Contract
EXHIBIT
4.2
EXECUTION
COPY
THIS
ESCROW AGREEMENT, dated as of April 12, 2007, made by and between Sun Healthcare
Group, Inc., a Delaware corporation (the “Issuer”)
and
Xxxxx Fargo Bank, National Association, as escrow agent until a successor
replaces it, and thereafter the successor (the “Escrow
Agent”).
Recitals
The
Issuer, the Guarantors (listed in Schedule B of the Purchase Agreement), Credit
Suisse Securities (USA) LLC (“CS”)
and
the other Initial Purchasers referred to therein (together with CS, the
“Initial
Purchasers”)
are
parties to that certain Purchase Agreement dated as of March 22, 2007 (the
“Purchase
Agreement”).
The
Issuer, the Guarantors that are parties to the Indenture (as defined below)
and
Xxxxx Fargo Bank, National Association, as trustee (the “Trustee”)
are
parties to that certain Indenture governing the 9⅛ Senior Subordinated Notes due
2015 (the “Notes”),
dated
as of April 12, 2007 (the “Indenture”).
Capitalized terms that are used but not defined herein have the respective
meanings specified in the Indenture.
In
order
to facilitate the closing of the sale of the Notes under the Purchase Agreement,
the Issuer desires to escrow certain funds with the Escrow Agent, and the Escrow
Agent is willing to accept, hold, invest and distribute such funds, subject
to
the terms and conditions of this Escrow Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and undertakings set forth
in this Escrow Agreement and other good and valuable consideration, the receipt
and sufficiency of which are acknowledged, the Issuer and the Escrow Agent
agree
as follows:
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1.
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Delivery,
Acceptance and Investment of Escrowed
Funds.
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(a) Concurrently
with the closing of the sale of the Notes and the execution and delivery of
this
Escrow Agreement, the Issuer will deposit with the Escrow Agent (i) cash in
an
amount equal to the gross proceeds from the sale of the Notes (which amount
is
equal to $194,256,860) and (ii) an additional amount in cash or Treasury
Securities (which amount is equal to $10,305,640)
such
that the escrowed funds are in an amount sufficient to (x) make all interest
payments due and payable on or prior to July
11,
2007,
which is the latest possible date of redemption for a Special Mandatory
Redemption (as defined below) and (y) redeem in cash the Notes at a redemption
price equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest on the Notes to the latest possible date of redemption for
a
Special Mandatory Redemption (as defined below) (the amounts referred to in
clauses (i) and (ii) collectively, the “Initial
Deposit”)
and
(iii) deliver to the Escrow Agent a certificate of a financial or accounting
officer of the Issuer substantially in the form of the Exhibit A hereto,
verifying that the amount of the Initial Deposit has been calculated in
accordance with, and fully satisfies, the requirements of this Escrow Agreement.
(b) The
Escrow Agent hereby agrees to accept the Initial Deposit and to hold such funds
and any proceeds thereof or interest or income resulting from the investment
thereof in trust in an account located in the United States of America for
investment and disbursement in accordance with the provisions of this Escrow
Agreement. The Initial Deposit and any proceeds thereof or interest or income
resulting from the investment thereof of any such deposit shall constitute
the
“Escrowed
Funds.”
The
Escrow Agent shall invest the Escrowed Funds or any portion thereof in Escrow
Investments (as defined below) as directed in writing from time to time by
the
Issuer. Such written instructions, if any, referred to in the foregoing sentence
shall specify the type and identity of the Escrow Investments to be purchased
or
sold and shall also include the name of the broker-dealer, if any, that the
Issuer directs the Escrow Agent to use in respect of such investment, any
particular settlement procedures required (which settlement procedures shall
be
consistent with industry standards and practices), and such other information
as
the Escrow Agent may require. The Escrow Agent shall not be liable for failure
to invest or reinvest funds absent written direction from the Issuer in
accordance with this Escrow Agreement. Unless the Escrow Agent is otherwise
directed in such written instructions, the Escrow Agent may use a broker-dealer
of its own selection, including a broker-dealer owned by or affiliated with
the
Escrow Agent or any of its affiliates. The Issuer agrees that any investment
in
Escrow Investments identified by the Issuer shall be in an amount which will,
without the reinvestment thereof or sale prior to maturity, provide cash that,
together with other cash constituting the Escrowed Funds, will be sufficient
to
pay the Mandatory Redemption Price. Any such Escrow Investments will constitute
Escrowed Funds. The Escrow Agent shall liquidate any such Escrow Investments
at
the written direction of the Issuer or when needed to make distributions
pursuant to this Escrow Agreement.
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“Escrow
Investments”
means
(i) Treasury Securities (as defined below), (ii) investments in time
deposit accounts, certificates of deposit and money market deposits, in each
case maturing no later than July 11, 2007 (the “Escrow
Outside Date”),
entitled to U.S. Federal deposit insurance for the full amount thereof or
issued
by a bank (within the meaning of Section 3(a)(2) of the Securities Act of
1933,
as interpreted by the staff of the Securities and Exchange Commission) or
trust
company (including the Escrow Agent or an affiliate of the Escrow Agent)
which
is organized under the laws of the United States of America or any State
thereof
having capital, surplus and undivided profits aggregating in excess of
$500,000,000, (iii) investments in commercial paper maturing no later than
the Escrow Outside Date and having, at the date of acquisition, a credit
rating
no lower than A-1 from Standard & Poor’s Rating Service, P-1 from Xxxxx’x
Investors Service, Inc., or F-1 from Fitch Ratings Ltd. and (iv) repurchase
obligations maturing no later than the Escrow Outside Date entered into with
a
nationally recognized broker-dealer, with respect to which the purchased
securities are obligations issued or guaranteed by the United States of America
or any agency thereof, which repurchase obligations shall be entered into
pursuant to written agreements.
“Treasury
Securities”
means
any investment in obligations issued or guaranteed by the United States of
America or any agency thereof, in each case, maturing on or prior to the Escrow
Outside Date.
(c) For
income tax and withholding purposes, all income earned on investments in the
Escrowed Funds shall be attributed to the Issuer. The Escrow Agent shall have
no
responsibility for the tax consequences of this Escrow Agreement or the payment
of any taxes. The Escrow Agent hereby advises the Issuer to consult with
independent legal counsel concerning the tax ramifications of the arrangements
contemplated by this Escrow Agreement. The Issuer hereby agrees to indemnify,
defend and hold the Escrow Agent harmless from and against any tax, late
payment, interest, penalty or other cost or expense that may be assessed against
the Escrow Agent on or with respect to the Escrowed Funds and the investment
thereof. The indemnification provided by this Section is in addition to the
indemnification provided in Section 4 hereof and shall survive the resignation
of the Escrow Agent and termination of this Escrow Agreement.
(d) The
Issuer acknowledges that the regulations of the Office of the Comptroller of
the
Currency grant the Issuer the right to receive brokerage confirmations of
security transactions as they occur. The Issuer specifically waives such
notification to
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the
extent permitted by law and acknowledges that it will receive periodic cash
transaction statements, which will detail all investment
transactions.
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2.
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Release
of Escrowed Funds
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(a) The
Escrow Agent shall release the Escrowed Funds from the escrow account created
hereby only in accordance with this Section 2.
(b) If
at any
time on or prior to the Escrow Outside Date, the Escrow Agent receives written
notice from the Issuer that (which notice may be effected by delivery of an
officer’s certificate substantially in the form of Exhibit B hereto)
(i) all conditions precedent to the Merger (as defined below) have been
satisfied or waived; (ii) the Issuer has received the net proceeds from
borrowings of at least $290.0 million of senior secured term loans under its
senior secured credit facility as described in the Offering Circular dated
March
22, 2007 (the “Offering
Circular”);
(iii)
the Merger will be consummated on substantially the terms described in the
Offering Circular and substantially contemporaneously with the requested release
of the Escrowed Funds, and the Escrowed Funds will be applied, together with
the
borrowings under the Issuer’s senior secured credit facility and cash-on-hand of
the Issuer and Harborside Healthcare Corporation, in the manner described under
the section “Use of Proceeds” of the Offering Circular; (iv) no Default has
occurred or is continuing (or result from the requested release of Escrowed
Funds) from the Issue Date to the date of the acquisition of Harborside
Healthcare Corporation and immediately after giving effect to such acquisition,
in each case applying the covenants described under the section “Description of
the Notes ─ Certain Covenants” in the Offering Circular to the Issuer,
Harborside Healthcare Corporation and their respective subsidiaries (other
than
such Subsidiaries that are designated as Unrestricted Subsidiaries); (v) the
Counterparts to the Purchase Agreement, the Counterparts to the Registration
Agreement and the Supplemental Indenture (as such terms are defined in the
Purchase Agreement) have been executed by the Harborside Guarantors (as listed
in Schedule F of the Purchase Agreement), and delivered to the Initial
Purchasers, to be effective upon the consummation of the Merger; and (vi)
immediately after the release of the Escrowed Funds, the Issuer will use the
Escrowed Funds, together with cash on hand, in the manner described under the
caption “Use of Proceeds” contained in the Offering Circular (the foregoing
clauses (i) through (vi) of this subsection being the “Escrow
Conditions”),
the
Escrow Agent shall release all Escrowed Funds then held by it to or for the
account of the Issuer, upon presentation of (i) the certificates, opinions
and other documentation required pursuant to the Purchase
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Agreement
and (ii) an officer’s certificate of the Issuer substantially in form and
substance of Exhibit B hereto, signed by an authorized officer of the Issuer,
certifying to the Escrow Agent as to the matters specified in Exhibit B
hereto.
(c) If
the
acquisition of Harborside Healthcare Corporation (the “Merger”)
as
described in the Offering Circular is not consummated on substantially the
terms
described in the Offering Circular by the Escrow Outside Date, or if the merger
agreement for the Merger is terminated at any time prior to the Escrow Outside
Date (each a “Mandatory
Redemption Event”),
then
within three business days the Issuer shall provide written notice to the Escrow
Agent and request the Trustee to mail to the holders of the Notes, in accordance
with the terms of the Indenture, notice that a Mandatory Redemption Event has
occurred and five business days after mailing such notice of a Mandatory
Redemption Event, the Issuer shall redeem the Notes in cash at a redemption
price equal to 100% of the principal amount of the Notes (the “Redemption
Price”),
plus
accrued and unpaid interest on the Notes to the applicable redemption date
(the
“Special
Mandatory Redemption”).
Upon
the occurrence of a Mandatory Redemption Event, the Issuer shall deliver to
the
Escrow Agent, so as to be received by the Escrow Agent no later than one
business day following the Escrow Outside Date, an officer’s certificate that
sets forth (i) that the Special Mandatory Redemption is to occur, (ii) the
Escrow Outside Date and (iii) the Redemption Price plus accrued interest and
unpaid interest to be released by the Escrow Agent to the Trustee or Paying
Agent (as defined below) for the benefit of the holders of the Notes and for
the
purpose of redeeming the Notes. If the Escrow Agent timely receives such an
officer’s certificate from the Issuer, then the Escrow Agent shall, no later
than the second business day following the Escrow Agent’s receipt of such
officer’s certificate, release to Xxxxx Fargo Bank, National Association, as
Paying Agent (the “Paying
Agent”)
an
amount of Escrowed Funds equal to the Redemption Price plus accrued and unpaid
interest on the Notes to the applicable redemption date. Concurrently with
such
release to the Paying Agent, the Escrow Agent shall release any Escrowed Funds
that exceed the Redemption Price and any and all accrued and unpaid interest
on
the Notes to the redemption date to the Issuer.
(d) This
Escrow Agreement shall terminate upon the occurrence of the events specified
in
paragraphs (b) or (c) of this Section; provided,
however,
that
the obligations of the Issuer under Section 4 and Section 8 of this Escrow
Agreement shall survive such termination. Upon termination of this Escrow
Agreement, any Escrowed Funds remaining in the custody of the Escrow Agent,
net
of fees and expenses payable to
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the
Escrow Agent, shall be delivered promptly to the Issuer in accordance with
the
Issuer’s written instructions.
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3.
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Reliance;
Liability
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The
Escrow Agent may rely on, and shall not be liable for acting or refraining
from
acting in accordance with, any written notice, instruction or request or other
communication furnished to it hereunder or pursuant hereto and believed by
it in
good faith to be genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall be responsible for holding, investing,
reinvesting and disbursing the Escrowed Funds pursuant only to this Escrow
Agreement; provided,
however,
that in
no event shall the Escrow Agent be liable for any lost profits, lost savings
or
other special, exemplary, consequential or incidental damages even if the Escrow
Agent has been advised of the likelihood of such loss or damage; and
provided,
further,
that
the Escrow Agent shall have no liability for any loss arising from any cause
beyond its control, including, but not limited to, the following: (a) acts
of
God, force majeure, including, without limitation, war (whether declared or
existing), revolution, insurrection, riot, civil commotion, terrorism, accident,
fire, explosion, stoppage of labor, strikes and other differences with
employees; (b) the act, failure or neglect of any other party or any agent
or
correspondent or any other person selected by the Escrow Agent; (c) any delay,
error, omission or default of any mail, courier, telegraph, cable or wireless
agency or operator; or (d) the acts or edicts of any government or governmental
agency or other group or entity exercising governmental powers. The Escrow
Agent
shall not be responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the subject matter of this Escrow
Agreement or any part hereof or for the transaction or transactions requiring,
relating to or underlying the execution of this Escrow Agreement, the form
or
execution hereof or for the identity or authority of any person executing this
Escrow Agreement or any part hereof or depositing the Escrowed Funds. In the
event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands from any party hereto
which, in its opinion or in the opinion of its counsel, conflict with any of
the
provisions of this Escrow Agreement, it shall be entitled to refrain from taking
any action and its sole obligations shall be to keep safely all property held
under the terms of this Escrow Agreement until it shall be directed otherwise
in
writing by the Issuer (with the written consent of the Initial Purchasers)
or by
a final order or judgment of a court of competent jurisdiction.
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4. Indemnity
The
Issuer agrees to indemnify the Escrow Agent, and its officers, directors,
employees and agents for, and to hold it and each of them harmless against,
any
loss, liability or expense arising out of or in connection with this Escrow
Agreement and carrying out its duties hereunder, including, without limitation,
the costs and expenses of defending itself against any claim of liability,
damage, expense or loss (including, without limitation, attorneys’ fees and
expenses); provided,
however,
that
the Issuer will not be liable for indemnification or otherwise for any loss,
liability or expense to the extent arising out of the gross negligence, willful
misconduct or bad faith of the Escrow Agent. In no event shall the Escrow Agent
be liable for punitive, incidental or consequential damages. The obligations
of
the Issuer under this Section 4 shall survive the resignation of the Escrow
Agent and the termination of this Escrow Agreement.
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5.
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Modifications,
Waivers and Amendments
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The
Escrow Agent shall not be bound by any modification, waiver, amendment,
termination (except as provided in Section 2 hereof), cancellation, rescission
or supersession of this Escrow Agreement unless the same shall be in writing
and
signed by the parties hereto, and, if its rights, duties, immunities or
indemnities as Escrow Agent are affected thereby, unless it shall have given
its
prior written consent thereto. This Escrow Agreement may not be modified,
waived, amended or terminated without the written consent of the Escrow Agent,
Initial Purchasers and the Issuer.
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6.
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Concerning
the Escrow Agent
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(a) The
Escrow Agent and the Issuer acknowledge and agree that the Escrowed Funds shall
be held by the Escrow Agent for and on behalf of the Issuer, and that the Escrow
Agent is acting exclusively as the agent, custodian and bailee of the Issuer,
and not of any other party; provided,
however,
the
Initial Purchasers and the Trustee are each third party beneficiaries of this
Escrow Agreement with full rights of enforcement.
(b) The
Escrow Agent shall exercise the same degree of care toward the Escrowed Funds
as
it exercises toward its own similar property.
(c) The
Escrow Agent may execute any of its powers or responsibilities hereunder and
exercise any rights hereunder either directly or by or
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through
its agents or attorneys. The Escrow Agent shall have the right, but not the
obligation to consult with counsel and/or other such professionals of the Escrow
Agent’s choice and shall not be liable for any action taken or omitted to be
taken by the Escrow Agent in accordance with the advice of such counsel or
other
such professionals. The Escrow Agent shall be entitled to reimbursement for
any
and all compensation (fees, expenses, and other costs) paid to such counsel
and/or professional.
(d) Nothing
in this Escrow Agreement shall be deemed to impose upon the Escrow Agent any
duty to qualify to do business or to act as agent or otherwise in any
jurisdiction other than the State of New York.
(e) The
Escrow Agent shall have the right at any time to resign hereunder by giving
written notice of its resignation to the Issuer at the address set forth herein
or at such other address as the Issuer shall provide, at least 30 days prior
to
the date specified for such resignation to take effect. Upon the effective
date
of such resignation, all cash and other payments and all other property then
held by the Escrow Agent hereunder shall be delivered by it to a successor
Escrow Agent appointed by the Issuer with the consent of the Initial Purchasers.
If no successor Escrow Agent is appointed, the Escrow Agent may apply to a
court
of competent jurisdiction for such appointment. The successor Escrow Agent
is
not required to be the same entity as the Trustee under the
Indenture.
(f) In
the
event that any Escrowed Funds shall be attached, garnished or levied upon by
any
court order, or the delivery thereof shall be stayed or enjoined by an order
of
a court, or any order, judgment or decree shall be made or entered by any court
order affecting the property deposited under this Escrow Agreement, the Escrow
Agent is hereby authorized, in its sole discretion, to obey and comply with
all
writs, orders or decrees so entered or issued, and in the event that the Escrow
Agent obeys or complies with any such writ, order or decree it shall not be
liable to the Issuer or to any other person, firm or corporation, by reason
of
such compliance notwithstanding that such writ, order or decree be subsequently
reversed, modified, annulled, set aside or vacated.
(g) In
the
event that the Escrow Agent should at any time be confronted with inconsistent
claims or demands with respect to the Escrowed Funds, the Escrow Agent shall
have the right, but not the duty, to interplead the Escrowed Funds and/or the
parties making such requests or demands in any court of competent
8
jurisdiction
and request that such court determine the respective rights of the parties
with
respect to the Escrowed Funds. In the event the Escrow Agent no longer holds
any
Escrowed Funds, it shall be released from any obligation or liability as a
consequence of any such claims or demands.
(h) All
references in this Escrow Agreement to any other agreement are for the
convenience of the Issuer, and the Escrow Agent has no duties or obligations
with respect thereto.
(i) No
provision of this Escrow Agreement shall require the Escrow Agent to risk or
advance its own funds or otherwise incur any financial liability in the
performance of its duties or the exercise of its rights under this Escrow
Agreement.
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7.
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Notices
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All
notices required to be given hereunder shall be in writing and shall be deemed
given when received at the following addresses until such time as the parties
hereto designate a different or additional address or addresses:
To
the
Issuer:
Sun
Healthcare Group, Inc.
00000
Xxx
Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxx
Facsimile:
(000) 000-0000
with
a
copy to:
O’Melveny
& Xxxxx LLP
000
Xxxxx
Xxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx Xxxxxxx
Facsimile:
(000) 000-0000
To
the
Escrow Agent:
Xxxxx
Fargo Bank, National Association
Corporate
Trust Services
9
000
Xxxxxxxx Xxxx., 00xx Xxxxx
Attention:
Madeliena X. Xxxx
Facsimile:
000-000-0000
8. Compensation
and Fees and Expenses of the Escrow Agent
The
Issuer hereby agrees to pay the Escrow Agent for its services hereunder in
accordance with the Escrow Agent’s fee schedule as attached hereto as Exhibit C
and to pay all expenses incurred by the Escrow Agent in connection with the
performance of its duties and enforcement of its rights hereunder and otherwise
in connection with the preparation, operation, administration and enforcement
of
this Escrow Agreement, including, without limitation, reasonable attorneys’ fees
and expenses, brokerage costs and other reasonable and related expenses incurred
by the Escrow Agent in accordance with this Escrow Agreement. The fees and
expenses agreed upon for the services rendered hereunder is intended as full
compensation for the Escrow Agent's services as contemplated by this Escrow
Agreement; provided, however, that in the event that the conditions for the
disbursement of funds under this Escrow Agreement are not fulfilled, or the
Escrow Agent renders any material service not contemplated in this Escrow
Agreement, or there is any assignment of interest in the subject matter of
this
Escrow Agreement, or any material modification hereof, or if any material
controversy arises hereunder, or the Escrow Agent is made a party to any
litigation pertaining to this Escrow Agreement, or the subject matter hereof,
then the Escrow Agent shall be compensated for such extraordinary services
and
reimbursed for all costs and expenses, including reasonable attorneys’ fees and
expenses, occasioned by any delay, controversy, litigation or event, and the
same shall be recoverable from Issuer. The obligations of the Issuer under
this
Section 8 shall survive the resignation of the Escrow Agent and the termination
of this Escrow Agreement.
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9.
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Miscellaneous
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(a) This
Escrow Agreement sets forth exclusively the duties of the Escrow Agent with
respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
This Escrow Agreement contains the entire understanding among the parties and
supersedes any prior understanding and agreements among them, in each case
respecting this subject matter.
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(b) This
Escrow Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which when taken together shall constitute
one
agreement.
(c) Unless
the context otherwise requires, “or” is not exclusive.
(d) This
Escrow Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
(e) In
the
event that any provision of this Escrow Agreement is declared by any court
or
other judicial or administrative body to be null, void, or otherwise
unenforceable for any reason, said provision shall survive to the extent it
is
not so declared, and all of the other provisions of this Escrow Agreement shall
remain in full force and effect.
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IN
WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of
the
date first above written.
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SUN
HEALTHCARE GROUP, INC.,
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By
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/s/
Xxxxxxx Xxxxxx
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Name:
Xxxxxxx Xxxxxx
Title:
Executive Vice President
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XXXXX
FARGO BANK, National
Association,
as Escrow Agent
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By
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/s/
Xxxxx
Xxxx
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Name: Xxxxx
Xxxx
Title:
Assistant Vice President
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