
The Issuer and the Guarantor agree that the Holders of the Transfer
Restricted Securities shall be third party creditor beneficiaries to the
agreements made hereunder by the Initial Purchasers, the Issuer and the
Guarantor, and each Holder shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when
23
<PAGE>
so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties hereto that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) SECURITIES HELD BY THE ISSUER, THE GUARANTOR OR THEIR
RESPECTIVE AFFILIATES. Whenever the consent or approval of Holders of a
specified percentage of Transfer Restricted Securities is required hereunder,
Transfer Restricted Securities held by the Issuer, the Guarantor, or their
respective affiliates (as such term is defined in Rule 405 under the
Securities Act) (other than the Initial Purchasers or subsequent Holders of
Transfer Restricted Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Transfer Restricted
Securities), shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(m) SURVIVAL. This Agreement is intended to survive the
consummation of the transactions contemplated by the Purchase Agreement. The
indemnifica-
24
<PAGE>
tion and contribution obligations under Section 7 of this Agreement shall
survive the termination of the Issuer's and the Guarantor's obligations under
Section 2 of this Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SUN FINANCING I
By: /s/ Robert F. Murphy
---------------------------
Name: Robert F. Murphy
Title: Administrative Trustee
SUN HEALTHCARE GROUP, INC.
By: /s/ Robert D. Woltil
---------------------------
Name: Robert D. Woltil
Title: Chief Financial Officer
<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SCHRODER & CO. INC.
By: BEAR, STEARNS & CO. INC.
By: /s/ Curtis Lane
---------------------------------
Name: Curtis Lane
Title: Senior Managing Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SUN
HEALTHCARE GROUP, INC, MARCH 31, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,113
<SECURITIES> 0
<RECEIVABLES> 637,740
<ALLOWANCES> 36,620
<INVENTORY> 0
<CURRENT-ASSETS> 705,763
<PP&E> 654,971
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,692,603
<CURRENT-LIABILITIES> 349,381
<BONDS> 1,638,365
0
0
<COMMON> 517
<OTHER-SE> 639,033
<TOTAL-LIABILITY-AND-EQUITY> 2,692,603
<SALES> 0
<TOTAL-REVENUES> 741,490
<CGS> 0
<TOTAL-COSTS> 709,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,013
<INTEREST-EXPENSE> 35,140
<INCOME-PRETAX> 31,977
<INCOME-TAX> 13,590
<INCOME-CONTINUING> 18,387
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,387
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.37
</TABLE>
