SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 14, 1999
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SUN HEALTHCARE GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-12040 85-0410612
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
101 SUN AVENUE, N.E., ALBUQUERQUE, NEW MEXICO 87109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (505) 821-3355
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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Item 3. Bankruptcy or Receivership
On October 14, 1999, Sun Healthcare Group, Inc. (the "Company" or "Sun")
announced that it and its U.S. operating subsidiaries (collectively, the
"Debtors") filed voluntary petitions for protection under chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code) with the United States
Bankruptcy Court for the District of Delaware (the "Court") (case nos. 99-3657
through 99-3841 inclusive). The Debtors' cases have been consolidated for the
purpose of joint administration and have been assigned to Judge Mary F. Walrath.
At hearings held on October 14, 1999, the Court entered first day orders
granting the Debtor's authority to pay pre-petition and post-petition employee
wages, salaries, benefits and other employee obligations. The Court also
approved orders granting authority, among other things, to pay pre-petition
claims of utilities and patient obligations.
On October 22, 1999, the Court also granted interim approval of the
Company's debtor in possession financing (the "DIP Financing") with a bank group
led by The CIT Group/Business Credit, Inc. The final hearing on the DIP
Financing is scheduled for November 12, 1999. The DIP Financing and the
Company's cash flows from operations will be used to fund the Company's ongoing
operations during the restructuring.
On October 26, 1999, the Company announced that it had reached an agreement
in principal with representatives of its bank lenders and holders of
approximately two-thirds of its outstanding senior subordinated bonds on the
terms of an overall restructuring of the Company's capital structure. The
specific terms of the agreement in principal are reflected in a restructuring
term sheet, dated October 26, 1999, a copy of which is attached hereto as
Exhibit 99.3. Implementation of the agreement in principal is subject to
appropriate documentation, including a chapter 11 plan of reorganization, and
approval by the bankruptcy court, among other things. If approved, the agreement
in principal would provide Sun's bank lenders with cash, new senior long-term
debt, new preferred stock and new common stock. Sun's senior subordinated
bondholders would receive new common stock. The agreement in principal would
also provide new long-term debt, new preferred stock and new common stock to
general unsecured creditors, and reinstate a significant portion of Sun's
secured debt. The agreement in principal provides no recoveries for the holders
of Sun's outstanding convertible subordinated debt, convertible trust issued
preferred securities, or common stock. The Company intends to file another Form
8-K shortly setting forth certain projections used by the parties in connection
with negotiations on the agreement in principal.
The Company's press releases dated October 14 and 26, 1999 are attached as
Exhibits 99.1 and 99.2 and are incorporated by reference herein and made a part
hereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
99.1 Press Release dated October 14, 1999.
99.2 Press Release dated October 26, 1999.
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99.3 Term Sheet for Plan of Reorganization Prepared by Senior Lenders'
Working Group dated October 26, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
/s/ William C. Warrick
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Name: William C. Warrick
Title: Vice President-Corporate Controller
Dated: October 26, 1999
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTITY OF EXHIBIT
<S> <C>
99.1 Press Release issued by the Registrant on October 14, 1999.
99.2 Press Release issued by the Registrant on October 26, 1999.
99.3 Term Sheet for Plan of Reorganization Prepared by Senior Lenders'
Working Group dated October 26, 1999.
</TABLE>
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Exhibit 99.1
SUN HEALTHCARE GROUP, INC.
Contact: 505-858-4507 (media)
505-856-2341 (investors)
SUN HEALTHCARE GROUP FILES VOLUNTARY PETITION FOR BANKRUPTCY PROTECTION
COMPANY TO CONTINUE NORMAL OPERATIONS;
RECEIVES COMMITMENT FOR UP TO $200 Million in DIP Financing
Albuquerque, N.M., Oct. 14, 1999 -- Sun Healthcare Group, Inc.
(SHGE:OTC-BB) announced today that Sun and its U.S. operating subsidiaries have
filed voluntary petitions with the U.S. Bankruptcy Court for the District of
Delaware to reorganize under chapter 11 of the U.S. Bankruptcy Code in order to
restructure the company's debt obligations. The company elected to seek court
protection in order to facilitate its efforts to restructure its capital and
lease obligations.
To ensure that the company has the short-term working capital necessary to
operate its business, it has obtained a commitment for up to $200 million in
debtor-in-possession ("DIP") financing with a group led by The CIT
Group/Business Credit, Inc. and Heller Healthcare Finance, Inc. Sun has
requested the Court's permission to access the DIP financing to fund normal
business operations and other cash needs during the bankruptcy proceeding.
"Deep cuts in Medicare reimbursement exceeded all industry expectations,
and severely impacted the company's ability to service its current capital
structure. This situation, coupled with a significant decline in the market
demand for ancillary services, resulted in the need for us to lower our
operating costs and significantly reduce our indebtedness," said Andrew L.
Turner, Sun's chairman and chief executive officer.
Mark Wimer, president, added, "Most important, court protection under
chapter 11 ensures that we can continue to serve our patients and our customers'
patients while we reorganize."
Because of significant debt repayment obligations, the company has been in
negotiations with its banks and senior bondholders in anticipation of the need
to restructure its obligations. The company believes that it is close to
reaching an agreement with the banks and bond holders on the key terms for a
financial restructuring. The Court protection afforded by chapter 11 will enable
the company to develop a plan of reorganization with the goal of emerging from
bankruptcy in a stronger financial position. The company is also in discussions
with some of the owners of the nursing homes it operates in an effort to
renegotiate certain leases.
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Headquartered in Albuquerque, N.M., Sun Healthcare Group, Inc. is a
diversified international long-term care provider. Sun companies operate
long-term and post-acute care facilities in the United States, the United
Kingdom, Spain, Germany and Australia. Sun subsidiaries provide therapy and
pharmacy services, fulfill the medical supply needs of nursing homes, and offer
a comprehensive array of ancillary services for the healthcare industry.
Certain statements set forth above, including, but not limited to,
statements containing the words "anticipates," "believes," "expects," "intends,"
"will," "may" and similar words constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on the company's current expectations and
include known and unknown risks, uncertainties and other factors, many of which
the Company is unable to predict or control, that may cause the Company's actual
results or performance to differ materially from any future results or
performance expressed or implied by such forward-looking statements. These
statements involve risks, uncertainties and other factors detailed from time to
time in the Company's filings with the Securities and Exchange Commission. Such
factors may include, without limitation, the delays or the inability to complete
the Company's plan of reorganization; the availability and terms of capital in
light of recent losses, cash flow shortfalls and the Company's chapter 11
bankruptcy filing; adverse actions which may be taken by creditors and the
outcome of various bankruptcy proceedings; the Company's ability to attract
patients given its current financial position; and the effects of healthcare
reform and legislation on the Company's business strategy and operations. The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. The Company disclaims any
obligation to update any such factors or to announce publicly the results of any
revisions to any of the forward-looking statements included herein to reflect
future events or developments.
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Exhibit 99.2
CONTACT: Marjorie Goldstein (investors)
Phyllis Goodman (media)
505-821-3355
SUN HEALTHCARE GROUP REACHES AGREEMENT IN PRINCIPAL
WITH BANKS AND SENIOR BONDHOLDERS FOR
RESTRUCTURING OF COMPANY DEBT
Albuquerque, N.M., Oct. 26, 1999 -- Sun Healthcare Group, Inc.
(SHGE:OTC-BB) announced today that it has reached an agreement in principal with
representatives of its bank lenders and holders of approximately two-thirds of
its outstanding senior subordinated bonds on the terms of an overall
restructuring of Sun's capital structure. The bank and senior bond debt
represents more than $1.3 billion of Sun's capital structure.
Implementation of the agreement in principal is subject to appropriate
documentation, including a chapter 11 plan of reorganization, and approval by
the bankruptcy court, among other things. If approved, the agreement in
principal would provide Sun's bank lenders with cash, new senior long-term debt,
new preferred stock and new common stock. Sun's senior subordinated bondholders
would receive new common stock. It would also provide new long-term debt, new
preferred stock and new common stock to general unsecured creditors, and
reinstate a significant portion of Sun's secured debt. The agreement in
principal provides no recoveries for the holders of Sun's outstanding
convertible subordinated debt, convertible trust issued preferred securities, or
common stock.
The terms of the agreement in principal will be disclosed shortly by the
company in a filing with the Securities and Exchange Commission.
Headquartered in Albuquerque, N.M., Sun Healthcare Group, Inc. is a
diversified international long-term care provider. Sun companies operate
long-term and postacute care facilities in the United States, the United
Kingdom, Spain, Germany and Australia. Sun subsidiaries provide therapy and
pharmacy services, fulfill the medical supply needs of nursing homes, and offer
a comprehensive array of ancillary services for the healthcare industry.
Certain statements set forth above, including, but not limited to,
statements containing the words "anticipates," "believes," "expects," "intends,"
"will," "may" and similar words constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on management's current expectations and
include known and unknown risks, uncertainties and other factors, many of which
the Company is unable to predict or control, that may cause the Company's actual
results or performance to differ materially from any future results or
performance expressed or implied by such forward-looking statements. These
statements involve risks, uncertainties and other factors detailed from time to
time in the Company's filings with the Securities and Exchange Commission. Such
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factors may include, without limitation, the delays or the inability to complete
the Company's plan of reorganization; the availability and terms of capital in
light of recent losses, cash flow shortfalls and the Company's Chapter 11
bankruptcy filing; adverse actions which may be taken by creditors and the
outcome of various bankruptcy proceedings; the Company's ability to attract
patients given its current financial position; and the effects of healthcare
reform and legislation on the Company's business strategy and operations. The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. The Company disclaims any
obligation to update any such factors or to announce publicly the results of any
revisions to any of the forward-looking statements included herein to reflect
future events or developments.
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Exhibit 99.3
SUN HEALTHCARE
TERM SHEET FOR PLAN OF REORGANIZATION
October 26, 1999
This term sheet is prepared for the purpose of facilitating discussion of a
possible restructuring of Sun Healthcare Group, Inc. and its domestic
subsidiaries. The term sheet sets forth certain major terms of a possible
restructuring, but additional terms and conditions, material to the transaction,
are not set forth herein. Nothing contained herein shall in part or in whole
constitute an offer susceptible of acceptance of a legally binding obligation.
This term sheet is being provided in furtherance of settlement discussions, and
is entitled to the protection from use or disclosure afforded by Federal Rule of
Evidence 408 and any similar applicable rule of evidence. The plan of
reorganization will contain the following classes of claims and treatment for
creditors in those classes. Except as expressly set forth herein, all
distributions will be made on the effective date of the plan of reorganization
(the "Plan").
1. DIP LOAN/PRIORITY EXIT REVOLVER.
a. AMOUNT: approximately $56.1 million.
b. TREATMENT: DIP loan rolled into or taken out by a revolving
credit facility with $200 million commitment. Amount outstanding
on emergence based on the amount of the DIP loan drawn at that
time. Interest to be LIBOR-based to be determined at time of
emergence (assumed LIBOR + 3.00%). Term to be an evergreen
revolver. Security interest in inventories and receivables.
Outstanding letters of credit under the Pre-Petition Credit
Agreement (the "Credit Agreement") to be reinstated or refinanced
under DIP Loan/Priority Exit Revolver.
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2. REINSTATED SECURED DEBT.
a. AMOUNT: $115.8 million.(1)
b. TREATMENT: Reinstated.
3. TRADE CREDITORS THAT COMMIT TO PROVIDE POST-CONFIRMATION TRADE CREDIT
AND LANDLORDS THAT AGREE TO RENT CONCESSION ON REMAINING FACILITIES AND
ELECT FOR CLASS 3 TREATMENT.
a. AMOUNT: Estimated at $40 million.
b. TREATMENT: Paid in cash the lesser of: (i) 25% of allowed claim
and (ii) pro-rata share of $10 million. In order to be eligible
for such treatment, a creditor must be either (i) a trade
creditor that commits contractually to provide normal trade
credit for at least one year to reorganized Sun, or (ii) a
landlord that leases facilities retained by Sun and provides
satisfactory rent concessions with respect to those remaining
facilities (the 25% cash would be paid with respect to the
landlord's rejection claims for other facilities that were
closed). Class 3 treatment is optional for the creditor -- the
creditor can elect Class 4 treatment instead.
4. GENERAL UNSECURED CREDITORS (EXCLUDING THE SENIOR LENDERS, SUBORDINATED
NOTEHOLDERS AND CLASS 3 CREDITORS).
a. AMOUNT: Estimated at $85 million.(2)
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(1) Assumed to be $129.4 million LESS claims that in fact are unsecured and
LESS Bombardier airplane loan of $2.4 million (airplane to be surrendered to
Bombardier). Amount of reinstated secured debt subject to further reduction with
respect to additional secured claims that should be written down to the value of
the collateral or the collateral returned to the creditor.
(2) Assumed to be $100 million PLUS $12 million of secured debt
reclassified as unsecured debt (see note 1 above), LESS $40 million assumed to
qualify for Class 3 treatment, rounded up to $85 million to deal with
contingencies/additional unsecured claims.
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b. TREATMENT: Each Class 4 creditor receives a pro-rata share of the
following aggregate distributions to Class 4: (i) $7.1 million of
Term A Senior Debt, (ii)$10.5 million of Term B Senior Debt,
(iii) 4.2 million shares of Class A Preferred Stock, and (iv)
470,000 shares of common stock.(3)
5. SENIOR LENDERS (EXISTING PRE-PRETITION CREDIT AGREEMENT (THE "CREDIT
AGREEMENT").
a. AMOUNT: Approximately $880 million.(4) Outstanding letters of
credit to be reinstated or refinanced under the DIP Loan/Priority
Exit Revolver to the maximum extent possible. The Company shall
use its reasonable best efforts to cause beneficiaries under
letters of credit not to draw letters of credit issued under the
Credit Agreement and to accept replacement letters of credit
issued, in the first instance, under the DIP Loan and, on the
effective date of the Plan, issued under the Priority Exit
Revolver. If the Plan described in this Term Sheet does not
become effective, any reduction in credit exposure (the "L/C
Exposure Reduction") of the Senior Lenders under the Credit
Agreement by reason of outstanding letters of credit being
replaced by letters of credit issued under the DIP Loan shall be
subject to the reservation of rights described in paragraph 5(b)
below. It is assumed that approximately $20 million of letters of
credit (principally related to rejected leases) will be drawn
during the bankruptcy case and, accordingly, will not be rolled
into the DIP Loan/Priority Exit Revolver. To the extent actual
draws of letters of credit are greater or less than $20 million,
the initial accreted amount of Series A Preferred Stock issued to
the Senior Lenders will be increased or decreased.
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(3) Any creditor in Class 4 will be entitled to its pro-rata share of these
distributions, which are based on estimates of the relative amounts in classes
4-8 without adjustment for the fact that the Senior Lenders also purportedly
have the benefit of a pledge of approximately $1.4 billion of intercompany debt
and are offering a compromise to Class 6. To the extent actual claims in Class 4
are greater or less than $85 million, creditors in Class 4 will either receive
an enhanced or diminished recovery.
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b. TREATMENT: Each Senior Lender receives its pro rata share of the
following aggregate distributions to Class 5: (i) $71 million in cash
(consisting of $31 million paid on the Plan effective date and the $40
million Adequate Protection Payment paid within 1 week of filing the
bankruptcy case pursuant to the Cash Collateral Stipulation between
the Senior Lenders and the Company (subject to the reservation of
rights set forth in that certain Stipulation Regarding Use of Cash
Collateral and Adequate Protection dated as of October 20, 1999), (ii)
$142.9 million of Term A Senior Debt, (iii) $209.5 million of Term B
Senior Debt, (iv) 85.8 million shares of Class A Preferred Stock, and
(v) 2.23 million shares of common stock.
c. ADJUSTMENT FOR ADDITIONAL CASH COLLATERAL. The foregoing is based on
the simplifying assumption that cash collateral is exactly $40
million. If actual cash collateral is greater than $40 million, the
Senior Lenders will receive additional cash on the effective date of
the Plan equal to the difference between actual cash collateral and
the $40 million paid on the petition date. The Senior Lenders' pro
rata share of Term Debt, Class A Preferred Stock and Common Stock will
be recalibrated accordingly.
6. SENIOR SUBORDINATED NOTES.
a. AMOUNT: $432.1 million.
b. TREATMENT: Each Note holder receives its pro rata share of 7.3
million shares of common stock.
7. CONVERTIBLE SUBORDINATED DEBT.
a. AMOUNT: $87.9 million.
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(4) Approximately $820 million principal PLUS $39 million of interest
accrued through October 1, 1999 PLUS $20 million of letters of credit related to
rejected leases.
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b. TREATMENT: No distribution (all deemed turned over to senior
creditors pursuant to subordination provisions).
8. TIPES.
a. AMOUNT: $360 million.
b. TREATMENT: No distribution (all distributions deemed turned
over to senior creditors pursuant to subordination provision).
9. EXISTING EQUITY PLUS SECURITIES LAW CLAIMS SUBORDINATED PURSUANT TO
BANKRUPTCY CODE SECTION 510(b).
a. AMOUNT: N.A.
b. TREATMENT: No distribution.
MANAGEMENT: The Plan shall reserve an appropriate amount of the Reorganized
Company's Series A Preferred Stock for option grants to management. Issuance of
such options shall be determined by the Board of Directors of the Reorganized
Company. All stock distributions listed above are subject to dilution for
management stock/options.
MEDICARE/MEDICAID OVERCHARGE CLAIMS. Implementation of the Plan shall be
subject to, among other things, a mutually acceptable agreement with federal
government and relevant state governments concerning any possible overcharge
claims related to all pre-petition periods.
REGISTRATION RIGHTS. Demand and piggyback registration rights for
significant holders of Term A Senior Debt, Term B Senior Debt, common and
preferred stock.
LISTING. Reorganized Company shall use its best efforts to list and
maintain the listing of the Common Stock and Class A Preferred Stock on the
NASDAQ National Market or another acceptable national securities exchange.
FEES. The reasonable fees and expenses of legal counsel and financial
advisors to the Senior Lenders and Unofficial Committee shall be paid by the
Debtors' estates on the effective date of the Plan.
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SUMMARY OF CAPITAL STRUCTURE FOR REORGANIZED SUN
I. POST-CONFIRMATION PRIORITY REVOLVING CREDIT FACILITY.
Issuer: Sun Healthcare Group.
Type of facility: Revolving Credit Facility.
Commitment: $200 million.
Outstanding: Assumed $56.1 million on the confirmation date.
Interest: LIBOR-based to be determined at time of
confirmation, assumed to be LIBOR + 3.00%.
Term: Evergreen revolver.
Security: Inventory and receivables.
II. TERM A SENIOR LOAN.
Issuer: Sun Healthcare Group.
Type of facilities: Term Loan/Senior Notes.
Principal Amount $150 Million.
Interest: LIBOR plus 3%.
Term: 7 years.
Amortization: Year 1: $3.75 million (2.5%);
Year 2: $7.5 million (5.0%);
Year 3: $11.25 million (7.5%)
Years 4-6: $22.5 million each year (15.0%);
Year 7: $60.0 million (40.0%)
Excess Cash Flow Payments: 75% of excess cash flow (with the definition of
excess cash flow to be set forth in
definitive documentation reasonably acceptable
to the parties) to be applied first to year 1
scheduled amortization and then pro-rata to
remaining scheduled amortization on Term A
Senior Loan, until satisfied, and then to Term B
Loan.
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Asset Sales: 75% of proceeds to be applied first to year 1
scheduled amortization and the pro-rata to
remaining scheduled amortizations on Term A Senior
Loan until satisfied, and then to Term B Loan.
Optional Prepayments: May be applied as directed by Company.
Security: Stock of subsidiaries.
III. TERM B SENIOR LOAN.
Issuer: Sun Healthcare Group.
Type of facility: Term Loan/Senior Notes.
Principal Amount $220 Million.
Interest: LIBOR plus 3.5%.
Term: 7 years.
Amortization: Years 1-6: $2.2 million each year (1.0%)
Year 7: $206.8 million (94.0%)
Excess Cash Flow Payments: After satisfaction of Term A, 75% of excess cash
flow (with the definition of excess cash flow to
be set forth in definitive documentation
reasonably acceptable to the parties) applied to
year 7 amortization.
Asset Sales: After satisfaction of Term A, 75% of proceeds
applied to year 7 amortization.
Optional Prepayments: May be applied as directed by the Company.
Security: Stock of subsidiaries.
IV. CLASS A PREFERRED STOCK.
Issuer: Sun Healthcare Group.
Number of Shares: 90 million
Liquidation Preference: Equal to accreted value.
Accreted Amount at Issuance: $435 million.
Accretion Rate: 14.5% per annum, accreting quarterly.
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Conversion: Commencing on October 1, 2003, convertible into
common stock at 1:1 - i.e., 90% of common stock,
prior to dilution for management stock/options.
Not convertible prior to October 1, 2003.
Optional Redemption The Company at its option may redeem the Class A
Preferred Stock in whole or in part in cash at any
time at its accreted value.
Mandatory Redemption: Mandatory redemption: (i) 7 years from the
effective date of the Plan, or (ii)if EBITDA
equals or exceeds $250 million for any fiscal
year, in either case at a redemption price equal
to accreted value.
Voting: Each share of Class A Preferred Stock has voting
rights equal to a share of common stock on matters
to be determined by shareholders, except the
preferred stock as a class will have the right to
elect 5 of 9 directors.
Distribution: Senior Lenders: 85.8 million shares (95.3% of all
Class A Preferred).
Class 4 General unsecureds: 4.2 million shares
(4.7% of all Class A Preferred)
V. COMMON STOCK.
Issuer: Sun Healthcare Group.
Issue: Common stock.
Number of shares: 10 million shares before conversion of Class A
Preferred Stock.
100 million shares after conversion of Class A
Preferred Stock.
Distribution: Senior Lenders: 2.23 million shares (22.3% prior
to dilution)
Class 4 General Unsecureds: 470,000 shares (4.7%
prior to dilution)
Class 6 Senior Subordinated notes: 7.3 million
shares (72.5% prior to dilution)
Board Seats: Common Stock as a class will have the right to
elect 3 of 9 directors until preferred stock is
redeemed or converted.
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VI. CORPORATE GOVERNANCE.
Board Size: 9 Directors.
Initial Board: Initial members of the Board of Directors will be
selected as follows: i) 5 selected by Senior
Lenders, ii) 3 selected by the Senior Subordinated
Notes, and iii) the CEO for the Reorganized
Company.
Class voting for Directors: Until the Series A Preferred Stock is redeemed or
converted, the Series A Preferred Stock shall be
entitled to select 5 Directors and the Common
Stock shall be entitled to select 3 Directors.
Special Vote for Significant During the first 12 months after the effective
Events: date of the Plan, the occurrence of a "Significant
Event" shall require the affirmative vote of (i)
at least 6 members of the Board including at least
two of the Directors elected by holders of Common
Stock, (ii) more than 50% of the outstanding
shares of Common Stock voting as a class, and
(iii) a fairness opinion from a mutually
acceptable, nationally recognized investment
banking firm retained by the Reorganized Company
that the transaction is fair from a financial
point of view to the Reorganized Company and its
shareholders, taking into consideration the
interests of all shareholders. After the 12
month anniversary of the effective date of the
Plan through October 1, 2003, the occurrence of a
"Significant Event" shall require (i) the
affirmative vote of at least 6 members of the
Board including at least two of the Directors
elected by holders of Common Stock, (ii)a fairness
opinion from a mutually acceptable, nationally
recognized investment banking firm retained by the
Reorganized Company that the transaction is fair
from a financial point of view to the Reorganized
Company and its shareholders, taking into
consideration the interests of all shareholders,
and (iii) either (at the option of a majority of
the Board) (x) 60 days advance written notice to
the Common Stock holders, it being understood and
agreed that during such period of time, no further
steps to implement such Significant Event may be
taken, or (y) the affirmative vote of more than
50% of the outstanding shares of Common Stock
voting as a class. "Significant Events" are
defined as: (i) any merger, consolidation, or
combination of the Reorganized Company in which it
is not the surviving entity (subject to clause v
below), (ii) any sale or other disposition of all
or substantially all of the Reorganized Company's
assets; (iii) any voluntary liquidation,
dissolution or winding-up of the Reorganized
Company,(iv) any amendment or modification to the
Certificate of Incorporation that affects the
rights and privileges of common or preferred
stock, and (v) the issuance of shares of Common
Stock (or participating preferred stock or other
similar security to be mutually agreed) in a
single transaction or series of transactions
(including a merger in which the Reorganized
Company is the surviving entity) other than (x)
the shares of Common Stock issued pursuant to the
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Plan, (y) the shares of Common Stock reserved for
issuance upon conversion of the Series A Preferred
Stock issued pursuant to the Plan or reserved for
issuance upon conversion of the Series A Preferred
Stock subject to management options (which shares
of Common Stock may only be used only to satisfy
the conversion of such Series A Preferred Stock),
and (z) 20% of the issued and outstanding shares
of Common Stock.
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