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COMMON SECURITIES GUARANTEE AGREEMENT
SUN HEALTHCARE GROUP, INC.
DATED AS OF MAY 4, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation. . . . . . . . . . . . . . . . . . . .2
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.2. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.3. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.4. Obligations Not Affected. . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.5. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.6. Guarantee of Payment. . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.7. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.8. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.9. Acknowledgment by Guarantor. . . . . . . . . . . . . . . . . . . . ..6
ARTICLE III
LIMITATION OF TRANSACTIONS; RANKING
SECTION 3.1. Limitation of Transactions. . . . . . . . . . . . . . . . . . . . . .7
SECTION 3.2. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE IV
TERMINATION
SECTION 4.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 5.2. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 5.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 5.4. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
COMMON SECURITIES GUARANTEE AGREEMENT
This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common Securities
Guarantee"), dated as of May 4,1998, is executed and delivered by Sun Healthcare
Group, Inc., a Delaware corporation (the "Guarantor"), for the benefit of the
Holders (as defined herein) from time to time of the Common 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 426,805.25 Common Securities, having a stated liquidation
amount of $25 per Common Security, designated the 7% Trust Issued Common
Securities (the "Common Securities"), designated the "7% Common Securities";
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Common Securities Guarantee, to guarantee the
obligations of the Trust to the Holders on the terms and conditions set forth
herein;
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Convertible Preferred Securities Guarantee") in substantially
identical terms to this Common Securities Guarantee for the benefit of the
holders of the Convertible Preferred Securities (as defined herein), except that
if an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of Holders to receive Guarantee Payments (as defined
herein) under this Common Securities Guarantee shall be subordinated to the
rights of holders of Convertible Preferred Securities to receive Guarantee
Payments (as defined in the Convertible Preferred Securities Guarantee) under
the Convertible Preferred Securities Guarantee; and
NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Common Securities Guarantee for the benefit of the
Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION
In this Common Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Common 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 Common Securities Guarantee unless otherwise
defined in the Common Securities Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee has
the same meaning throughout;
(d) all references to "the Common Securities Guarantee" or "this
Common Securities Guarantee" are to this Common Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to Articles
and Sections are to Articles and Sections of this Common Securities
Guarantee unless otherwise specified;
(f) a term defined in the Trust Indenture Act of 1939, as amended,
has the same meaning when used in this Common Securities Guarantee, unless
otherwise defined in this Common 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
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(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.
"Convertible Preferred Securities" means the securities representing
preferred undivided beneficial interests in the assets of the Trust.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Common 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 Common Securities to the
extent the Trust has funds available therefor, (ii) the redemption price, with
respect to any Common 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 or the redemption of all the Common Securities (as
provided in the Declaration)), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Common
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
distribution to Holders 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 Common Securities.
"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 (as defined in
the Indenture) of the Trust.
"Indenture Event of Default" means an event of default as defined in
the Indenture.
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ARTICLE II
GUARANTEE
SECTION 2.1. 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 2.2. SUBORDINATION
Upon the occurrence and during the continuation of an Event of Default
under the Indenture, holders of Convertible Preferred Securities shall have
priority over Holders with respect to distributions and payments on liquidation,
redemption and otherwise.
SECTION 2.3. WAIVER OF NOTICE AND DEMAND
The Guarantor hereby waives notice of acceptance of this Common
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 proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 2.4. OBLIGATIONS NOT AFFECTED
The obligations, covenants, agreements and duties of the Guarantor
under this Common 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 Common Securities to be
performed or observed by the Trust;
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(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 Common Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Common 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 Common
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 Common
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 2.4 that the 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 2.5. RIGHTS OF HOLDERS
The Guarantor expressly acknowledges that any Holder may directly
institute a legal proceeding against the Guarantor to enforce the obligations of
the
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Guarantor under this Common Securities Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other Person or
entity.
SECTION 2.6. GUARANTEE OF PAYMENT
This Common Securities Guarantee creates a guarantee of payment and
not of collection.
SECTION 2.7. 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 Common 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 rights 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 Common Securities Guarantee, if, at the time of
any such payment, any amounts are due and unpaid under this Common 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 2.8. INDEPENDENT OBLIGATIONS
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Common
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.4 hereof.
SECTION 2.9. ACKNOWLEDGMENT BY GUARANTOR
The Guarantor acknowledges its obligation to issue and deliver common
stock upon the conversion of the Common Securities.
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ARTICLE III
LIMITATION OF TRANSACTIONS; RANKING
SECTION 3.1. LIMITATION OF TRANSACTIONS
So long as any Common 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
Common 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, 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 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), (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 Common
Securities Guarantee).
SECTION 3.2. RANKING
(a) This Common 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.
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(b) The holders of any obligations of the Guarantor that are senior in
priority to the obligations under this Common 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 Common 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 IV
TERMINATION
SECTION 4.1. TERMINATION
This Common Securities Guarantee will terminate as to each Holder upon
(i) full payment of the Redemption Price of the Common Securities;(ii) the
distribution of the Guarantor's common stock to the Holders in respect of the
conversion of the Convertible Preferred Securities into the Guarantor's common
stock or the distribution of the Convertible Debentures (as defined in the
Declaration) to the Holders of all of the Common Securities; or (iii) full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Trust. Notwithstanding the foregoing, this Common Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid under the
Common Securities or under this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. SUCCESSORS AND ASSIGNS
All guarantees and agreements contained in this Common 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 Common Securities then outstanding.
SECTION 5.2. 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
Common Securities
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Garantee may be amended only with the prior approval of the Holders of at
least a majority in liquidation amount of all the outstanding Common
Securities. The provisions of Section 11.2 of the Declaration with respect
to meetings of Holders of the Securities apply to the giving of such approval.
SECTION 5.3. NOTICES
All notices provided for in this Common 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 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):
Sun Financing I
000 Xxx Xxxxxx, X.X.
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Senior Vice President,
General Counsel and Secretary
(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):
Sun Healthcare Group, Inc.
000 Xxx Xxxxxx, X.X.
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, 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.
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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 5.4. BENEFIT
This Common Securities Guarantee is solely for the benefit of the
Holders and is not separately transferable from the Common Securities.
SECTION 5.5. GOVERNING LAW
THIS COMMON 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 COMMON SECURITIES GUARANTEE AGREEMENT is executed as of the day
and year first above written.
SUN HEALTHCARE GROUP, INC.,
as Guarantor
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
