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convertible and was subordinated to the extent and in the manner
set forth therein to "all Sun’s Senior Indebtedness" (as defined
therein), and a $1 million note. The form of the debenture
attached to the Investment Agreement as Annex I defined "Senior
Indebtedness" as:
the principal of (and premium, if any) and unpaid
interest on, (i) indebtedness of Sun, whether
outstanding on the date hereof or hereafter created, to
banks, leasing companies, insurance companies or other
lending institutions, regularly engaged in the business
of lending money, which is for money borrowed by Sun or
a subsidiary of Sun, whether or not secured, or
equipment leased by Sun or a subsidiary of Sun and (ii)
any deferrals, renewals or extensions of any such
indebtedness.
The debenture was also not entitled to a sinking fund. The
terms of the debenture, issued on December 1, 1983, required Sun
to pay $1.5 million to CV on or before December 1, 1988, with
interest accruing on the unpaid balance at the rate of 8 percent
per year. The principal amount of the debenture was convertible
into Sun’s series G preferred stock at a price equal to $150 per
share. CV acquired common stock in Sun in conversion of the
debenture and recognized gain on the sale of that stock in 1986
and 1987.8
Sale of the Warrants
On March 4, 1986, Sun made its initial public offering of
its common stock. Subsequently, pursuant to the agreements, each
8
It appears that the preferred stock that CV was entitled to
receive pursuant to the debenture was converted into common
stock, as was the case with the stock CV became entitled to
receive pursuant to the warrants as discussed below.
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